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Independent oil and gas producer Bayfield Energy Holdings plc (LSE:BEH) renegotiated its crude oil sales contract with state-run oil company, Petrotrin, in Trinidad and the selling price to be used will now be based on Brent Crude, dropping the existing West Texas Intermediate (WTI) crude marker.
The contract, signed in 2009 in relation to Bayfield’s acquisition of exploration and production licence over the Galeota Block where the historically producing Trintes field is located, sets the price of the company’s oil produce at a 17.5% discount to the published price of WTI, the benchmark for crude sales in the Carribean.
“The negotiations leading to the revised contract terms have recognised that developments in crude markets have resulted in a situation where the use of WTI as a reference price no longer fairly reflects the market value of Bayfield’s crude and also acknowledged significant increases in production from the Trintes field,” Bayfield said in a statement.
The existing selling price and the benchmark being used was based on low production volume from the Trintes field, which is 65% controlled by Bayfield with the remaining 35% held by Petrotrin, at that time the contract was signed – at 600 barrels of oil per day (bopd).
Trintes field’s latest production rate was now at 2,300 bopd, as at July 2012, up from 1,650 bopd reported in April 2012.
Crude sales from the field will now use Brent crude price as benchmark at a new discount rate of 9.5% for 12 months, with an antedated effectivity from 1st August 2012.
WTI crude oil price range around US$92 per barrel while Brent crude oil price is at US$110 per barrel, giving a premium of almost US$20 a barrel.
Bayfield banks on the improved sales contract to impact the company’s financials, which in 2011 reflected more cost in selling the produced hydrocarbon than the revenue earned.
“It is encouraging to report on the success of our initiatives to improve cash flow and manage our financial commitments to enable us to establish a sound platform from which to continue our exploration programme,” Chief Executive Hywel John commented.
Shares of Bayfield gained 7.8% to 31 pence on the London Stock Exchange at 10:30 AM GMT.
Company Spotlight
Bayfield Energy Holdings was incorporated in 2008 and joined trading on the Alternative Investment Market in July 2011 raising US$87 million at the height of th Eurozone crisis.
Aside from assets in Trinidad, the company also has inshore exploration licence in South Africa.
