TIDMVLU
RNS Number : 5625M
Valeura Energy Inc.
12 May 2020
VALEURA ANNOUNCES FIRST QUARTER 2020
FINANCIAL AND OPERATING RESULTS
Calgary, May 12, 2020: Valeura Energy Inc. (TSX:VLE, LSE:VLU)
("Valeura" or the "Company"), the upstream natural gas company
focused on the Thrace Basin of Turkey, reports its financial and
operating results for the three month period ended March 31, 2020
.
The complete quarterly reporting package for the Company,
including financial statements and associated management's
discussion and analysis ("MD&A"), are being filed on SEDAR at
www.sedar.com and have been posted on the Company's website at
www.valeuraenergy.com . All dollar amounts are in US dollars unless
otherwise stated.
Financial and Operating Results Highlights
-- Maintained gas production operations in light of the COVID-19
pandemic by implementing measures to protect the health and
well-being of Valeura personnel and contractors;
-- Valeura net Q1 2020 average production increased to 716 boe/d, up 11% from Q4 2019;
-- Average realised Q1 2020 gas prices unchanged on a Turkish
Lira basis versus the prior quarter, equivalent to $7.08/Mcf, down
5% from Q4 2019;
-- Revenue in Q1 2020 of $2.8 million, an increase of 6% over the prior quarter;
-- Operating netback of $24.95/boe in Q1 2020, up 2% from Q4 2019;
-- Net working capital surplus at March 31, 2020 of $34.1
million, including cash of $32.6 million;
-- Valeura's interest in the Thrace deep rights doubled
effective April 2, 2020, following the Government of Turkey
approval for the transfer of Equinor's working interest to Valeura
and partner Pinnacle Turkey Inc.;
-- Successfully drilled two commitment wells on the West Thrace
Exploration Licence with preliminary indications of hydrocarbons in
both wells;
-- All Valeura lands remain in good standing with no unsatisfied work commitments; and
-- The Company is exploring the potential for mergers and
acquisitions to grow its portfolio, capitalising on the current
market environment.
Valeura remains committed to safe ongoing operations and has
taken precautious both to protect the well-being of its staff and
to sustain its ongoing production and revenue generation in Turkey.
At the same time, the Company continues to pursue appraisal of the
deep unconventional gas play and following the doubling of its
working interest after Equinor's exit and is commencing the process
to seek a new partner for the play. The Company's strong financial
position, with an end-Q1 2020 working capital surplus of $34.1
million and no debt, affords it significant flexibility to support
its strategy to extract maximum value from both its shallow
conventional production and deep unconventional plays in the Thrace
basin of Turkey.
Sean Guest, President and CEO commented:
"Keeping our people safe is our highest priority, and we are
taking direction from public health authorities and medical
professionals on how to both remain safe and continue operations.
Our Q1 2020 results are an example of how even in the face of
substantial new challenges due to the COVID-19 pandemic, we can
maintain our health and safety record while continuing critical
operations to maintain the supply of gas to our customers. By
having direct control of the value chain all the way from the
wellhead to the customer, coupled with pricing that has not been
influenced by the recent sharp decline in crude oil prices, our
shallow gas business is fundamentally well-positioned to remain
resilient in these times.
"At the same time, we remain committed to our deep, tight gas
play, and are commencing the process of securing a new partner to
participate in an ongoing appraisal work programme. In the near
term we will continue to work toward more low-cost data collection,
including plans to resume long-term production testing at
Devepinar-1.
"Valeura remains in a strong financial position, with a gas
production asset that generates cash flow even in times of economic
turmoil, and significant option value on a potentially very large
unconventional gas play. We will continue to closely monitor
economic conditions in Turkey, and to course-correct our operations
as required to protect our ongoing revenue generation. With
appropriate safeguards in place, we are well positioned to ride out
the current economic turmoil and expect to emerge strong."
Financial and Operating Results Summary
Three Months Three Months Three Months
Ended Ended December Ended
March 31, 31, 2019 March 31,
2020 2019
Financial
(thousands of US$ except share
amounts)
------------- ---------------- -------------
Petroleum and natural gas revenues 2,808 2,653 2,918
------------- ---------------- -------------
Adjusted funds flow (1) 52 1,595 341
------------- ---------------- -------------
Net loss from operations (192) (735) (2,310)
------------- ---------------- -------------
Exploration and development
capital 1,882 3,669 4,273
------------- ---------------- -------------
Banarli Farm-in proceeds (2) - - (1,452)
------------- ---------------- -------------
Net working capital surplus 34,054 37,645 43,811
------------- ---------------- -------------
Cash 32,554 36,111 47,800
------------- ---------------- -------------
Common shares outstanding
Basic 86,584,989 86,584,989 86,584,989
Diluted 94,988,323 92,421,565 92,406,655
------------- ---------------- -------------
Share trading (CDN$ per share)
High 0.65 2.65 3.99
Low 0.20 0.48 2.25
Close 0.23 0.64 2.59
------------- ---------------- -------------
Operations
------------- ---------------- -------------
Production
------------- ---------------- -------------
Crude oil (barrels ("bbl")/d) 17 - 20
------------- ---------------- -------------
Natural Gas (one thousand cubic
feet ("Mcf")/d) 4,200 3,877 4,488
------------- ---------------- -------------
boe/d 716 646 768
------------- ---------------- -------------
Average reference price
Brent ($ per bbl) 50.44 - 63.10
BOTAS Reference ($ per Mcf)
(3) 7.17 7.54 7.11
------------- ---------------- -------------
Average realised price
Crude oil ($ per bbl) 65.22 - 69.56
Natural gas ($ per Mcf) 7.08 7.44 6.92
------------- ---------------- -------------
Average Operating Netback
($ per boe) (1) 24.95 24.53 25.30
------------- ---------------- -------------
Notes:
See the MD&A filed on SEDAR for further discussion.
(1) The above table includes non-IFRS measures, which may not be
comparable to other companies. Adjusted funds flow is calculated as
net income (loss) for the period adjusted for non-cash items in the
statement of cash flows. Operating netback is calculated as
petroleum and natural gas sales less royalties, production expenses
and transportation.
(2) Proceeds received from Equinor to complete spending
commitment for Phase 2 of the Banarli Farm-in. Recorded in the
financial statements as a reduction of exploration and evaluation
assets.
