TIDMOPHR
RNS Number : 3580U
Ophir Energy Plc
12 July 2018
12(th) July 2018
Ophir Energy plc
("Ophir", the "Group" or the "Company")
Operations and Trading Update
Ophir provides the following update on its trading and
operations for the six-month period ending 30 June 2018.
Alan Booth, Interim CEO of Ophir, commented:
"Since stepping in to the role of interim CEO, I have defined
three clear and immediate priorities for our teams to deliver: 1)
Continue to manage our existing production operations safely and
efficiently; 2) Explore every avenue to create value from our
Fortuna FLNG project; and 3) Complete the Santos acquisition and
integrate these assets effectively and efficiently into our
organisation.
"Each of these priorities is precisely aligned with our near
term strategy to become a self-sustaining business. We will
continue to rebalance our portfolio towards a stronger production
base and higher cash flow generation in order to give ourselves a
broader opportunity set no matter how the external environment
evolves. The Santos assets grow and diversify our production base
and mark an important step towards achieving cash flow
sustainability.
"We are keen to continue to grow production and will remain
alert to potential inorganic growth opportunities when they are
consistent with our strategy. We are, of course, especially
conscious that our Fortuna licence expires at the end of this year;
however, we remain determined to deliver value both to our
shareholders and the government of Equatorial Guinea.
"Our search for a new CEO is making good progress and a number
of highly experienced and qualified external candidates have been
identified. The Board will of course provide further updates as and
when appropriate."
1 H 2018 Highlights:
-- $205 million acquisition of Southeast Asian asset package
from Santos which will materially increase production and cash
flow
-- Average production of 11,400 boepd, marginally ahead of expectations
-- Revenue of $102 million and cash flow from production of $43 million
-- We continued active discussions on partnering and financing
of our Fortuna FLNG project with credible and well-financed third
parties.
-- Net cash of $75 million and gross liquidity (cash and undrawn
debt facilities) at 30 June 2018 of $370 million
Portfolio Management/M&A
In early May, we announced an agreement to acquire a package of
assets in Southeast Asia from Santos Limited. The principal assets
are interests in the producing Chim Sao/Dua oil field in Vietnam,
and the Madura Offshore and Sampang PSCs in Indonesia, which
contain a number of producing gas fields. The transaction is
consistent with our strategy of increasing our cash generation in
order to bring forward Ophir's stated objective of being free cash
flow positive and become a self-funding E&P company.
On a full year pro-forma basis for 2018, (assuming the
acquisition was effective from 1 January 2018), we expect the
transaction to add 13,500 boepd of production, which would take
full year production on a proforma basis to 25,000 boepd, and add
around $90 million of operating cash flow. 2018 full year pro forma
capital expenditure (excluding the cost of acquisition) for the
Santos assets is expected to be $25 million.
A Shareholder Circular is expected to be published later in the
summer with an EGM expected to take place shortly thereafter.
Production & Development
Production during the first half of 2018 was above expectation
at an average of 11,400 boepd.
Gross production at the Bualuang oil field was 7,800 bopd in the
period. The Phase 4 development activities will commence in July
with the arrival of a rig to drill three replacement production
wells as well as to work over two existing wells. As a result,
production in the second half is expected to average over 9,000
bopd.
Gross production from the Kerendan gas field averaged 17.2
MMscfd, broadly in line with expectations. In addition, we advanced
discussions with the local regulator on a revised gas price for the
existing GSA of $5.65 per mmbtu.
Gross production from the Sinphuhorm gas field was 77 MMscfd for
the half-year, marginally ahead of expectations.
Throughout the first half of the year, we engaged in
negotiations with potential lenders, but have not yet finalised a
project finance solution for Fortuna FLNG. In May, OneLNG made the
decision to dissolve itself. Although this decision was
disappointing, we continue to believe that Fortuna is a high
quality asset and, along with Golar, we are focused on trying to
secure a new partner with the financial strength likely to be
required to unlock the project financing.
