TIDMCERP
RNS Number : 0009A
Columbus Energy Resources PLC
21 December 2017
21 December 2017
COLUMBUS ENERGY RESOURCES PLC
("Columbus" or the "Company")
Operational, Financial and Management Update
Columbus, the oil and gas producer and explorer focused on
onshore Trinidad with the ambition to grow in South America, is
pleased to provide an update on its operational and financial
activities as well as announce the appointment of Tony Hawkins as
Legal and Mergers & Acquisition ("M&A") Director and Troy
Wilson as Goudron Field Manager.
Leo Koot, Executive Chairman of Columbus, commented:
"Since the Annual General Meeting in September, Columbus has
continued to deliver at pace upon our wholescale change in strategy
and has focussed on our target of increasing the Company's
production in Trinidad to over 550 bopd and becoming cash flow
positive by year-end 2017. It is my pleasure to announce that we
have achieved and exceeded these targets, with the Company
achieving production of 561 bopd within the past week and will be
generating more cash than we are spending on our day to day
activities across the Group as we enter 2018. The Company now finds
itself in a position where we are fully funded for our planned 2018
work programme and can use our positive cash flow and currently
available funds to re-invest in further real growth of Goudron
production in 2018 and also on other growth opportunities.
Delivering this target has not been easy and has involved a huge
amount of work and dedication from the staff of Columbus which a
new Company Video, which can be viewed here
(https://youtu.be/FoJNT8iiZYE) and on the Company's website,
illustrates.
Although we achieved the 561 bopd production level recently, a
71% increase from where we started at the end of June, numerous
legacy challenges, old infrastructure and inferior oil-field
practices and equipment meant that we were unable to grow our
production to reach the internal stretch targets I hoped might be
achievable in 2017. We have subsequently implemented a programme of
infrastructure and process improvements and introduced new
leadership in the Goudron field, as outlined below, all designed to
address the legacy issues which were hampering our production
growth. We have also implemented the first of our waterflood pilot
programmes with water being injected into well GY-669 and we are
targeting increasing production in well GY-670 which has
historically produced at over 1,100 bopd. The increases in
production achieved in 2H 2017 and the commencement of the
waterflood campaign have been achieved at a capex cost of
US$350,000 and incremental opex costs of US$260,000 which are
significant reductions on previously planned costs to grow
production in Trinidad. We will look to expand the waterflood pilot
campaign through other pilots in 2018.
Our forecast production profiles for the Goudron field in 2018,
including low and high case production scenarios, are included in a
presentation entitled "End of year update (December 2017)" on the
Company's website. The low case profile forecasts production growth
similar to that achieved in 2H 2017 (around 60%-70%%) and the high
case targets are significantly greater but, I believe, are
potentially achievable.
In addition to this, and in line with our planned strategy for
growth, I am delighted to welcome Tony Hawkins and Troy Wilson to
Columbus. Tony, with his 20 years of legal and commercial
experience at both large and small oil & gas companies,
including executing commercial deals in Trinidad for Centrica, will
provide Columbus with a unique ability to deliver upon our strategy
for accelerated growth and consider further M&A opportunities
in his position as Legal and M&A Director (a non-Board position
at present). I also look forward to working with Trinidad national,
Troy as Goudron Field Manager. Troy joins the company from
Schlumberger having worked in a number of countries, including
Trinidad, Venezuela, Suriname, Barbados and the USA. Troy's most
recent position at Schlumberger was as a senior artificial lift
specialist and will bring invaluable experience to help us achieve
our 2018 production targets.
Whilst progress on the completion of the acquisition of the
South West Peninsula ("SWP") assets, through the previously
announced BOLT transaction, has been slower than we would have
wished, we hope to be able to announce improved and re-structured
commercial arrangements for these very exciting assets in the very
near future.
In summary, the second half of 2017 has been a significant
period for Columbus, during which we have completely revitalised
our producing Goudron field, implemented changes across many other
areas of the business and strengthened our balance sheet to allow
further growth to be fully funded in 2018. The Board and I look
forward to updating shareholders on further operational and
business activities shortly."
Key Highlights:
-- Key production target has been met with production in
Trinidad currently delivering between 520 and 561 barrels of oil
per day ("bopd"), the latter amount achieved within the past few
days:
o This follows wholescale field re-organisation and significant
workstream efficiency gains since the appointment of the new
management.
-- The production increase in 2H 2017 and the commencement of
the waterflood campaign have been achieved at a capex cost of
US$350,000 and incremental opex costs of US$260,000 - a significant
reduction on previously planned costs.
-- A number of challenges have been faced to increase production
in 2H 2017 due to numerous legacy issues, old infrastructure and
inferior oil-field practices and equipment. New leadership and a
programme of infrastructure and process improvements have been
implemented in the Goudron field to address the legacy issues which
were hampering production growth.
-- In January 2018, the Company will be generating more cash
than it is spending on day to day activities and is now cash flow
positive. The Company plans to invest this cash into the Company's
growth opportunities to deliver further returns.
-- The Company is fully funded for its 2018 work programme as a
result of its positive cashflow position and the funds, totalling
US$6.0million, which were received in October and November
2017.