(3) BOTAS regularly posts prices and its Level-2 Wholesale
Tariff benchmark is shown herein as a reference
price. See the Company's AIF filed on SEDAR for further discussion .
Net petroleum and natural gas sales in Q1 2020 averaged 716
boe/d, which was 11% higher than Q4 2019. While the Company
experienced reduced gas demand by some of its light industrial
customers in the latter part of Q1 2020 due to COVID-19, the
reduction was managed primarily by curtailing third-party gas
throughput, thereby imposing only minimal reductions to Valeura's
equity gas production. Through this production management, the
Company continues to benefit from the impact of successful well
workovers performed in late 2019 and early in Q1 2020.
Production revenue in Q1 2020 was $2.8 million, an increase of
6% over Q4 2019 due to the higher production in Q1, partly offset
by the impact of a stronger US dollar on price realisations.
Turkey's gas prices were unchanged from the prior quarter, as
denominated in Turkish Lira.
Exploration and development capital spending was $1.9 million in
Q1 2020, comprised of $1.1 million spent on shallow operations,
with the remainder on concluding the Devepinar-1 short-term
production test and completing the well in preparation for a
long-term production test.
As of March 31, 2020, the Company had a net working capital
surplus of $34.1 million, of which $32.6 million was cash. This
compares to a net working capital surplus of $37.7 million at
December 31, 2019, of which $36.1 million was cash. The decrease in
the Company's reported cash position was due in part to the
strengthening of the US dollar in relation to the Canadian dollar,
reflecting the fact that the Company holds its cash in a mix of US
dollar and Canadian dollar accounts. In addition, the Company
incurred non-recurring expenses in Q1 2020, including severance
payments, which are not expected in the remaining quarters of
2020.
Operations Update
Valeura's gas production continues to generate strong operating
netbacks, most recently averaging $24.95/boe during Q1 2020. This
creates a stream of operating income for the business and also
underscores the long-term potential value of the Company's
unconventional gas resource.
During the first part of Q1 2020, Valeura continued its
programme of selective low-cost well workovers across its
conventional production base, leading to increased production
capacity. Workover operations, along with other non-critical field
work, were suspended in March 2020 as part of the Company's
measures to protect the health of the Company's employees and
contractors due to the COVID-19 pandemic. While Valeura is
maintaining its production operations, the Company acknowledges
that the combined effect of reduced field activity, the potential
for lower industrial gas demand in light of COVID-19, and the
upcoming holiday period at the end of Ramadan, is expected to have
a negative impact on Q2 2020 production volumes.
The Company has drilled two shallow exploration commitment
wells, Kuzey Atakoy-4 and Bati Sariyer-1, on its West Thrace
exploration licence . At Bati Sariyer-1, the Company observed
positive indications of hydrocarbons during drilling, and is
preparing for wireline evaluation of the objective section.
Wireline logs from Kuzey Atakoy-4 indicate gas zones, but this will
need to be confirmed with production testing. This testing is
planned to begin once safe field operations can resume and the
Company has constructed pipelines to tie the wells to its gas sales
network.
The Company is continuing to assess the potential for further
exploitation from its producing fields by converting reserves into
production. A technical study will be completed in Q2 2020 with
recommendations on further infill drilling opportunities. With
suitable equipment and a capable workforce available in country,
Valeura can ramp up investment activities rapidly once public
health guidelines permit doing so.
All production leases and exploration licences remain in good
standing with no unsatisfied work commitments. On March 26, 2020
the Government of Turkey approved a 10-year extension of the
Company's Hayrabolu Production Lease until February 16, 2030. In
April, the Company submitted applications for the first 2-year
extension period for the Banarli and West Thrace Exploration
Licences. Early in Q2 2020, Valeura exited from the non-core Edirne
Production Lease, which has not had any production or activity for
several years and is no longer deemed prospective.
Valeura remains committed to the appraisal of the deep tight gas
play, as the management and directors continue to see the potential
for significant long-term gas production. During Q1 2020, Equinor
announced their intent to discontinue participation in the deep
tight gas play, and their exit was completed early in Q2. As a
result, Valeura's working interest in the deep play has effectively
doubled, resulting in the Company holding 100% in the Banarli
exploration licences, and 63% of the deep rights in the West Thrace
Exploration Licence and production leases. Valeura remains operator
of all the blocks.
Valeura recognises that the deep gas play is at an early phase
of its life cycle and will ultimately require more drilling and
testing. The Company has begun seeking an additional partner to
participate in the deep unconventional play and intends to engage
an advisor, with a mandate to secure a suitable candidate. The
target will be a partner who brings both financial and technical
capability to the joint venture, for a carried work programme that
is expected to include drilling new vertical and horizontal wells,
reservoir stimulation, and production testing.
In the near term, the Company is pursuing a programme of
low-cost data collection for the deep play and plans to re-start
production from the Devepinar-1 well for a longer-term test.
Valeura is currently in the process of securing suitable equipment
and the timing for field operations is likely to be influenced by
restrictions on movement of people and equipment as a result of the
global COVID-19 response.
Valeura is also exploring the potential for inorganic
opportunities including mergers and acquisitions to play a role in
the Company's growth, particularly in light of recent economic
turmoil which may result in new opportunities emerging across the
region. In all instances, the Company will evaluate opportunities
to assess strategic fit, with a priority on adding value to the
portfolio in the near to mid-term and retaining relative balance
sheet strength.
Annual and Special Meeting
Valeura has rescheduled its annual and special meeting of
shareholders as a result of restrictions on public gatherings due
to COVID-19. The Company is now planning to hold the meeting on
August 12, 2020 at 9:00 a.m. (MDT), in Calgary. The meeting
materials will be mailed in early July 2020.
Webcast and Conference Call
The management team will host an investor and analyst call and
question session at 9:00 a.m. Calgary (11:00 a.m. Toronto, 4:00
p.m. London) today, Tuesday, May 12, 2019. A live audio feed of the
call will be available via the webcast link below, and those
interested in participating in the question session should use the
dial-in numbers below. Please register approximately 15 minutes
prior to the start of the call. The quarterly results will be made
available on the Company's website at: www.valeuraenergy.com .
