Valeura Energy Inc (TSX:VLE), the upstream oil and gas company with assets in the offshore Gulf of Thailand and the Thrace Basin of Turkey, has reported its financial and operating results for the three month period ended December 31, 2022 and the year ended December 31, 2022, as well as its year-end 2022 reserves and contingent resources.
The complete quarterly reporting package for the Company, including the audited financial statements and associated management’s discussion and analysis (“MD&A”) and the 2022 annual information form, are being filed on SEDAR at www.sedar.com and posted to the Company’s website at www.valeuraenergy.com.
Financial and operating results presented in this announcement, together with the financial statements, the MD&A and the AIF, reflect the Company’s assets and operations as of December 31, 2022, and accordingly do not include the results of operations from the assets acquired through the Company’s recent Thailand acquisition, which was announced on December 6, 2022 and was completed on March 22, 2023.
Highlights
· The Company entered into a sale and purchase agreement to acquire the upstream Thailand oil producing portfolio of Busrakham Oil and Gas Ltd., a subsidiary of Mubadala Energy (the “Mubadala Acquisition”), which subsequently closed on March 22, 2023;
· Total year-end Proved Plus Probable reserves in the Wassana oil field of 6.1 million bbls;
· Cash and cash equivalent resources of US$17.5 million at year-end;
· Progress toward resuming production operations at the Wassana oil field;
· Preparations for infill drilling in Thailand, including procuring a drilling rig for an initial scope of work comprised of a five-well infill drilling programme on Wassana; and
· Subsequent to end of the quarter, the acquisition of the remaining minority interest in the Company’s special purpose vehicle subsidiary company, Valeura Energy Asia Pte. Ltd. (“VEA”), which holds all of the Company’s assets in Thailand.
Sean Guest, President and CEO commented:
“2022 was a year of genuine transition for Valeura as we evolved our business to focus on the Southeast Asia region, where we now own a significant portfolio of cash generating assets. Our financial results reflect the decision to deploy resources toward inorganic growth in Thailand, and thereafter toward the restart of production operations at the Wassana oil field.
Looking forward, we are excited to begin demonstrating the results of operations from our extensive oil producing portfolio. Through our first week of operations following completion of the Mubadala Acquisition, oil production has averaged approximately 21,500 bbls/d (net to Valeura’s interest), slightly above the October 2022 rates that we announced upon agreeing to the deal in December, and a reflection of the ongoing opportunity to keep growing through investment. We intend to remain focused on safe, reliable delivery, and are continuing to pursue our growth-oriented strategy with vigour.”
Financial Update
As of the end of Q4 2022, Valeura had cash and cash equivalent resources totalling US$17.5 million. This compares to a cash position of US$22.3 million at the end of the prior quarter. The change in cash position during Q4 2022 primarily reflects total draws of US$12.5 million from the Company’s facility arrangement (which is comprised of advances in support of Wassana oil field operations and acquisition deposit noted below, as more fully described in the AIF), offset by investing activity comprised primarily of a deposit lodged in relation to the Mubadala Acquisition and by operating activities focused on pre-production work for the Wassana oil field in addition to costs associated with the Company’s ongoing business development endeavours.
At the end of Q4 2022, the Company had debt of US$11.1 million under its facility arrangement which provides for i) advances in support of Wassana oil field operations and ii) a commercial contract relating to crude oil production from the Wassana oil field. US$5.9 million of the total debt is current.
Operations Update
Valeura’s operational focus during Q4 2022 was on preparing for the restart of production operations at the Wassana oil field. To this end, the Company completed upgrades, maintenance, and inspection work on its Mobile Offshore Production Unit Ingenium (the “MOPU”), to ready the facility for production. The Company received formal notice of the MOPU’s recertification in January 2023.
Separately, Valeura agreed to charter the MT Jaka Tarub oil storage vessel (the “Vessel”), to be used as the floating storage vessel for the Wassana oil field’s production, and the Vessel was mobilised to the field in late March 2023.
During start-up preparations, the third-party operated Vessel impacted the field’s Catenary Anchor Leg Mooring buoy, resulting in damage to certain offloading components. No personnel were injured, and as production had not yet started, there was no discharge of fluids.
In keeping with Valeura’s strict health, safety, and environmental standards, the Company is working collaboratively with Thailand’s upstream regulator, the Department of Mineral Fuels, to ensure the safe re-start of production operations, which will now entail a thorough inspection to assess damage and verify the operational integrity of the complete offloading system before startup.
The Company is also preparing for infill drilling operations in Thailand and agreed in Q4 2022 to charter the PV Drilling I jack-up drilling rig to conduct an initial scope of work comprised of a five-well infill drilling programme on the Wassana oil field. The Company began planning work for the drilling programme, in addition to procuring long-lead items. The PV Drilling I rig is scheduled to arrive in the first half of Q3 2023.
