Trading Symbol: NWX (TSX-V)
VANCOUVER, March 30, 2020 /CNW/ - Newport Exploration
Ltd ("Newport" or the "Company") is pleased to provide shareholders
and investors with an update on its quarterly dividend payment
schedule as a result of recent global activity in the oil markets.
As the Company's Gross Overriding Royalty ("GOR") business model
relies upon the operations of Beach Energy Ltd ("Beach") in
Australia, the Company is also
providing a summary of a news release made by Beach dated
March 27th, 2020.
The economic shut down from COVID-19 has resulted in a reduction
in demand for crude oil and petroleum products worldwide.
Also, failure of the OPEC + countries to agree on a reduction of
supply by 1.5mmbpd and the subsequent price war between
Russia and Saudi Arabia has plunged the global financial
markets into turmoil. Crude oil, as a global commodity, has been
extremely negatively affected during the past several weeks
resulting in a great deal of uncertainty in the sector.
What is already certain is that significant capex cuts are being
made by most producers, with energy companies cutting and deferring
costs wherever they can. At the same time oil production from North
American companies is declining, bank capital substantially
reduced; in some cases banks are refusing energy companies access
to credit facilities that were already in place, with other
companies in breach of their debt covenants. As a consequence,
dividends in energy companies are being slashed or suspended.
This latter point is obviously of concern to shareholders and
potential investors in Newport.
As stated in a Company News release dated, February 10th, 2020, "The Company's
strong balance sheet ensures that Newport has the ability to maintain regular
quarterly dividend payments with a reduced likelihood that the
quarterly dividend payments would be cut in any sector
downturn".
That statement is still valid and Management remains confident
in the Company's ability to weather the current oil price
disruption. After the recent dividend payment the Company has over
$6 million in the treasury, no debt,
and will not need to incur any debt or sell any assets in order to
remain solvent and/or to pay dividends. Furthermore, the Company is
well positioned to maintain a solid balance sheet even if the oil
price stays at USD$25/bbl through
2020 and 2021 without the need to raise any additional capital.
This was achieved in early 2016 when the low oil price at that time
was followed by a V-shaped recovery. However, with uncertainty of
such a recovery in 2020, and without knowing the medium to long
term economic effects of the COVID-19 pandemic, it is difficult to
predict what's next for the oil sector.
The Company's ability to maintain its dividend schedule is
subject to Beach continuing to produce oil and gas from their
Cooper Basin operations. Beach are extremely well positioned to
weather the current oil price storm. In its news release of
March 27th, 2020, entitled
'Business Update', Beach make several key points relevant to
Newport's 2.5% GOR. These are
summarized as follows:
At the end of February 2020 Beach
had AUD$151M net cash, with access to over AUD$600M in liquidity
via a AUD$450M committed revolving credit facility.
Western Flank oil assets are low cost producers, with field
operating costs of approximately AUD$5/bbl.
Revenues from Beach's gas business cover all their group
operating and stay-in-business costs; projected FY2021 free cash
flow break-even oil price is less than US$0/bbl.
Beach's actual realized oil price in January and February 2020 was AUD$100/bbl.
Beach crude oil sells at a material premium to the Brent Crude
oil price and the declining Australian dollar provides a further
buffer against lower US dollar oil prices.
Beach is well positioned to manage an extended period of low oil
prices, as well as the impact of the Covid-19 pandemic.
While its strong balance sheet means Beach is well placed to
continue growth investment, in recognizing the current downturn, it
is being prudent in targeting up to a 30% deferral in FY2021
capital investment relative to its previous guidance.
Obviously, Newport's management
will re-examine the Company's dividend schedule on the basis of
Beach's FY2020 Financial Results and any revised guidance. At the
present time shareholders should be aware that Newport can support the current quarterly
dividend schedule, and Beach is in an incredibly strong position to
handle the current market disruption.
About Newport
Newport holds a 2.5% GOR on
several oil and gas licences and permits in the Cooper Basin in
Australia. These permits are currently being operated and
explored by Beach and Santos Ltd. ("Santos"), both major Australian
oil and gas producers.
The Company has an advantageous business model, with the 2.5%
GOR over permits with strong technical fundamentals and with
excellent operators in Beach. As stated in a Company News Release
dated February 11th, 2020,
Beach achieved a 100% success rate with wells in ex PEL 91,
including 12 horizontal development wells, with several new well
locations identified, and new infrastructure approved for
anticipated increased production. The Company has built-in exposure
to significant potential for long term growth at zero risk to
shareholders as there is no time limit or expiry date on the GOR
assets, and most importantly, no cost to the Company to retain,
explore, develop or operate them.
The Company continues to strongly encourage shareholders and
potential investors to access information released independently by
Beach and Santos in order to keep current during exploration,
development and production on all the licences subject to the
Company's 2.5% GOR.
The Company currently has 104,429,874 common shares issued and
outstanding and over $6 million in
the Treasury, comprised of cash, cash equivalents and short term
fixed income investments.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the accuracy or
adequacy of this news release.
Cautionary Statement on Forward-Looking Information
This news release is intended to provide readers with a
reasonable basis for assessing the future performance of the
Company. The words "believe", "should", "could", "expect",
"anticipate", "contemplate", "target", "plan", "intends",
"continue", "budget", "estimate", "may", "will", "schedule" and
similar expressions identify forward-looking statements.
Forward-looking statements may pertain to assumptions regarding
Beach's drilling plans, future dividends, the price of oil and
fluctuations in currency markets (specifically the Australian
dollar). Forward-looking statements are based upon a number of
estimates and assumptions that, which are considered reasonable by
the Company, are inherently subject to business, economic and
competitive uncertainties and contingencies. Factors include, but
are not limited to, the risk of fluctuations in the assumed prices
of oil, the risk of changes in government legislation including the
risk of obtaining necessary licences and permits, taxation,
controls, regulations and political or economic developments in
Canada, Australia or other countries in which the
Company carries or may carry on business in the future, risks
associated with developmental activities, the speculative nature of
exploration and development, and assumed quantities or grades of
reserves. Readers are cautioned that forward-looking statements are
not guarantees of future performance. There can be no assurance
that such statements will prove to be accurate and actual results
and future events could differ materially from those acknowledged
in such statements.
The Company disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new
information, future events or otherwise, except to the extent
required by applicable laws.
SOURCE Newport Exploration Ltd.