Event title: Valeura First Quarter 2020 Results Conference
Call
Webcast link:
https://produceredition.webcasts.com/starthere.jsp?ei=1312681&tp_key=5a72d7796a
Calgary dial-in: +1 587 880 2171
Toronto dial-in: +1 416 764 8688
North America toll-free: +1 888 390 0546
UK toll-free: +44 0800 6522 435
For further information, please contact:
Valeura Energy Inc. (General and Investor Enquiries) +1 403 237 7102
Sean Guest, President and CEO
Heather Campbell, CFO
Robin Martin, Investor Relations Manager
Contact@valeuraenergy.com , IR@valeuraenergy.com
Canaccord Genuity Limited (Corporate Broker) +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor, James Asensio
CAMARCO (Public Relations, Media Adviser) +44 (0) 20 3757 4980
Owen Roberts, Monique Perks, Hugo Liddy, Billy Clegg
Valeura@camarco.co.uk
Oil and Gas Advisories
A boe is determined by converting a volume of natural gas to
barrels using the ratio of 6 Mcf to one barrel. Boes may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 boe is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. Further, a
conversion ratio of 6 Mcf:1 boe assumes that the gas is very dry
without significant natural gas liquids. Given that the value ratio
based on the current price of oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilising a conversion on a 6:1 basis may be misleading as an
indication of value
Advisory and Caution Regarding Forward-Looking Information
Certain information included in this new release constitutes
forward-looking information under applicable securities
legislation. Such forward-looking information is for the purpose of
explaining management's current expectations and plans relating to
the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes, such as making
investment decisions. Forward-looking information typically
contains statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", "project",
"target" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this new
release includes, but is not limited to: resumption of the
Company's operations following the COVID-19 pandemic; the potential
for hydrocarbons at Kuzey Atakoy-4 and Bati Sariyer-1 wells and
that production testing will confirm such; the ability to extract
maximum value from both its shallow conventional production and
deep unconventional plays in the Thrace basin of Turkey; the
resiliency of the Company's shallow gas business; the short-term
impact of COVID-19 and the Ramadan holiday period on Q2 2020
production volumes; the ability to conduct a long term test on
Devpinar-1; the completion of geological and geophysical studies on
the Banarli Exploration Licences and resulting satisfaction of the
work programme obligations thereon in the current term of the
licences; the potential of a deep gas play in the Thrace Basin; the
completion of the Company's technical study assessing the potential
for further exploitation of its conventional shallow play;
management's belief regarding the potential of the Company's deep
basin-centred gas play and shallow gas business in the Thrace
Basin; the optimisation of the Company's conventional shallow gas
assets; the Company's ability to find another partner for the deep
unconventional gas appraisal programme; the ability to secure new
equipment; the
Company's commitment to safety, environmentally responsible
practices and optimising operational and administrative functions;
the Company's business strategy and outlook, operational plans, and
expected capital expenditures; and the potential for inorganic
opportunities to play a role in the Company's growth.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things: the
resumption of operations following the COVID-19 pandemic; political
stability of the areas in which the Company is operating and
completing transactions; continued safety of operations and ability
to proceed in a timely manner; the impact of Equinor's withdrawal
from joint operations; continued operations of and approvals
forthcoming from the Turkish government in a manner consistent with
past conduct; future drilling activity on the expected timelines;
the prospectivity of the TBNG JV Lands and Banarli Exploration
Licences, including the deep potential; the continued favourable
pricing and operating netbacks in Turkey; future production rates
and associated operating netbacks and cash flow; decline rates;
future sources of funding; future economic conditions; future
currency exchange rates; the ability to meet drilling deadlines and
other requirements under licences and leases; and the Company's
continued ability to obtain and retain qualified staff and
equipment in a timely and cost efficient manner. In addition, the
Company's work programmes and budgets are in part based upon
expected agreement among joint venture partners and associated
exploration, development and marketing plans and anticipated costs
and sales prices, which are subject to change based on, among other
things, the actual results of drilling and related activity,
availability of drilling, high-pressure stimulation and other
specialised oilfield equipment and service providers, changes in
partners' plans and unexpected delays and changes in market
conditions. Although the Company believes the expectations and
assumptions reflected in such forward-looking information are
reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and
unknown risks and uncertainties. Exploration, appraisal, and
development of oil and natural gas reserves are speculative
activities and involve a degree of risk. A number of factors could
cause actual results to differ materially from those anticipated by
the Company including, but not limited to: the risks of currency
fluctuations; changes in gas prices and netbacks in Turkey;
potential changes in joint venture partner strategies and
participation in work programmes; uncertainty regarding the
contemplated timelines and costs for the deep evaluation; the risks
of disruption to operations and access to worksites, threats to
security and safety of personnel and potential property damage
related to political issues or civil unrest in Turkey; potential
changes in laws and regulations, the uncertainty regarding
government and other approvals; counterparty risk; risks associated
with weather delays and natural disasters; and the risk associated
with international activity. The forward-looking information
included in this new release is expressly qualified in its entirety
by this cautionary statement. See the 2019 AIF for a detailed
discussion of the risk factors.
The forward-looking information contained in this new release is
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this new release is expressly qualified by
this cautionary statement.
Additional information relating to Valeura is also available on
SEDAR at www.sedar.com .
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction,
including where such offer would be unlawful. This announcement is
not for distribution or release, directly or indirectly, in or into
the United States, Ireland, the Republic of South Africa or Japan
or any other jurisdiction in which its publication or distribution
would be unlawful.
Neither the Toronto Stock Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Toronto
Stock Exchange) accepts responsibility for the adequacy or accuracy
of this news release.
