TIDMOPHR
RNS Number : 7739K
Ophir Energy Plc
12 July 2017
12(th) July 2017
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 period ending 30 June 2017.
Key Points:
-- A cost saving initiative, focused on London and expatriate roles,
has been initiated which is expected to deliver annual cost
savings of $10-12 million
-- Fortuna FID is expected to be delivered in 2H 2017 as the remaining
milestones are closed out with the multiple stakeholders
-- Ophir's financing position was further strengthened by the signing
of a new $250 million Reserve Based Lending Facility, with a
further $100 million available through an uncommitted Accordion
facility
-- Production in 1H averaged 11.3 Mboepd, FY 2017 guidance is lowered
to 12.0 Mboepd
-- Net cash at the period end is estimated at $130 million; with
gross cash and undrawn debt of $412 million
Nick Cooper, CEO of Ophir, commented:
"We have taken certain difficult but necessary decisions to
further reduce our cost base. This is now right-sized to maximise
the value of our core assets in the period before the Fortuna FLNG
Project is on-stream. As part of the cost reduction exercise, Dr
Bill Higgs will be stepping down as COO and I would like to thank
Bill for his outstanding contribution to Ophir since 2014. We are
closing in on the Fortuna Project FID which will start the
monetisation of a substantial portion of Ophir's resource
base."
Cost Reductions
Ophir's Board has recently moved to further reduce the company's
underlying cost base in recognition of limited signs of an oil
price recovery, and of lower exploration activity. Ophir's goal of
becoming a sustainable exploration company remains in place and it
is forecast that Ophir's cash flow generation will support the
drilling of 2-3 exploration wells per annum when the Fortuna FLNG
project is on-stream in 2020. Prior to that, Ophir's discretionary
spend will be paced in order to preserve balance sheet capacity,
thereby prioritising the Fortuna FLNG project and the expansion of
Ophir's Asian producing assets.
To decrease running costs, corporate roles in the London office
and expatriate positions will be reduced by approximately 50%
(equating to around 15% of the global workforce). These actions are
estimated to result in annual cost savings of $10-12 million (after
one-off restructuring costs of $7 million). The company will,
nevertheless, retain all competencies essential to the delivery of
its core projects, including the remaining workstreams required to
secure the Final Investment Decision ("FID") of Fortuna, to
undertake the expansion of the Asian production base and to operate
Ophir's exploration portfolio.
Production
Production during the first half of 2017 averaged 11.3 Mboepd.
This is 1.2 Mboepd below budget due to temporarily lower than
expected production on the two gas assets. Production from the
Kerendan gas field averaged 12.3 MMscfd as the field ramped-up
through the second quarter of 2017 to the full daily contract
quantity of 19.2 MMscfd at a slower rate than expected. Gross
production from the Sinphuhorm gas field was forecast at 94.0
MMscfd for the half-year, as the off-taker EGAT temporarily reduced
its offtake nominations. The nominations have recently returned to
normal levels.
Gross production at the Bualuang oil field was 8.0 Mbopd in the
period. An infill drilling programme on the Bualuang field
commenced in May which will deliver increased production in the
second half of the year. With the lower Group production achieved
in 1H 2017, and allowing for the increase of Bualuang production in
2H 2017, the forecast full year production for 2017 is lowered to
12.0 Mboepd.
Equatorial Guinea Monetisation - the Fortuna FLNG Project
Significant steps were accomplished in the first half of 2017
towards the FID of the Fortuna FLNG Project. Given that the
remaining milestones are dependent on multiple stakeholders, it has
proven difficult to precisely forecast FID timing. However with the
strong progress seen in the first half of 2017 and the current
intensive effort from all parties, we currently expect FID of the
Fortuna Project to be achieved in the second half of 2017.
At present, the project has two milestones outstanding prior to
FID: (i) the awarding of the offtake agreements and (ii) the
closing out the project debt facility. Both of these workstreams
are currently being progressed with continual contact between the
stakeholders to finalise the details of coordination along the
value chain.