Strategic Update
Valeura is pursuing a growth-oriented strategy, including both organic and inorganic endeavours. During Q4 2023 the Company’s efforts focused on growth opportunities within its portfolio, including preparing for the Wassana oil field’s 2023 infill drilling programme and continuing discussions in relation to the Rossukon oil field with partners and regulators.
During Q4, the Company announced the Mubadala Acquisition, which is a transformational inorganic growth transaction. Upon completion on March 22, 2023, Valeura has become the largest independent oil producer in Thailand.
Valeura believes the inorganic growth opportunities it agreed in 2022 are representative of additional potential mergers and acquisitions which may become available within Thailand and the broader Southeast Asia region. As a result, inorganic growth remains part of the Valeura strategy, while remaining focused on its strict screening criteria and biased toward potential transactions which both generate near-term cash flow and provide opportunities for follow-on investment.
In addition, Valeura’s tight gas play in the Thrace basin of Turkey (the “Tight Gas Play”) remains a part of the Company’s portfolio, and the Company’s strategy is to attract a farm-in partner before committing significant capital toward the next phase of exploration and appraisal. Valeura believes the Tight Gas Play is a potentially significant source of potential value in the longer term.
2023 Outlook
Following completion of the Mubadala Acquisition just one week ago, Valeura has gained access to the full team of Thailand personnel, as well as all business plan scenarios and technical data associated with the acquired assets. The Company is working rapidly to support an independent third party reserves and resources evaluation, and to align on business plans and objectives for 2023. Valeura intends to publish the results of its third party independent reserves and resources evaluation and to provide a fulsome guidance outlook within the coming weeks, which will be founded on the following priorities:
· Pursuing infill drilling, Nong Yao C field development and further growth opportunities within the recently-acquired assets, with a view to continuing the assets’ long history of reserves renewal;
· Safe production operations at the Wassana oil field and pursuing production and value growth through infill drilling starting in early Q3;
· Arriving at a decision for the Rossukon oil field;
· Integrating the business acquired via the Mubadala Acquisition with the rest of the Valeura organisation;
· Seeking operational and financial synergies within the portfolio;
· Continuing to pursue inorganic growth within the Southeast Asia region; and
· Attracting a suitable farm-in partner to pursue the next phase of exploration and appraisal of the Thrace basin Tight Gas Play.
Year-end 2022 Reserves and Resources
As at December 31, 2022, all of the Company’s reserves are associated with the Wassana oil field, in the offshore Gulf of Thailand, where the Company holds an 89% operated working interest through its subsidiary company, VEA. Subsequent to year end 2022, Valeura’s ownership stake in VEA increased to 100% on March 21, 2023. An evaluation of the Wassana oil field reserves and Licence G10/48 contingent resources was conducted by Netherland, Sewell & Associates, Inc. (“NSAI”) and are presented in a report dated March 29, 2023 and summarised below.
NSAI has also been commissioned to conduct a reserves and contingent resources evaluation for all of the Company’s Thailand assets, including those acquired through the Mubadala Acquisition, effective December 31, 2022, and will publish the results in due course.
Wassana Oil Field Gross Reserves Volumes and Values(1)(2)
The forecast prices used to calculate reserves value are based on a Brent crude oil reference price of US$84.67/bbl in 2023, US$82.69/bbl in 2024, US$81.03/bbl in 2025 and US$81.39/bbl in 2026, and apply a differential of US$4.34/bbl, resulting in a forecast realised price of US$80.33/bbl in 2023, US$78.35/bbl in 2024, US$76.69/bbl in 2025 and US$77.05 in 2026. These prices escalate at 2% per year going forward. More details on the commodity price assumptions are included in the AIF.
| Reserves Category | Company Gross Heavy Oil Reserves (Mbbls) | Company Gross Before Tax NPV10 (US$ millions) |
| Proved | ||
| Developed producing | 0 | 0 |
| Developed non-producing | 1,820 | (59.2) |
| Undeveloped | 1,976 | 68.7 |
| Total Proved (1P) | 3,796 | 9.4 |
| Probable | 2,323 | 56.9 |
| Total Proved Plus Probable (2P) | 6,119 | 66.3 |
| Possible | 859 | 43.3 |
| Total Proved Plus Probable Plus Possible (3P) | 6,978 | 109.6 |
Notes:
(1) See Oil and Gas Advisories and Reserves Definitions below.
(2) Due to rounding, summations in the table may not add.
Wassana Oil Field Gross Contingent Resources Volumes (Development Unclarified)
Contingent oil resources on Licence G10/48 are heavy crude oil classified as “Development Unclarified” and carry an assessed chance of development ranging from 10% to 22%. These accumulations provide a future opportunity to access additional hydrocarbon volumes.
| Resources Category | Company Gross Unrisked Resources (Mbbls) | Company Gross Risked Resources (Mbbls) |
| Low Estimate (1C) | 5,777 | 1,039 |
| Best Estimate (2C) | 8,004 | 1,434 |
| High Estimate (3C) | 13,030 | 2,218 |