Condensed Interim Consolidated Statements of Financial
Position
(thousands of US Dollars, March 31, December 31,
unaudited) 2020 2019
--------------------------------- ---------------- ----------------
Assets
Current Assets
Cash and cash equivalents $ 32,554 $ 36,111
Accounts receivable 4,078 5,590
Prepaid expenses and deposits 988 1,123
Inventory 216 214
37,836 43,038
Restricted cash (note 3) 272 258
Right of use lease asset (note
8) 95 78
Exploration and evaluation
assets (note 4) 3,970 4,006
Property, plant and equipment
(note 5) 30,800 34,283
$ 72,973 $ 81,663
--------------------------------- ---------------- ----------------
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable and accrued
liabilities $ 3,782 $ 5,393
Lease liability (note 8) 88 69
Decommissioning obligations
(note 6) 7,024 8,181
Deferred taxes 1,612 1,702
Shareholders' Equity
Share capital (note 7) 179,717 179,717
Contributed surplus 21,415 21,229
Accumulated other comprehensive
loss (55,118) (49,273)
Deficit (85,547) (85,355)
---------------------------------- ---------------- ----------------
60,467 66,318
--------------------------------- ---------------- ----------------
$ 72,973 $ 81,663
--------------------------------- ---------------- ----------------
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Loss and
Comprehensive Loss
For the three months ended March 31, 2020 and 2019
March 31, March 31, 2019
(thousands of US Dollars, unaudited) 2020 (1)
--------------------------------------------------
Revenue (note 9)
Petroleum and natural gas sales $ 2,808 $ 2,918
Royalties (378) (388)
Other Income 268 621
-------------------------------------------------- ---------------
2,698 3,151
-------------------------------------------------- ---------------
Expenses
Production 801 783
General and administrative 1,230 1,066
Severance (note 10) 450 -
Transaction costs - 806
Accretion on decommissioning liabilities
(note 6) 218 379
Foreign exchange (gain) loss (1,317) 349
Share-based compensation (note 7) 157 538
Depletion and depreciation (notes 5 and
8) 1,278 1,397
2,817 5,318
--------------------------------------------------
Loss for the period before income taxes (119) (2,167)
Income taxes
Current tax expense - 108
Deferred tax expense 73 35
-------------------------------------------------- ---------------
Net loss (192) (2,310)
-------------------------------------------------- ---------------
Other comprehensive loss
Currency translation adjustments (5,845) (662)
-------------------------------------------------- ---------------
Comprehensive loss (6,037) (2,972)
-------------------------------------------------- ------------ ---------------
Net loss per share
Basic and diluted $ (0.00) $ (0.03)
Weighted average number of shares outstanding
(thousands) 86,585 86,491
-------------------------------------------------- ------------ ---------------
(1) Presented in US Dollars to conform with current period
presentation (note 2b)
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2020 and 2019
March 31, 2020 March 31, 2019
(thousands of US Dollars, unaudited) (1)
Cash was provided by (used in):
Operating activities:
Net loss for the period $ (192) $ (2,310)
Depletion and depreciation (note 5 and
8) 1,278 1,397
Share-based compensation (note 7) 157 538
Accretion on decommissioning liabilities
(note 6) 218 379
Unrealised foreign exchange loss (gain) (1,482) 302
Deferred tax expense 73 35
Decommissioning costs incurred (note
6) (16) (8)
Change in non-cash working capital (note
11) 775 (640)
------------------------------------------- ---------------
Cash (used in) provided by operating
activities 811 (307)
------------------------------------------- ---------------
Financing activities:
Principal payments on lease liability
(note 8) (24) (23)
Proceeds from stock option exercises - 201
------------------------------------------- ---------------
Cash (used in) provided by financing
activities (24) 178
------------------------------------------- ---------------
Investing activities:
Property and equipment expenditures (note
5) (1,461) (818)
Exploration and evaluation expenditures
(note 4) (421) (3,455)
Banarli Farm-in - 1,452
Change in restricted cash (14) 50
Change in non-cash working capital (note
11) (1,046) 4,444
------------------------------------------- ---------------
Cash used in investing activities (2,942) 1,673
------------------------------------------- ---------------
Foreign exchange gain (loss) on cash
held in foreign currencies (1,402) 263
------------------------------------------- ---------------
Net change in cash (3,557) 1,807
Cash, beginning of period 36,111 45,993
------------------------------------------- ---------------
Cash, end of period $ 32,554 $ 47,800
------------------------------------------- --------------- ---------------
(1) Presented in US Dollars to conform with current period
presentation (note 2b)
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Changes in
Shareholders' Equity
For the three months ended March 31, 2020 and 2019
(thousands of Number
US Dollars and of Accumulated
thousands of common Contributed Other Comp. Total Shareholders'
shares) shares Share Capital Surplus Deficit Loss Equity
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
Balance,
January
1, 2020 86,585 $ 179,717 $ 21,229 $ (85,355) $ (49,273) $ 66,318
Net loss for
the
period - - - (192) - (192)
Currency
translation
adjustments - - - - (5,845) (5,845)
Share-based
Compensation - - 186 - - 186
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
March 31, 2020 86,585 $ 179,717 $ 21,415 $ (85,547) $ (55,118) $ 60,467
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
(thousands of Number
US Dollars and of Accumulated
thousands of common Contributed Other Comp. Total Shareholders'
shares) Shares Share Capital Surplus Deficit Loss Equity
--------------- -------- ------------------------------ ----------------------------- --------------------------------- ------------ --------------------------------
86,233 $ $
Balance, Janu
ary
1, 2019 $ 179,384 $ 19,488 $ (80,540) (47,389) 70,943
Net loss for
the
period - - - (2,310) - (2,310)
Shares issued 352 333 (132) - - 201
Shares -
issuance
costs - - - - -
Currency
translation
adjustments - - - - (662) (662)
Share-based
Compensation - - 560 - - 560
--------------- -------- ------------------------------ ----------------------------- --------------------------------- ------------ --------------------------------
March 31, 2019
(1) 86,585 $ 179,717 $ 19,916 $ (82,850) $ (48,051) $ 68,732
--------------- -------- ------------------------------ ----------------------------- --------------------------------- ------------ --------------------------------
(1) Presented in US Dollars to conform with current period
presentation (note 2b)
See accompanying notes to the condensed interim consolidated
financial statements.
1. Reporting Entity
Valeura Energy Inc. ("Valeura" or the "Company") and its
subsidiaries (refer to note 2c) are currently engaged in the
exploration, development and production of petroleum and natural
gas in Turkey. Valeura is incorporated in Alberta, Canada and has
subsidiaries in the Netherlands, British Virgin Islands and Turkey.
Valeura's shares are traded on the Toronto Stock Exchange ("TSX")
under the trading symbol VLE and the Main Market of the London
Stock Exchange ("LSE"), under the trading symbol "VLU". Valeura's
head office address is 1200, 202 - 6 Avenue SW, Calgary, AB,
Canada.
