CALGARY, April 1, 2015 /CNW/ - Oando Energy Resources
Inc. ("OER" or the "Company") (TSX: OER), a company focused on
oil and gas exploration and production in Nigeria, today announced financial and
operating results for the year ended December 31, 2014. The audited consolidated
financial statements, notes and management's discussion and
analysis pertaining to the period are available on the System for
Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com and by visiting www.oandoenergyresources.com. All
monetary figures reported herein are U.S. dollars unless otherwise
stated.
"In 2014 we executed on our growth strategy by acquiring the
Nigerian upstream business of ConocoPhillips Company and our
continued focus over the near term will be on optimizing the
performance of these key assets," said Pade
Durotoye, CEO of Oando Energy Resources Inc. "While the
acquisition propelled sizable improvements in our production base,
we also invested in our legacy assets, which we expect will support
further organic production growth in the near future. In the wake
of the acquisition we have acted on a number of opportunities to
improve our balance sheet including converting debt to equity and,
subsequent to year end, resetting our oil hedging program, which
contributed $234 million of the
$238 million debt reduction in a
$50 per barrel environment."
Key Operational Highlights
- On July 30, 2014, the Company
completed the acquisition of the Nigerian upstream oil and gas
business of ConocoPhillips Company ("COP" or the "Acquisition
Assets") for a total cash consideration of $1.5 billion, which included substantial
production and a considerable base of exploration and exploitation
opportunities;
- 2014 production increased to 9.1 MMboe (average 24,945 boe/day)
from 1.5 MMboe (average 3,991 boe/day) in 2013. Fourth quarter
production increased to 54,721 boe/day from 4,413 boe/day in 2013
which included 50,226 boe/day from the assets acquired in the COP
Acquisition;
- 2014 Revenue contribution from the production is as follows
crude oil (84%), NGL's (1%) and Natural Gas (15%);
- In the fourth quarter, the Company and its partners completed
the construction of the 45,000bbls/d Umugini pipeline project and
commenced filling the pipeline in the final weeks of the year
making it possible for net production from the Ebendo field to
increase from 1,410bopd to over 2,565bopd;
- Subsequent to year end, in March
2015, OER announced that initial production commenced from
the Qua Iboe field at approximately 2,150 boepd gross; and
- Also subsequent to year end, the Company successfully realized
$234 million by resetting its crude
oil hedge floor price from an average of $95.35 per barrel to $65.00 per barrel on 10,223 bbls/day of oil
production for the next 18 months and another 1,553 bbls/day for a
further 18 months until January 2019.
The proceeds, in addition to $4
million cash on hand, were used to prepay $238 million of certain loan facilities.
Financial Highlights
US$'000, except production per share data
|
Selected Annual
Information
|
Fourth
Quarter
|
|
2014
|
2013
|
2012
|
2014
|
2013
|
Financial:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
421,422
|
127,211
|
135,200
|
174,042
|
23,976
|
Cash flows from
operating activities
|
116,087
|
77,409
|
23,991
|
63,652
|
34,523
|
Comprehensive
income/(loss)
|
(320,041)
|
(38,230)
|
16,021
|
(199,595)
|
(41,008)
|
|
|
|
|
|
|
Net income/(loss)per
share: Basic
|
(0.53)
|
(0.36)
|
0.16
|
(0.40)
|
(0.32)
|
|
|
|
|
|
|
Net income/(loss)per
share: Diluted (1)
|
(0.53)
|
(0.36)
|
0.16
|
(0.40)
|
(0.32)
|
Total
assets
|
3,242,791
|
1,299,422
|
1,127,050
|
3,247,172
|
1,299,422
|
Total non-current
liabilities
|
1,088,996
|
275,195
|
177,699
|
1,088,996
|
275,195
|
Operational:
|
|
|
|
|
|
Production
(2)
|
|
|
|
|
|
Crude oil
(bbl)
|
4,092,973
|
1,456,818
|
1,482,522
|
2,000,821
|
406,029
|
NGL (boe)
(3)
|
475,053
|
-
|
-
|
291,907
|
-
|
Natural Gas
(mcf)
|
27,221,832
|
-
|
-
|
16,449,778
|
-
|
Total production
(boe) (3)
|
9,104,998
|
1,456,818
|
1,482,522
|
5,034,358
|
406,029
|
|
|
|
|
|
|
Boe/day - Legacy
assets (4)
|
4,273
|
3,991
|
4,051
|
4,495
|
4,413
|
Boe/day - Acquisition
assets (4)
|
20,672
|
-
|
-
|
50,226
|
-
|
|
|
|
|
|
|
Boe/day -
total
|
24,945
|
3,991
|
4,051
|
54,721
|
4,413
|
Gross realized
prices (5)
|
|
|
|
|
|
Crude oil
($/bbl)
|
95.72
|
110.30
|
110.20
|
81.29
|
111.40
|
BGL
($/boe)
|
11.77
|
-
|
-
|
10.91
|
-
|
|
|
|
|
|
|
Natural Gas
(mcf)
|
2.54
|
-
|
-
|
2.46
|
-
|
Net realized
prices (6)
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
($/bbl)
|
87.81
|
87.32
|
91.20
|
66.83
|
59.05
|
BGL
($/boe)
|
10.95
|
-
|
-
|
10.14
|
-
|
|
|
|
|
|
|
Natural Gas
(mcf)
|
2.33
|
-
|
-
|
2.21
|
-
|
(1) In determining the diluted EPS antidilutive
instruments have been excluded.