-- The first waterflood pilot campaign has commenced on GY-669,
targeting increased production in GY-670 which has historically
produced at over 1,100 bopd. Further waterflood pilots are planned
to commence in 1H 2018.
-- The South West Peninsula ("SWP") negotiations with BOLT and
other relevant stakeholders are progressing and the Company hopes
to announce improved and re-structured commercial arrangements for
the assets in the near future.
-- Following the completion of negotiations on the South West
Peninsula, the Company intends to re-activate the Bonasse field and
increase production in 2018.
-- The Spanish Government has confirmed they will close the
current concession in early 2018 after the completion of the
relevant documentation and activities on the licence, including
certain dismantling works by Columbus' Spanish subsidiary. Tender
process for the new concession is now expected to commence in Q2/Q3
2018 with the concession being awarded to the new licensee in
2019.
-- Tony Hawkins and Troy Wilson appointed as Legal and M&A
Director and Goudron Field Manager respectively, bringing a wealth
of worldwide experience to the Company and further strengthening
the team to progress with its growth strategy focus.
DETAILED INFORMATION
Operations
Goudron
Goudron Field wellwork has comprised of over 70 separate
workovers since August 2017 performed under a new Wellwork Planning
Procedure followed by a new Active Well Optimisation procedure
aimed at maximising the potential of the existing producing
well-stock. Simple well integrity checks have preceded water
injectivity testing and combined well clean-outs and stimulations
termed "Perforation Washes" on 20 wells, which have resulted in
some significant improvements in oil rates. Perforation Washes on
wells GY-190, GY-211, GY-257, GY-290, GY-673 and GY-683 have
resulted in instantaneous oil rate gains of 20-60 BOPD per well.
Not all jobs have resulted in oil gains and problems handling
reservoir sand laden fluids produced from wells GY-664 and GY-670
during October and November resulted in production losses from
these significant oil production rate wells during those months.
The challenges of developing downhole pumping systems able to
handle sand content in the produced oil and water has been
partially met through the introduction of new sand handling systems
such as downhole filters and sand resistant rod pump designs.
The Goudron Field waterflood pilot facilities have been
commissioned with the first water injection pump being delivered to
the field and commissioned in November 2017 on the GY-669 well with
the objective of testing communication with GY-670. Intermittent
water injection has been carried out into GY-669 during December
2017 with more continuous injection planned in 1Q18. Waterflood
Pilot "A" implementation is approved and is focussed on supporting
the GY-664 and GY-665 wells. Additional produced water storage
tanks were installed in December 2017 to allow capture and
treatment of all produced water. A second water injection pump is
being delivered in December. The conversion to injection of the
first target Waterflood Pilot "A" well, GY-668 is planned to allow
Pilot "A" to commence in 1Q 2018.
The field safety record has been commendable with no Lost Time
Incidents in 2017 to date.
The area has experienced a particularly heavy rainy season with
frequent flooding and road blockages affecting field access. The
operations crew have coped with the adverse weather conditions and
maintained field production, workover and water injection facility
commissioning operations throughout. Additions to the crew and
changes to the crew schedules have been implemented in November
2017 in anticipation of the increased workload from water injection
and well stimulation activities planned in 2018.
South West Peninsula
Negotiations with BOLT and other stakeholders have been slower
than the Company would have wished but it hopes to be able to
announce improved and re-structured commercial arrangements for
these very exciting assets in the near future. Tony Hawkins has
been assisting the Company on the commercial negotiations in recent
months as a consultant, including attending a number of meetings
with the relevant parties in Trinidad.
Bonasse Field
After the Company complete the South West Peninsula transaction,
the Company intends to re-activate the Bonasse field and use its
knowledge of recent operations on the Goudron field to increase
production in 2018.
Spain
The Company has continued to work towards closing the La Lora
Concession and now anticipates the closure of the concession in
February 2018. At present the Company is removing/dismantling old
infrastructure in the field, which it anticipates will be completed
early January 2018, and will allow the Spanish authorities to
formally close the current concession. Following such closure,
Columbus will have an opportunity to take part in the tendering
process for a new concession (expected Q2-Q3 2018).
The closure of the current concession has been a protracted and
hugely frustrating process, due in large part to the fact this
process has never been undertaken by Spanish authorities before for
an operating oil-field. The Spanish authorities have therefore been
very pedantic in what should have been a relatively short and
straight-forward process to enable the tender for the new
concession to take place. Despite these delays, the Company has
continued to meet its ongoing obligations on the current
concession, including meeting the staffing, legal and operational
costs associated with keeping the field in good order and seeking
to close-out the current concession. This has involved costs of
approximately US$60,000 per month which are included in the
Company's positive cashflow assessment.
Financial
The Company is fully funded for its planned 2018 work
programme:
Cash flow positive
The Company has taken action throughout 2H 2017 to reduce its
G&A costs, particularly in London with an office move to a new
location and with the senior leadership (Executive Chairman, CFO
and Managing Director Trinidad) all taking 50% of their fees in
shares instead of cash. The shares will be issued after one year of
employment for all three employees. It should be noted that Tony
Hawkins, who will commence his employment with the Company on 1
January 2018, will also take 50% of his fees in shares after one
year.