2. Basis of Preparation
(a) Statement of compliance
These unaudited condensed interim consolidated financial
statements have been prepared in accordance with IAS 34 - Interim
Financial Reporting of the International Financial Reporting
Standards ("IFRS"). The attached unaudited condensed interim
consolidated financial statements should be read in conjunction
with Valeura's audited consolidated financial statements and
MD&A for the year ended December 31, 2019. The unaudited
condensed interim consolidated financial statements have been
prepared in accordance with IFRS accounting policies and methods of
computation as set forth in Valeura's audited consolidated
financial statements for the year ended December 31, 2019, with the
exception as noted below of certain disclosures that are normally
required to be included in annual consolidated financial statements
which have been condensed or omitted in the interim statements.
Operating, transportation and marketing expenses in profit or
loss are presented as a combination of function and nature in
conformity with industry practices. Depletion and depreciation and
finance expenses are presented in a separate line by their nature,
while net administrative expenses are presented on a functional
basis. The use of estimates and judgements is also consistent with
the December 31, 2019 financial statements.
The unaudited condensed interim consolidated financial
statements were authorised for issue by the Board of Directors on
May 11, 2020.
(b) Basis of measurement
These unaudited condensed interim consolidated financial
statements have been prepared on the historical cost basis except
for certain financial and non-financial assets and liabilities,
which have been measured at fair value. The methods used to measure
fair value are consistent with the Company's December 31, 2019
audited consolidated financial statements.
Effective December 31, 2019, the Company changed its
presentation currency from Canadian Dollars to US Dollars to better
reflect the Company's business activities, the needs of investors
and comparability to peers in the oil and gas industry. All
comparative amounts have been presented in US Dollars to conform
with current period presentation.
Subsequent to December 31, 2019, the global impact of the
COVID-19 as well as recent declines in spot prices for oil and gas
have resulted in significant declines in global stock markets and
has created a great deal of uncertainty as to the health of the
global economy. As a result, oil and gas companies are subject to
liquidity risks in maintaining their revenues and earnings as well
as ongoing and future development and operating expenditure
requirements. These factors are likely to have a negative impact on
the Company's ability to raise equity, if required, in the near
future or on terms favorable to the Company. The potential impact
that COVID-19 will have on our business or financial results cannot
be reasonably estimated at this time. Any shutdowns requested or
mandated by government authorities in response to the outbreak of
COVID-19 may have a material impact to the Company's planned
operating activities, however, no mandated shutdowns have affected
operations to date.
The situation is dynamic and the ultimate duration and magnitude
of the impact on the economy and the financial effect to the
Company is not known at this time. Estimates and judgments made by
management in the preparation of these condensed interim
consolidated financial statements are subject to a higher degree of
measurement uncertainty during this volatile period.
The Company's unaudited condensed interim consolidated financial
statements include the accounts of Valeura and its subsidiaries and
are expressed in thousands of US Dollars, unless otherwise
stated.
(c) Functional and presentation currency
The consolidated financial statements are presented in US
Dollars which is Valeura's reporting currency. Valeura's and its
foreign subsidiaries transact in currencies other than the US
Dollar and have a functional currency of Turkish Lira and Canadian
dollars as follows:
Company Functional Currency
Valeura Energy Inc. Canadian Dollars
--------------------
Valeura Energy (Netherlands) Turkish Lira
Cooperatief UA
--------------------
Valeura Energy (Netherlands) Turkish Lira
BV
--------------------
Corporate Resources BV Turkish Lira
--------------------
Thrace Basin Natural Gas Turkiye Turkish Lira
Corporation
--------------------
The functional currency of a subsidiary is the currency of the
primary economic environment in which the subsidiary operates.
Transactions denominated in a currency other than the functional
currency are translated at the prevailing rates on the date of the
transaction. Any monetary items held in a currency which is not the
functional currency of the subsidiary are translated to the
functional currency at the prevailing rate as at the date of the
statement of financial position. All exchange differences arising
as a result of the translation to the functional currency of the
subsidiary are recorded in earnings.
Translation of all assets and liabilities from the respective
functional currencies to the reporting currency are performed using
the rates prevailing at the statement of financial position date.
The differences arising upon translation from the functional
currency to the reporting currency are recorded as currency
translation adjustments in other comprehensive income or loss
("OCI") and are held within accumulated other comprehensive loss
until a disposal or partial disposal of a subsidiary. A disposal or
partial disposal will then give rise to a realized foreign exchange
gain or loss which is recorded in earnings.
(d) Use of estimates
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The ability to
make reliable estimates is further influenced by political and
economic factors. Management has based its estimates with respect
to the Company's operations in Turkey based on information
available up to the date these condensed interim consolidated
financial statements were approved by the Board of Directors.
Significant changes could occur which could materially impact the
assumptions and estimates made in these consolidated financial
statements. Changes in assumptions are recognised in the financial
statements prospectively.
(e) Changes in accounting policies
The following amendment as issued by the IASB has been adopted
by the Company effective January 1, 2020.
IFRS 3 - Business Combinations sets out the principles in
accounting for the acquisition of a business. The amendments to
this standard include a change in the definition of a business and
the addition of an optional concentration test to determine if the
acquisition is a business.
The definition of a business under the amendment to IFRS 3 is
now that a business consists of inputs and processes applied to
those inputs that have the ability to contribute to the creation of
outputs. The three elements of a business are defied as
follows:
-- Input: any economic resource that creates outputs, or has the
ability to contribute to the creation of outputs, when one or more
processes are applied to it.
-- Process: any system, standard, protocol, convention or rule
that, when applied to an input or inputs, creates outputs or has
the ability to contribute to the creation of outputs.
-- Output: the result of inputs and processes applied to those
inputs that provide goods or services to customers, generate
investment income or generate other income from ordinary
activities.
The optional concentration test permits a simplified assessment
of whether an acquired set of activities and assets is in fact a
business. An entity may elect to apply, or not apply, the test. An
entity may make such an election separately for each transaction or
other event. If the concentration test is met, the set of
activities and assets is determined not be a business and no
further assessment is needed.
