Valeura Energy Inc (LON:VLU), the upstream oil and gas company with assets in the Thrace Basin of Turkey and in the offshore Gulf of Thailand, has reported its unaudited financial and operating results for the three and six month periods ended June 30, 2022.
In Q2 2022, Valeura signed and then closed a share purchase agreement to acquire KrisEnergy International (Thailand) Holdings Ltd. which owns and operates two licences in the offshore Gulf of Thailand. The Acquisition includes the suspended Wassana oil field and the fully appraised Rossukon oil field. Additionally, through a separate agreement, the Company has agreed to acquire the Mobile Production Unit Ingenium (“MOPU”) which is on location at the Wassana oil field.
Highlights
· Announced the independent third-party reserves and resources assessment associated with the Acquisition: proved and probable (2P) reserves of 6.5 million bbls of oil at Wassana, best estimate (2C) unrisked contingent resources of 4.7 million bbls of oil at Rossukon (development pending), on a net working interest basis1;
· Commenced planning and procurement activities to re-activate production at the Wassana oil field, with aim of restoring up to 3,000 bbls/d net production in Q4 20221;
· Planning for Q3 2022 inspection works to re-certify the MOPU;
· Advanced commercial discussions regarding procurement of a Floating Storage and Offloading vessel (“FSO”) for Wassana;
· Continuing safe operations on the MOPU, with no recorded health or safety incidents;
· Commenced technical and commercial work for the development to support a final investment decision later this year on development of the Rossukon oil field; and
· Continuing efforts to secure a suitable farm-in partner for the Turkey tight gas play.
1 Throughout this announcement, net interests in Licence G10/48, Licence G6/48, the MOPU and in their associated fields’ production, reserves, and resources are presented on a working interest acquired basis to the Valeura-controlled special purpose vehicle, Panthera Resources Pte. Ltd., in which Valeura holds 85% of the share capital.
Sean Guest, President and CEO of Valeura commented:
“During the second quarter, we agreed, announced, and then closed our Gulf of Thailand acquisition, a transaction which is exactly in line with our strategy to provide near-term cash flow and mid-term growth through the mergers and acquisitions market. For total consideration of US$19.3 million (including initial and contingent consideration and the MOPU acquisition), we have acquired 6.5 million bbls of 2P oil reserves in addition to 2C contingent oil resource volumes of 4.7 million bbls on an unrisked, best estimate basis, with an assessed 84% chance of development.
We have moved quickly to integrate the Thailand business into our Company, and have set our sights on restoring production from the Wassana oil field during the fourth quarter of this year. To that end, offshore operations have begun to ensure readiness of the MOPU and to conduct a major facility inspection to complete its mandatory re-certification – expected to be completed in Q3. In addition, we are now in advanced negotiations to lease a suitable FSO for Wassana’s production and have begun discussions regarding timing for development of the Rossukon oil field with our partner and with the Thailand regulator. Elsewhere in our business, we are continuing efforts to find a farm-in partner for our Turkish deep gas play, where several parties are currently evaluating the opportunity.
Our financial position at the end of the quarter remains strong, with no debt, and nearly US$30 million in cash on hand. This sets us up well to bring the Wassana field on production and continue our M&A-led growth strategy, where we are actively pursuing additional targets in the Southeast Asia region.”
Financial Update
As of the end of Q2 2022, Valeura had cash and cash equivalent resources totalling US$29.7 million, and no debt. This compares to a cash position of US$39.8 million at the end of the prior quarter. The change in cash position during Q2 2022 primarily reflects the Acquisition. Cash associated with the Acquisition of US$4.1 million comprising mainly the maintenance and administrative costs between the effective date and close, and US$4.2 million in phased payments towards the purchase of the MOPU.
As the Acquisition closed just prior to the end of Q2, 2022, the Company has now begun recording expenses, spending, etc., in relation to the Thailand business from that date forward.
The Company received no revenue attributable to petroleum and natural gas sales or royalties during Q2 2022. However, given strong gas prices in Turkey, the Company is entitled to receive the full US$2.5 million capped maximum royalty payment in relation to the 2021 sale of its Turkey gas producing business. The remaining royalty amount to be paid to Valeura is approximately US$0.4 million, which has been invoiced and recorded as a receivable.
Operations Update
Valeura’s operations are squarely focused on resuming oil production at the Wassana field in Q4 2022. Offshore work continues to be performed safely, with no recorded incidents as the team performs ongoing routine maintenance work on the MOPU. Subsequent to the end of the quarter, work has commenced on the MOPU to ensure its readiness for production operations. The Company will shortly complete the inspection work relating to the mandatory re-certification of the facility. All of these key activities are expected to be completed in Q3 2022.
Valeura has also made strides toward securing a suitable FSO for Wassana, and is in advanced commercial discussions. Timing for arrival of the FSO is expected to drive the schedule for re-start of the Wassana oil field, expected in Q4 2022 at an initial rate of up to 3,000 bbls/d (net working interest).
Separately, the Company has progressed its planning, technical and financing arrangements for a five-well infill drilling programme on the Wassana field, where it expects to commence drilling operations in late Q2 2023. The team are currently finalising well designs and expect to hire a drilling rig and procure the key long lead equipment this quarter. The Company is targeting an increase in oil production rates to 4,500 bbls/d, consistent with the externally-evaluated 2P reserves profile, which includes 6.5 million bbls of oil (net working interest).
Commercial Update
Valeura is engaged in discussions with regulators and partners relating to development of the Rossukon oil field. While a formal field development plan was submitted by the previous operator and has been approved by regulators, the Company is exploring the optimal timing and the potential for a phased development schedule to bring Rossukon’s 4.7 million bbls of 2C resources on stream (unrisked, best estimate 2C resources, net working interest) in Q4 2023. Valeura will provide more clarity on the Rossukon development plan in due course.
Valeura’s Thrace basin tight gas play in Turkey continues to see interest from potential farm-in partners, driven in large part by the substantial increase in European gas prices. Several parties are evaluating a potential partnership with the Company in Turkey, however, no assurances can be given that such evaluations will result in a partnership with the Company.
Ongoing Strategy
Valeura has created a foundation in the Southeast Asia region and is well positioned to grow further by way of mergers and acquisitions. As such, the Company is continuing to evaluate additional targets that will further bolster near-term cashflow while providing opportunities for additional medium-term re-investment to generate value through further growth. In the longer-term, Valeura continues to believe the 20 Tcfe prospective resources tight gas appraisal play in Turkey represents a significant source of potential long-term value.
Financial Statements
Valeura Energy’s condensed interim consolidated financial statements and Management’s Discussion and Analysis for the three and six months ended June 30, 2022 and 2021 are available on the Company’s website at www.valeuraenergy.com/investor-information/financials/ and will be made available through www.sedar.com.