(2)Barrels abbreviated to "bbl", barrels of oil
equivalent to "boe", thousand cubic feet abbreviated to "mcf".
(3)Natural gas volumes are converted to boe using at six
mcf of natural gas to one boe
(4)Legacy asset production means production from OML 125
and OML 56; Acquisition assets production means production from
OMLs 60 to 63 that were acquired on July 30,
2014. Calculation of boe/day used 365 days and 92 days for
the annual and quarterly periods, respectively. Actual production
from Acquisition assets from July 30 to
December 31, 2014 was 49,316boe/day.
(5)Before royalties, the Government share of profit oil,
oil losses and unrecognized revenues from excessive NNPC liftings
at OML 125.
(6)After royalties, the Government share of profit oil
losses, and unrecognized revenues from excessive NNPC liftings at
OML 125. In 2014, net realized prices were $87.81/bbl annually and $66.83/bbl in the fourth quarter without
unrecognized revenues incorporated.
For the year ended December 31,
2014 the Company reported:
- Net revenue was $421.4 million in
2014, an increase of $294.2 million
over $127.2 million earned in 2013,
primarily as a result of the COP Acquisition. OER had hedged 10,223
bbl/day of crude oil production between $91/bbl and $97/bbl
until July 2017 and January 2019, respectively, with further upside
available if certain price targets were met. The hedges represent
approximately 47% of the fourth quarter production rates of crude
oil. In February 2015, the hedge
price was reset to $65/bbl following
the restructuring of the hedge agreement; proceeds of $234 million were realized and used to repay
debt;
- From July 30 to December 31,
2014, the Acquisition Assets contributed $136.8 million to net income before taxes based
on $299.0 million in revenue,
$116.5 million of production
expenses, and $45.7 million in
depreciation, depletion and amortization ("DD&A")
expense;
- The Company incurred a net loss of $320.0 million during the year, as compared to a
net loss of $38.2 million in 2013.
This was mainly due to non-cash asset impairment charges of
$462.8 million, as well as
approximately $84.9 million in
transaction costs associated with the acquisition of the
ConocoPhillips Nigerian business. These amounts were partially
offset by the $288.3 million net gain
on financial instruments;
- The Company recognized impairments on property, plant and
equipment ("PP&E") of $61.4
million and impairments on exploration & evaluation
assets ("E&E") of $401.4
million, as a result of lower crude oil prices;
- Production Expenses increased by $122.9
million to $152.9 million from
$30.0 million in 2013. The increase
was primarily due to additional production expenses from the
Acquisition Assets of $116.5 million
of which $38.6 million related to
non-recurring acquisition accounting fair value adjustments.