3. Restricted Cash
The Company has restricted cash in the amount of $0.3 million
(2019 - $0.3 million) that is securing licence deposits with the
General Directorate of Mining and Petroleum Affairs of the Republic
of Turkey ("GDMPA"). This restricted cash is held with National
Bank of Canada ("NBC") as security, along with the Account
Performance Security Guarantee ("APSG") facility described below,
for decommissioning or abandonment obligations and ongoing work
programmes on the Company's Turkish licences and as security for
third party gas purchase, as described in Note 9 - Revenue. As the
expected abandonment date and work programmes for these assets is
more than one year from March 31, 2020, this restricted cash and
deposit have been classified as non-current in the Company's
financial statements.
Effective March 17, 2020, the Company renewed its APSG facility
with Export Development Canada ("EDC"). The APSG facility, which
was issued to NBC allows the Company to use the facility as
collateral for certain letters of credit issued by NBC. The
facility is effective from March 17, 2020 to May 31, 2021 with a
limit of US$4.5 million and can be renewed on an annual basis. The
Company has issued approximately US$2.9 million in letters of
credit under the APSG facility at current exchange rates.
4. Exploration and Evaluation Assets
Cost Total
Balance, December 31, 2019 $ 4,006
Additions 421
Capitalised share-based compensation 32
Effects of movements in exchange rates (489)
----------------------------------------- --------------------------
Balance, March 31, 2020 $ 3,970
----------------------------------------- --------------------------
Exploration and evaluation ("E&E") assets consist of the
Company's exploration projects which are pending the determination
of proved or probable reserves. Additions represent the Company's
share of costs incurred on E&E assets during the period.
In circumstances where the Company has entered into farm-in
arrangements whereby the farm-in partner ("partner") will earn a
working interest on certain properties through payment of a
pre-determined portion of the costs of exploration or development
activities, Valeura recognises a disposal of the partner's working
interest once the commitment has been met and the difference
between the proceeds received and the carrying amount of the asset
are recognised as a gain or loss in earnings for Property, Plant
and Equipment assets and as a reduction of Exploration and
Evaluation Assets for instances where the farm-in is on undeveloped
land.
5. Property, Plant and Equipment
Cost Total
----------------------------------
Balance, December 31, 2019 $ 66,126
Additions 1,461
Change in decommissioning
obligations (note 6) (610)
Effects of movements in exchange
rates (6,155)
Balance, March 31, 2020 $ 60,822
------------------------------------
Accumulated depletion and Total
depreciation
----------------------------------
Balance, December 31, 2019 $ 31,843
Depletion and depreciation
expense 1,248
Effects of movements in exchange
rates (3,069)
Balance, March 31, 2020 $ 30,022
------------------------------------
Net book value Total
----------------------------
Balance, December 31, 2019 $ 34,283
Balance, March 31, 2020 $ 30,800
------------------------------ ------------------
(a) Contingencies
Although the Company believes that it has title to its oil and
natural gas properties, it cannot control or completely protect
itself against the risk of title disputes or challenges.
(b) Depletion - future development costs
For the purposes of calculating depletion, petroleum and natural
gas properties in Turkey include estimated future development costs
of $114.2 million (December 31, 2019 - $114.6 million) associated
with development of the Company's proved plus probable
reserves.
The ultimate recovery of property, plant and equipment and
exploration and evaluation costs in Turkey is dependent upon the
Company obtaining government approvals, obtaining and maintaining
licences in good standing, the existence and commercial
exploitation of petroleum and natural gas reserves and undeveloped
lands, and other uncertainties.
6. Decommissioning Obligations
March 31, 2020
Decommissioning obligations, beginning of period $ 8,181
Obligations settled (16)
Change in estimates (610)
Accretion of decommissioning obligations 218
Effects of movements in exchange rates (749)
-------------------------------------------------- ------------------
Balance, March 31, 2020 $ 7,024
-------------------------------------------------- ------------------
The Company's decommissioning obligations result from its
ownership interest in oil and natural gas assets including well
sites and gathering systems. The total decommissioning obligation
is estimated based on the Company's net ownership interest in all
wells and facilities, estimated costs to reclaim and abandon these
wells and facilities and the estimated timing of the costs to be
incurred in future years. The change in estimate is mainly due to
an increase in the risk free interest rate in Turkey (March 31,
2020 - 13.5%; December 31, 2019 - 12.0%)
7. Share Capital
(a) Issued
Common shares Number of Shares Amount
Balance, March 31, 2020 and December 31,
2019 86,584,989 $ 179,717
------------------------------------------ ----------------- --------------------
(b) Per share amounts
Per share amounts have been calculated using the weighted
average number of common shares outstanding. The weighted average
number of common shares outstanding for the three months ended
March 31, 2020 is 86,584,989 (March 31, 2019 - 83,491,203; December
31, 2019 - 86,561,863). The average number of common shares
outstanding was not increased for outstanding stock options as the
effect would be anti-dilutive.
(c) Stock options
Valeura has an option programme that entitles officers,
directors, and employees to purchase shares in the Company. Options
are granted at the market price of the shares at the date of grant,
have a 7 year term and vest over 3 years.
The number and weighted average exercise prices of share options
are as follows:
Weighted average
exercise price
Number of Options (CAD)
Balance outstanding, December 31, 2019 5,836,667 $ 1.97
Granted 3,045,000 0.25
Expired (240,000) 1.00
Forfeited/cancelled (238,333) 2.99
Balance outstanding, March 31, 2020 8,403,334 1.36
Exercisable at March 31, 2020 3,637,509 $ 1.55
---------------------------------------- ------------------ ------------------------------
The following table summarises information about the stock
options outstanding and exercisable at March 31, 2020:
Weighted
average
Outstanding remaining Weighted average Exercisable Weighted average
Exercise at March life exercise price at March exercise price
prices (CAD) 31, 2020 (years) (CAD) 31, 2020 (CAD)
$0.25 -
$0.40 2,795,000 6.96 $ 0.25 - $ -
$0.41 -
$0.66 1,402,500 2.30 0.59 1,152,500 0.60
$0.67 -
$0.78 1,621,667 3.43 0.74 1,421,667 0.74
$0.79 -
$3.81 1,685,000 5.85 2.69 495,004 2.54
$3.82 -
$4.62 899,167 4.89 4.62 568,338 4.62
8,403,334 5.06 $ 1.36 3,637,509 $ 1.55
The fair value, at the grant date during the period, of the
stock options issued was estimated using the Black-Scholes model
with the following weighted average inputs (weighted average fair
value per option in CAD):
March 31, 2020 December 31,
Assumptions 2019
-------------------------
Risk free interest rate
(%) 1.2 1.6
Expected life (years) 4.5 4.5
Expected volatility (%) 99.43 86.09
Forfeiture rate (%) 6.2 4.5
Weighted average fair
value per option $ 0.27 $ 1.84
--------------------------- --------------- -------------
8. Leases
Right of use asset leases - real estate March 31, 2020
Balance, January 1, 2020 $ 78
Addition 44
Depreciation (30)
Effect of movement in exchange rates 3
Balance, March 31, 2020 $ 95
Lease liability - real estate March 31, 2020
Balance, January 1, 2020 $ 69
Addition 44
Interest 4
Principal payments (28)
Effect of movement in exchange rates (1)
Balance, March 31, 2020 $ 88
All leases have terms between 14 and 18 months.