Final terms have now been agreed with a shortlist of off-takers
and the project stakeholders are currently evaluating which of
these offers to accept. These offers comprise Brent linked
contracts. Principle commercial terms have been agreed with a
consortium of three China-based banks for the debt facility and
documentation is being completed.
Once the offtake decision and debt facility have been agreed,
the Board of Ophir will be in the position to take the FID, which
will also be subject to approval by Ophir's shareholders and the
President of Equatorial Guinea.
Resource Monetisation
In June 2017, an investment decision was taken to commence the
fourth development phase of the Bualuang oil field. The capital
cost of Phase Four is expected to be $145 million. This investment
will convert 9.2 MMboe of contingent resource into proved and
probable reserves and will deliver incremental first oil in 2H
2018. This investment is expected to commence towards the end of
2017 with the majority of the expenditure occurring in 2018.
At the Kerendan gas field the focus is now on monetising further
gas from the asset beyond the first contracted amount. A 560 sq km
onshore 3D seismic survey in the Bangkanai PSC and West Bangkanai
PSCs commenced early in 2017 and is expected to complete during 4Q
2017. The seismic data, in combination with the data from the West
Kerendan-1 ("WK-1") well and the WK-1 drill stem test, will provide
assurance to SKK Migas (the state regulator) for approval of the
next tranche of gas sales from the 450 bcf of discovered but
uncontracted 2C gross resource associated with the Kerendan
field.
Exploration Update
As part of the rationalisation and renewal of its exploration
portfolio, Ophir exited four PSCs in the first half of 2017: the
DW2A PSC in Malaysia and the Mbeli, Ntsina and Gnondo PSCs in
Gabon. On the renewal side of the equation the licence was signed
for Block 5 in Mexico and Block 24 was awarded (subject to
negotiation of PSC terms) by the Government of Equatorial
Guinea.
Financial Update
Revenue for 1H 2017 is forecast at $88 million with Bualuang
production realising $50/bbl and Kerendan gas $5.22/Mscf. In
addition, Sinphuhorm generated net investment income $2.6 million
(at an average gas price of $4.36/Mscf).
Operating cash flow (post-tax, pre-working capital) for 1H 2017
is forecast at $40 million and for the full year at $85 million
with lower production and commodity prices. Capital expenditure for
1H 2017 is forecast at $60 million and included the drilling of the
Ayame-1 exploration well, the continued spend on progressing
Fortuna to FID and the current Bualuang infill drilling campaign.
Capital expenditure for the full year is forecast at $160 million
and includes Mexico seismic, completion of Bualuang infill drilling
and phase IV planning and FID of Fortuna.
Following the recent refinancing of the Reserve Based Lending
Facility, the liquidity position remains strong with forecast year
end 2017 cash and undrawn debt facilities of approximately $390
million. The Group elected not to draw on the new RBL facility
having repaid the previous facility in full.
Guidance is therefore provided in relation to the reporting
period to 30 June 2017 in advance of the Group's Half Year Results
release on 14 September 2017 and guidance for the full year.
Guidance figures are all subject to change.
HY 2017 FY 2017
(E) (E)
Production (Mboepd) 11.3 12.0
Operating cash flow ($'millions) 40 85
Capital expenditure ($'millions) 60 160
Net cash ($'millions) 130 85
Liquidity (cash and undrawn
debt facility) ($'millions) 412 390
For further enquiries please contact:
Ophir Energy plc + 44 (0) 20 7811 2400
Nick Cooper, CEO
Tony Rouse, CFO
Geoff Callow, Head of IR and Corporate Communications
Brunswick (PR Adviser to Ophir) +44 (0)20 7404 5959
Patrick Handley
Wendel Verbeek
The information contained within this announcement is deemed by
the Company to constitute inside information for the purposes of
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
This information is provided by RNS
The company news service from the London Stock Exchange
END
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