Production expenses improved to $16.66/boe in 2014 from $20.57/boe in 2013;
- General and administrative costs ("G&A costs") for
2014 increased by $47.9 million to
$70.0 million from $22.1 million in 2013. The increase was related
to the $41.2 million non-recurring
governmental consent fee, $25.4
million write off of OML 125 receivables due from the
Nigerian National Petroleum Corporation ("NNPC"), $84.9 million of non-recurring COP Acquisition
costs, and other write offs of joint venture and trade receivables
of $4.4 million;
- Cash flows from operating activities were $116.1 million, an increase of $38.7 million from $77.4
million in 2013, primarily as a result of increased cash
flow generated by the Acquisition Assets;
- The COP Acquisition on July 30,
2014 added $1,099 million in
fair value of assets and $161.0
million was incurred on capital expenditures during the
year. The capital expenditures consisted of $38.1 million for enhancing the Acquisition
Assets and $122.9 million for Legacy
Assets' drilling and completion activities, construction of
gathering systems and facilities, and capital asset maintenance
projects; and
- As at December 31, 2014 the
Company had a working capital deficiency of $567.2 million, and significant levels of debt
for which specific debt covenants must be satisfied. An additional
$345.6 million of borrowings was
reclassified to current borrowings as a result of debt covenant
breaches (refer the Borrowings Section); the breach of the covenant
gave the lenders associated with the $450
million loan the ability to accelerate the maturity of the
loan on demand. However, the lenders chose not to exercise the
rights to exercise their acceleration rights under that facility
and the Corporation received a waiver of the current ratio
requirement for the December 31, 2014
calculation at March 31, 2015.
OER has taken measures to improve liquidity by converting
long-term debt to equity, attracting equity financing, focusing on
projects with highest short-term cash flow returns, and realizing
financial commodity contract gains subsequent to year end. Since
December 2014, the Company has since
paid $238 million of debt down out of
this working capital deficiency with money received from
hedges.
Selected Quarterly Results
US$'000, except production per share data
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
2014
|
2014
|
2014
|
2014
|
2013
|
2013
|
2013
|
2013
|
Production
(boe)
|
5,035,053
|
3,248,158
|
413,985
|
407,803
|
406,029
|
363,032
|
353,145
|
334,612
|
Total
Revenue
|
174,042
|
184,777
|
30,440
|
32,163
|
23,976
|
37,461
|
36,072
|
29,702
|
Net Income for the
Period
|
(232,033)
|
89,541
|
(137,668)
|
(39,881)
|
(41,008)
|
11,645
|
(1,168)
|
(7,699)
|
Earnings Per
Share
|
(0.40)
|
0.12
|
(0.24)
|
(0.14)
|
(0.32)
|
0.12
|
(0.01)
|
(0.07)
|
Diluted Earnings Per
Share
|
(0.40)
|
0.12
|
(0.24)
|
(0.14)
|
(0.32)
|
0.12
|
(0.01)
|
(0.07)
|
Capital
Expenditures
|
41,206
|
52,910
|
24,355
|
42,550
|
45,573
|
29,684
|
36,353
|
8,345
|
Total
Assets
|
3,242,791
|
3,693,880
|
1,662,142
|
1,689,937
|
1,299,422
|
1,223,808
|
1,193,585
|
1,079,899
|
Total Non-Current
Liabilities
|
1,088,996
|
1,523,019
|
245,925
|
274,812
|
275,195
|
206,150
|
207,981
|
156,457
|
OPERATIONAL UPDATE AND OUTLOOK
Acquisition Assets
OML 60-63
From July 30 to December 31, 2014
capital expenditures on the Acquisition Assets totalled
$38.1 million, which was primarily
attributed to OML 60 to 63 assets. Capital expenditures included
$9.9 million spent on development
drilling activities in the Ogbogene NE and Ogbainbiri Deep C
projects and a number of work-over activities in the area. In
addition, the Company incurred $28.2
million on facilities related to the Ebocha Oil Centre,
production facility enhancements and the repair of gas
pipelines.
In 2015 the Company will prudently utilise capital recognizing
the current crude oil environment but fund essential projects in
the Acquisition Assets and estimates that $35.6 million will be expended on crude oil
related projects and $24.1 million on
gas projects in the OML 60 to 63 areas. Planned Oil and natural gas
projects consist of drilling and completing new wells, along with
Asset Integrity projects and enhancements to natural gas facilities
and pipelines.
Legacy Assets
OML 13 (Qua Ibo Field)
In 2014, the Company incurred capital expenditures of
$14.7 million on pipeline, facility
costs and the construction of a flow station. The Qua Iboe field
commenced production in January 2015
from the field's C4 and D5 reservoirs. Budgeted capital
expenditures for OML 13 were $40.6
million in 2014. The reduction in capital expenditures in
2014 as compared to budget was a result of conserving cash flow due
to lower crude oil prices in the second half of the year. In 2015,
the Corporation has budgeted $0.6
million in capital expenditures for facility
enhancements.