The Block R licence (which contains the Fortuna gas discovery)
is due to expire at the end of 2018. As already mentioned, we are
in active discussions to secure a partner and the status of the
financing and timing of FID will become clear in the coming months.
Depending on how these discussions progress, the carrying value of
the Block R licence ($604 million as at 31 Dec 2017) may need to be
reassessed as part of our interim reporting process.
Exploration & Appraisal
During the first half of 2018, Ophir devoted attention to step
out exploration from existing fields. As a result, the Bualuang
North prospect was high graded for drilling in 2H 2018, at the end
of our development drilling programme. The well is expected to cost
less than $1.5 million on a post-tax basis and is targeting between
one and five million barrels of prospective resources greater than
50% chance of success. In the event of success, the intention is to
tie Bualuang North back to the existing production facilities and
any discovery of over one million barrels is expected to payback in
less than 18 months.
In Mexico, we secured two blocks, 10 and 12, in offshore bid
round 2.4. These licences are in the Mexican Ridges and, in
combination with Block 5 (Sureste basin), give us a broad,
diversified acreage position.
In Equatorial Guinea, we were awarded Block EG-24 in the
licensing round completed earlier in 2018. We subsequently farmed
out 40% of the equity to Kosmos Energy who in return will shoot a
block wide 3D seismic survey, for which Ophir is fully cost
carried, and partially carry the costs of a well if a decision to
drill is made. The 3D survey commenced in May and is 28%
complete.
In Myanmar, we completed (subject to government approval) a
cross assignment with Chevron that will see Ophir have a 42%
interest in both blocks AD-03 and A-5. We expect to make a decision
on our further involvement in these licences before year-end.
Financial Update
Revenue for 1H 2018 is forecast at $102 million, with higher
than forecast commodity prices, with Bualuang production realising
$66.62/bbl and Kerendan gas $5.38/Mscf. Additionally, the
Sinphuhorm field generated $1.8 million of net investment income
(at an average gas price of $5.20/Mscf).
Cash flow from production in 1H 2018 is forecast to be $43
million and a full year forecast, on a pro forma basis including
the assets being acquired from Santos, of $190 million. Capital
expenditure for 1H 2018 is forecast at $47 million. Capital
expenditure for the full year 2018, on a pro forma basis including
the assets being acquired from Santos, is forecast at $145 million.
The revised capex forecast assumes the commencement of any Fortuna
related spend will be deferred until 2019 but includes expenditure
on Bualuang Charlie development and preparations for drilling in
Block 5, Mexico.
Following the acquisition of Santos, year-end 2018 net debt
forecast is revised to $135 million with year end gross liquidity
(cash and undrawn debt facilities) remaining strong, even allowing
for the acquisition of the Santos assets, expected to be $280
million.
Including
Ophir Standalone Basis pro forma
Santos(*)
HY 2018 FY 2018 FY 2018 (E)
(E) (E)
-------------- ------------- ------------ -----------
Production (Mboepd) 11.4 11.5 25.0
-------------- ------------- ------------ -----------
Cash flow from production ($'millions) 43 100 190
-------------- ------------- ------------ -----------
Capital expenditure ($'millions) 47 120 145
-------------- ------------- ------------ -----------
Net (cash)/debt ($'millions) (75) (35) 135
-------------- ------------- ------------ -----------
Gross liquidity (cash
and undrawn debt facility) ($'millions) 370 330 280
-------------- ------------- ------------ -----------
Capital expenditure has been reduced by $30m against previous
guidance, predominately with the deferral of Fortuna spend to
2019.
*guidance on a 2018 FY pro forma basis assuming accounting for
the Santos acquisition from the effective date of 1 January.2018.
Our current forecast is that the transaction will completed in
3Q'18 and the full year financial results will reflect acquisition
accounting from that completion date
For further enquiries, please contact:
Ophir Energy plc + 44 (0) 20 7811 2400
Geoff Callow, Head of IR and Corporate Communications
Brunswick (PR Adviser to Ophir) +44 (0)20 7404 5959
Patrick Handley
Wendel Verbeek
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END
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