TIDMCERP
RNS Number : 4816D
Columbus Energy Resources PLC
10 October 2018
10 October 2018
COLUMBUS ENERGY RESOURCES PLC
("Columbus" or the "Company")
Business, Operational and Financial Update - Q3 2018
Columbus, the oil and gas producer and explorer focused on
onshore Trinidad with the ambition to grow in South America, is
pleased to provide an update on business, operational and financial
activities during Q3 2018.
Following the announcement by the Company of the completion of
the acquisition (the "Acquisition") of Steeldrum Oil Company Inc
("Steeldrum") on 8 October 2018, the Company has incorporated
Steeldrum's business performance into Columbus' financial accounts
with effect from 13 July 2018, the effective date of the
Acquisition.
Key Highlights in Q3 2018:
-- Average production of 735 barrels of oil per day ("bopd")
achieved during Q3 2018 by the Columbus Group with 751 bopd
produced on average in September 2018 (Q2 2018: average of 553
bopd).
-- Peak production of 879 bopd, achieved in September 2018 (Q2 2018: 648 bopd).
-- Gross Revenues of US$3.85 million achieved (Q2 2018: US$3.01 million).
-- 62,658 barrels sold during Q3 2018 (Q2 2018: 50,314 barrels).
-- Average realised sales price from operations in Q3 2018:
US$60.90 per barrel (US$60.00 per barrel in Q2) - peaking at
US$62.14 per barrel in September 2018.
-- Strong progress made delivering Columbus' strategy roadmap of
being cash flow positive from operations and providing a foundation
for creating value though production and M&A growth.
-- Completion of the acquisition of Steeldrum achieved in early
Q4 2018, adding significant optionality to increasing production
going forward. Excellent collaboration between Columbus and
Steeldrum management/staff in Q3 2018 with the integration of the
two organisations well-advanced and the collaboration already
delivering positive production growth in the Steeldrum fields.
-- Cashflow positive position maintained from operations
delivering US$0.54 million after taking account of intensive field
maintenance and well workover campaign during Q3 2018 costing
US$0.72 million.
-- Continued focus on capital discipline, with cash balance of
US$1.97 million at 30 September 2018 (30 June 2018: US$2.35
million).
-- US$0.31 million also held as restricted cash at 30 September
2018, these payments made in Q3 2018 address legacy Performance
Bond and abandonment fund requirements in Trinidad.
-- Further reduction of G&A costs with significant
downscaling of London office to now just support administrative and
technical/engineering requirements.
Outlook
-- Group remains on track for production from Trinidad to exceed
1,000 bopd by the end of 2018 and the consolidated group, post the
Steeldrum transaction, is expected to remain operationally cash
flow positive.
-- Integration of Columbus and Steeldrum to be completed by end
Q4 2018, with Steeldrum sub-surface team immediately joining the
Columbus sub-surface team at the Company's expanded Trinidad office
in San Fernando, optimising co-ordination across all seven
fields/assets.
-- Operational teams from both entities, collaborating on
implementing various newly identified opportunities to increase
production across the expanded Columbus portfolio, all to be funded
from production revenues and available cashflow.
-- Technical work continuing to identify the optimal drilling
locations for the SWP exploration programme, planned for mid-2019
onwards.
-- Continuing to work actively on new acquisition opportunities
in Trinidad and South America using the following investment
screening criteria: onshore; operatorship, easy export routes,
mature oil provinces in the Caribbean or South America; close to
infrastructure; funded in a manner which is accretive for Columbus'
current shareholders.
Leo Koot, Executive Chairman of Columbus, commented:
"It has been an exciting few months for all at Columbus as we
sought to complete the acquisition of Steeldrum after it was
announced in early Q3 2018. We are delighted that this was achieved
just after the quarter-end following a huge amount of hard work by
management, staff and advisers from both entities.