The reductions in costs, as highlighted above, together
with:
-- the introduction of further cost efficiencies in Trinidad,
-- the increased production in the Goudron field by year-end 2017 to over 550 bopd, and
-- an improved oil price environment where the Company is
receiving an increased oil price on sales, with US$56.241 per
barrel being received in December 2017 for November sales to the
Pointe-a-Pierre refinery,
means that the Company will be generating sufficient net cash
from operations in Trinidad to meet all of the Group's day to day
running costs as it enters 2018. This introduces additional cash to
drive further production growth and allow the Company to consider
implementing other opportunities to add value.
Lind Partners
Following the announcement on 11 September 2017, the
restructuring of the Lind Partners, LLC ("Lind") loan has resulted
in the Company being able to accelerate its work programme in
Trinidad to increase production and revenues from existing fields,
including field optimisation, well stimulation and the
water-injection pilot. Lind also exercised their exclusive right to
provide the Company with a second loan facility of US$750,000,
which was received by the Company, net of expenses, in October
2017. With the exception of the monthly loan repayment due in
September 2017, which was paid in shares as part of the
re-structuring announced on 11 September 2017, the Company has
repaid Lind in cash every month since the initial loan was taken
out in December 2016. In October and November 2017, Lind also
exercised its right to convert a total of US$450,000 of the monies
outstanding from the loans into shares at the re-structured
conversion share price of 4.5p per share.
The total debt outstanding on the two Lind loans at the end of
December 2017, after repayments due later this month and the two
loan conversions referred to above, will be approximately US$1.35
million. The Company has budgeted to meet all repayments due to
Lind in 2018 in cash, although Lind retains the exclusive right to
convert outstanding debt at 4.5 pence per share at any time of
their choosing whilst the debt remains outstanding.
Equity Investment by Schroders and others
The Lind loan re-structure was followed by an investment of GBP3
million by Schroder Investment Management Ltd ("Schroders") at 5
pence per share in October 2017 and a further GBP1 million of
investment from existing shareholders through an Open Offer at the
same share price (an offer which was over-subscribed 3.2 times).
Senior management also participated in capital raising, further
aligning them with shareholders. As a result of this investment and
the Company's cashflow positive position, the Company is now in a
fully funded position to deliver on its planned 2018 work
programme. The Company was particularly delighted to add an
institutional investor with the excellent reputation of Schroders
to its shareholder register and demonstrates the increasing
confidence of institutional investors in Columbus' new business
strategy, leadership and growth potential.
Personnel
Tony Hawkins has been working for the Company as a consultant
over the past few months and, in particular, has taken a leading
role on the SWP negotiations in Trinidad. Tony, who will be taking
up the role of Legal and M&A Director in January 2018 (a
non-Board position at present), is an English and Australian
qualified lawyer of 20 years' experience, who has worked in both
private practice and in-house roles. Most recently, he was General
Counsel & Head of Commercial for Sterling Energy plc, a London
listed oil & gas company. He was also the company secretary. He
is a senior energy lawyer, asset manager and commercial negotiator,
predominately in oil and gas but also in power, LNG and renewables.
Prior to Sterling Energy, Tony spent 6 years at Centrica plc (a
FTSE 100 listed utility), where he had a number of roles, including
interim General Counsel for Centrica Energy. Whilst at Centrica
Energy, he assisted Centrica with its new country entry in Trinidad
(Block 2ab, NCMA-1, Block 22, Block 1(a) and Block 1(b)), Norway
and Egypt.
Troy Wilson joins the Company as Goudron Field Manager with 10
years field operations experience gained both from a major service
company and local Trinidad operating E&P companies. Troy is a
Trinidad and Tobago national and as Schlumberger's Senior
Artificial Lift Specialist has implemented downhole pump solutions
in many of the Trinidad field developments as well as having
experience in Suriname, Guyana, Barbados and the USA. Experienced
in completions design, production troubleshooting, well stimulation
and field optimisation, Troy brings Petroleum Engineering skills to
the field based Goudron Field Manager position.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Qualified Person's statement:
The information contained in this document has been reviewed and
approved by Stewart Ahmed, Managing Director (Trinidad) for
Columbus Energy Resources plc. Mr Ahmed has a BSc in Mining and
Petroleum Engineering and is a member of the Society of Petroleum
Engineers. Mr Ahmed has over 32 years of relevant experience in the
oil industry.
Contact Information
Columbus Energy Resources plc +44 (0)20 3794
Leo Koot / Gordon Stein 9230
VSA Capital Limited
Financial Adviser and Broker
Andrew Monk / Andrew Raca / Justin +44 (0)20 3005
McKeegan 5000
Beaumont Cornish Limited
Nominated Adviser
Roland Cornish / Rosalind Hill +44 (0)20 7628
Abrahams 3396
Camarco
Public and Investor Relations +44 (0)20 3757
Georgia Edwards / James Crothers 4983
This information is provided by RNS
The company news service from the London Stock Exchange
END
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