OML 56 (Ebendo Field)
The Corporation budgeted $22.7
million in capital expenditures for OML 56 in 2014 and
actually incurred a total of $10.7
million, which included the drilling of Ebendo 7, the
construction of additional crude oil storage tanks for the field
and the Company's prorate share of the costs for completing the
Umugini Pipeline.
In 2015, the Company has budgeted $7.7
million for facility and pipeline repairs.
OML 125 (Abo Field)
During 2014 the Company incurred $89.7
million of capital expenditures primarily on drilling and
completions and production infrastructure, compared to budgeted
capital expenditures of $37.5 million
for OML 125 in 2014. The Corporation drilled and completed ABO 8
and ABO 12 South wells and re-entered the ABO 3 well. Production
infrastructure expenditures included enhancements to its floating
production storage and offloading vessel ("FPSO"), capital
maintenance on flowlines and a new phase of gathering systems. The
significant increase in actual expenditures as compared to the 2014
budget was primarily the result of the additional project of
re-entering the ABO 3 well, expanded work scope for Life Extension
works for the FPSO and the successful drilling of an Exploration
leg on ABO 12, with the subsequent plug-back and side-track of the
Development leg which will be brought on stream in 2015.
In 2015, the Company has budgeted $67.1
million on the OML 125 Asset. The planned expenditures
include gathering system construction projects, Completing and
hooking up of ABO 12 Upper, Drilling ABO 13, along with safety
projects and extending the life of the FPSO.
About Oando Energy Resources Inc. (OER)
OER currently has a broad suite of producing, development and
exploration assets in the Gulf of Guinea (predominantly in Nigeria). OER's sales production was 53,161
boe/d for the month ending January 31,
2015.
Cautionary Statements
More information about the Company's oil and gas assets,
including cautionary language regarding the estimation of reserves
and resources, can be found in the most recent Form 51-101F1 filed
under the Company's profile on SEDAR at www.sedar.com. "Gross" or
"gross" means, when used in relation to production, reserves and
resources, OER's working interest share of production, reserves and
resources before deduction of royalties. "Net" or "net" means, when
used in relation to production, reserves and resources, either
OER's working interest share of production, reserves and resources
after deduction of royalties or OER's entitlement to production
reserves and resources after deduction of royalties and PPT for
production sharing contracts. In relation to OER's interest in
wells, "Net" or "net" means the number of wells obtained by
aggregating OER's working interest in each of its gross wells. In
relation to OER's interest in property, "Net" or "net" means the
total area in which OER has an interest multiplied by the working
interest owned by OER. "WI" means with respect to interests
governed by a JOA, PSC, farm-in agreement or farm-out agreement,
the undivided interest of such party (expressed as a percentage of
the total interests of all parties in the contract) in the rights
and obligations derived from such contract, which may be an
operating or non-operating interest.
Oil and Gas Equivalents
Production information is commonly reported in units of barrel
of oil equivalent ("boe" or "Mboe" or "MMboe") or in units
of natural gas equivalent ("Mcfe" or "MMcfe" or Bcfe").
However, boe's or Mcfe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe
conversion ratio of 1 barrel = 6 Mcf, is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Readers are cautioned that boe may be misleading, particularly if
used in isolation.
Forward Looking Statements:
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans", "intends"
and similar expressions are intended to identify forward-looking
information or statements. In particular, this news release
contains forward-looking statements relating to intended
acquisitions.
Although the Company believes that the expectations and
assumptions on which such forward-looking statements and
information are reasonable, undue reliance should not be placed on
the forward-looking statements and information because the Company
can give no assurance that such statements and information will
prove to be correct. Since forward-looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to: risks related to international operations,
the integration of assets acquired under the COP acquisition, the
actual results of current exploration and drilling activities,
changes in project parameters as plans continue to be refined and
the future price of crude oil. Accordingly, readers should not
place undue reliance on the forward-looking statements. Readers are
cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could
affect the Company's financial results are included in reports on
file with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com) under the
Company. The forward-looking statements and information contained
in this news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws.
SOURCE Oando Energy Resources Inc.