In addition to the leases disclosed above the Company has a
number of leases with terms of 12 months or less. Total commitments
under these short term leases at March 31, 2020 are $0.1 million.
Total lease expenses included in the financial statements related
to these contracts are as follows:
Lease payments for contracts 12 months or less in March 31, 2020
duration
Operating expenses $ 42
General and administrative expenses -
Exploration and evaluation costs 19
Property, plant and equipment costs 3
Total, March 31, 2020 $ 64
Total cash outflow, leases March 31, 2020
Principal payments $ 28
Interest payments 5
Payments under short term leases 64
Balance, March 31, 2020 $ 97
9. Revenue
Under the contracts, the Company is required to deliver a
variable volume of natural gas to the contract counter party.
Revenue is recognised when a unit of production is delivered to the
contract counterparty. The amount of revenue recognised is based on
the agreed transaction price, whereby any variability in revenue
relates specifically to the Company's efforts to transfer
production or the customer's demand for natural gas, and therefore
the resulting revenue is allocated to the production delivered in
the period during which the variability occurs. As a result, none
of the variable revenue is considered constrained
The Company's contracts have a term of one year or less, whereby
delivery takes place throughout the contract period. Revenues are
typically collected between the 12(th) and 25(th) day of the month
following production.
The Company produces a small amount of crude oil that is sold on
a spot basis as volumes warrant. Oil is delivered by truck to
customers and revenue is recognised in the period in which the
delivery occurs.
In addition to selling natural gas that the Company produces,
the Company sells natural gas that it purchases from other
producers in the area. This purchased natural gas is sold to the
same customers, using the same contracts, through the same
distribution network as natural gas the Company produces. The
Company purchases natural gas from other producers under contracts
that are typically one year or less in length at a discount of
between 12.5% and 15% to the BOTAS price. These contracts require
the Company to deliver the purchased natural gas to customers. The
Company does not have the right, nor the ability, to store the
purchased natural gas. Since the Company does not have the ability
to influence the decision making process for the purchased natural
gas volumes or the discretion to set prices, does not experience
any inventory risk, does not perform any processing of the product
and does not remit royalties to the Turkish government for the
product, it considers itself an agent in these transactions.
Revenue for this purchased gas is included net of purchase cost in
Other income.
Interest and other revenue is comprised mainly of interest on
cash in hand.
All of the Company's natural gas is sold in Turkey, in the
Thrace Basin, which is the same area in which it is produced.
Three months ended March 31, March 31,2019
2020
Natural gas $ 2,706 $ 2,795
Crude oil 102 123
Petroleum and natural gas sales $ 2,808 $ 2,918
Three months ended March 31, 2020 March 31,2019
Royalties - natural gas $ 338 $ 349
Crude oil 12 10
Gross overriding royalty 28 29
Royalties $ 378 $ 388
Three months ended March 31, 2020 March 31, 2019
Third party natural gas sales net of
costs $ 101 $ 250
Interest and other revenue 167 371
Other income $ 268 $ 621
10. Severance
In January 2020, the Company recorded severance costs of $0.45
million compared to $nil in 2019. The majority of the severance
costs related to the departure of the previous Chief Financial
Officer and were paid in accordance with his executive employment
agreement.
11. Supplemental Cash Flow Information
Three months ended March 31, March 31,
2020 2019
----------------------------------------
Change in non-cash working
capital:
Accounts receivable $ 1,512 $ 373
Prepaid expenses and deposits 135 494
Inventory (2) (21)
Deposits (non-current) - 5
Accounts payable and accrued
liabilities (1,611) 2,875
Movements in exchange
rates (305) 78
------------------------------------------ ------------- -------------
(271) 3,804
---------------------------------------- ------------- -------------
The change in non-cash working capital has been allocated to the
following activities:
------------------------------------------------------------------------
Operating 775 (640)
Investing (1,046) 4,444
------------------------------------------ ------------- -------------
$ (271) $ 3,804
---------------------------------------- ------------- -------------
12. Financial Risk Management
The Company's activities expose it to a variety of financial
risks that arise as a result of its exploration, development,
production, and financing activities such as:
-- Credit risk
-- Market risk
-- Liquidity risk
This note presents information about the Company's exposure to
each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk, and the Company's
management of capital.
The Board of Directors oversees managements' establishment and
execution of the Company's risk management framework. Management
has implemented and monitors compliance with risk management
policies. The Company's risk management policies are established to
identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and
adherence to market conditions and the Company's activities.
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the
Company's receivables from joint venture partners and oil and
natural gas marketers. The maximum exposure to credit risk is as
follows:
March 31, December
2020 31, 2019
------------------------------- ----
Joint venture receivable from
partners $ 64 $ 1,334
Revenue receivables from
customers 2,096 2,155
Taxes receivable 1,918 2,101
Accounts receivable $ 4,078 $ 5,590
--------------------------------------
Trade and other receivables:
Substantially all of the Company's petroleum and natural gas
production is marketed under standard industry terms that are
specific by country. The Company's policy to mitigate credit risk
associated with the balances is to establish marketing
relationships with credit worthy purchasers. The Company
historically has not experienced any collection issues with its
petroleum and natural gas purchasers. Joint venture receivables are
typically collected within one to three months of the joint venture
invoice being issued to the partner. The Company mitigates the risk
from joint venture receivables by obtaining partner approval of
significant capital expenditures.
Receivables from participants in the petroleum and natural gas
sector, and collection of the outstanding balances can be impacted
by industry factors such as commodity price fluctuations, limited
capital availability and unsuccessful drilling programmmes. The
Company does not typically obtain collateral from petroleum and
natural gas purchasers or joint venture partners; however the
Company can cash call for major projects and does have the ability,
in most cases, to withhold production from joint venture partners
in the event of non-payment, or withhold accounts payable
remittances.
(b) Market risk
Market risk is the risk that changes in market conditions, such
as commodity prices, foreign exchange rates and interest rates will
affect the Company's income or the value of financial instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while
maximizing the Company's return.
Foreign currency exchange rate risk:
Foreign currency exchange rate risk is the risk that the fair
value of future cash flows will fluctuate as a result of changes in
foreign exchange rates. Historically, any devaluation in the TL has
been followed by a legislated increase in the posted BOTAS
Reference Price for natural gas. However, devaluation of the TL
without a corresponding increase in the natural gas reference price
will have a negative impact on adjusted funds flow and could affect
the ability of the Company to fund its capital programme in the
future. Devaluation of the TL will also result in decreases in
royalties, and operating expenses, all other things being
equal.
The Company's seismic and drilling operations and related
contracts in Turkey are predominantly based in USD for Deep
Unconventional Gas Play operations. Material increases in the value
of the USD against the TL will negatively impact the Company's
costs of drilling and completions activities. Future USD/TL
exchange rates could accordingly impact the future value of the
Company's reserves as determined by independent evaluators.
Changes to the TL/USD exchange rate would have had the following
impact on revenues, royalties and production costs for the three
months ended March 31, 2020:
Petroleum
+/- 5 percent change in realised and natural Production
TL/USD exchange rate gas revenues Royalties costs
------------------------------------
Three months ended March 31, 2020 $ 145 $ 19 $ 40
------------------------------------ ---------- -----------
The Company's drilling and seismic operations and related
contracts in Turkey are predominantly based in US Dollars. Material
changes in the value of the US Dollar against the Turkish Lira will
impact the Company's capital costs.
Changes to the TL/USD exchange rate, would have had the
following impact on capital expenditures for the year ended March
31, 2020:
+/- 5 percent change in realised TL/USD exchange rate, Capital
upon conversion to presentation currency expenditures
----------------------------------------------------------
Three months ended March 31, 2020 $ 60
----------------------------------------------------------
Interest rate risk:
Interest rate risk is the risk that future cash flows will
fluctuate as a result of changes in market interest rates. The
Company is not currently exposed to interest rate risk as it has no
debt.
Commodity price risk:
Commodity price risk is the risk that future cash flows will
fluctuate as a result of changes in commodity prices. Commodity
prices for petroleum and natural gas are impacted by the
relationship between the Canadian Dollar and Turkish Lira, the
Canadian Dollar and United States Dollar, global economic events
and Turkish government policies.
The natural gas reference price in Turkey is in part correlated
to contract prices for natural gas imports into Turkey and also
government policy with respect to subsidies to consumers. Natural
gas sales for Valeura are under direct sales contracts to
industrial buyers and power generation companies in the area and
each contract is at a negotiated discount or premium to the BOTAS
benchmark price.
In the past two years, the government has increased the BOTAS
reference price thereby offsetting the decline in the value of the
TL and reflecting the increase in regional gas prices, resulting in
five price increases since the beginning of 2018. The Company's
average realised natural gas price in Turkey for the three months
ended March 31, 2020 was $7.08/mcf which represents a 1.0% discount
to the BOTAS price.
Liquidity risk:
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with the financial
liabilities. The Company's financial liabilities consist of
accounts payable. Accounts payable consists of invoices payable to
trade suppliers for office, field operating activities and capital
expenditures. The Company processes invoices within a normal
payment period. Accounts payable have contractual maturities of
less than one year. The Company maintains and monitors a certain
level of cash which is used to finance all operating and capital
expenditures.
Capital management:
The Company's objective when managing capital is to maintain a
flexible capital structure which allows it to execute its
growth strategy through expenditures on exploration and
development activities while maintaining a strong financial
position. The Company's capital structure includes working
capital and shareholders' equity. Currently, total capital
resources available include working capital and funds flow from
operations.
The Company's capital expenditures include expenditures in oil
and gas activities which may or may not be successful. The Company
makes adjustments to the capital structure in light of changes in
economic conditions and the risk characteristics of the underlying
petroleum and natural gas assets. In order to maintain or adjust
the capital structure, the Company may, from time to time, issue
shares, adjust its capital spending or issue debt instruments. The
Company is not currently subject to any externally imposed capital
requirements as it maintains operatorship over all of its lands in
the Thrace Basin.
The successful future operations of the Company are dependent on
the ability of the Company to secure sufficient funds through
operations, bank financing, equity offerings or other sources and
there are no assurances that such funding will be available when
needed. Failure to obtain such funding on a timely basis could
cause the Company to reduce capital spending and could lead to the
loss of exploration licences due to failure to meet drilling
deadlines, lower production volumes and associated revenues or
default under the Company's joint operating agreements. Valeura has
not utilised bank loans or debt capital to finance capital
expenditures to date
On February 4, 2020, Valeura's joint venture partner Equinor
Turkey B.V ("Equinor") provided formal notice under the applicable
joint operating agreements ("JOAs") that they intended to
discontinue participation in the deep unconventional gas appraisal
programme. Equinor elected to relinquish their interests under the
terms of the JOAs between the parties, and as such their working
interests and rights transfer to the remaining parties, Valeura and
Pinnacle Turkey Inc. ("PTI"), at no cost. As a result of Equinor's
withdrawal, Valeura will retain operatorship and continue to have
control and flexibility in planning its capital spend. This also
doubles Valeura's interest in the Deep play but may result in
operation delays as the Company searches for another partner to
participate in the deep unconventional gas appraisal programme.
13. Subsequent Event
On April 2, 2020, the Government of Turkey provided notice that
it had approved the transfer of Equinor's working interests and
rights to Valeura and PTI. In the Banarli exploration licences,
Valeura now holds a 100% working interest, and in the West Thrace
Exploration Licence and production leases the Company's holdings
increase to 63% working interest in the deep rights. Valeura
remains operator of all the blocks.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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