"We are already seeing the real benefits of having increased
optionality for production and joining the two entities together
provides a stronger platform for growth and helps de-risk our
portfolio in Trinidad, with Group production averaging 735 bopd in
Q3 2018 and hitting a peak of 879 bopd during the quarter. The
collaboration between our technical and operational staff since
early July, which has included the introduction of operational
techniques which we have successfully employed at Goudron, has
already seen some early gains in the Steeldrum fields with, for
example, production at the Innis Trinity field peaking at 217 bopd
in September 2018, which is greater than has been achieved for some
time.
"Gross revenues from oil sales from the expanded Columbus
portfolio increased to over US$3.85 million during the quarter and
further production growth over the coming months should provide
additional revenues and cashflow to allow us to chase additional
growth opportunities.
"We can see many opportunities for achieving quick production
growth across the new Columbus portfolio, which now includes five
producing fields, one development project and our highly
prospective South West Peninsula ("SWP") exploration opportunity,
and we will be implementing those projects in the coming weeks with
the objective of exceeding 1,000 bopd in Trinidad by the end of
2018. This programme includes our ongoing water injection campaign
at Goudron where we have already injected over 79,000 barrels of
water into one well and are seeing clear signs of connectivity to
adjacent wells.
"As announced in early September, we also plan to bring the
Snowcap Field in the Cory Moruga Licence onto production through
re-starting the Snowcap-1 well before the end of 2018, using
existing infrastructure and available funds, following the received
formal confirmation of the extension of the licence by the Trinidad
authorities. We believe this will achieve a quick production "win"
for Columbus towards the year-end production target highlighted
above.
"We continue to address a number of legacy issues which have
been un-avoidable during the quarter, including ongoing issues in
Spain and the need to undertake a "financial catch-up" on both
abandonment fund provisions in Trinidad and also the placement of
performance bonds on our Trinidad fields, both involving costs
which should have been incurred a number of years ago. This will
all help in establishing a more solid platform for growth in
Trinidad going forward. The closure of our main London office in
July was another example of where we will take action, as required,
to reduce our running costs and create a better support basis for
the future.
"Finally, I would like to thank all management, staff and
stakeholders at Steeldrum for their support since we announced our
acquisition in early July. We look forward to working with them as
we move forward together to unlock the many real growth
opportunities we are planning to chase in the coming months."
DETAILED INFORMATION
STEELDRUM ACQUISITION:
During Q3 2018, the Company released a number of announcements
relating to the acquisition of Steeldrum, including on 8 October
2018 when completion of the Acquisition was confirmed. These
announcements are available on the Company's website.
Steeldrum is the parent company for the West Indian Energy Group
Ltd and is the owner of the licences for the Innis-Trinity field
(100% and operator), South Erin field (100% and operator) and the
Cory Moruga development project (83.8% and operator), all located
in southern Trinidad and close to Columbus's existing assets. The
Innis-Trinity field and South Erin field have remaining 2P reserves
of approximately 4 million barrels of oil ("mmbbl") and 1.6 mmbbl
respectively. The Cory Moruga development is expected to have
recoverable reserves of approximately 1.1 mmbbl.
The Company will now focus on growing production and revenues in
Innis Trinity and South Erin, through the adoption of a similar
operational strategy to our existing fields and will commence
further appraisal including commercial sales from the Snowcap-1
well as the first step of moving the Snowcap Field in the Cory
Moruga License towards a full field development, with this being
funded from available cash resources.
OPERATIONS:
New Operating Strategy:
The growth in the number of producing fields and active wells
that the combined organisation brings about, allows a new approach
to managing operations to be implemented. The sharing of
experience, resources and services is allowing new opportunities to
be identified for production growth in all fields. With each field
being run as a cash positive asset, Operations Management have the
opportunity to allocate people, inventory and services to the
greatest operational benefit of the combined organisation.
The learnings from successful well reactivations, active well
optimisations and sand control techniques employed in Goudron are
being extended to the Inniss-Trinity and South Erin Fields with the
strong cost control focus of the Steeldrum organisation being
brought to focus the combined team on fast cash return wellwork
activities. Combined field inventories also allow wellwork and
drilling planning to progress with a renewed focus on production
gains per dollar invested.
The combined Operations team to be co-located in the San
Fernando office is planning the use of short-term cashflow
growth-based prioritisation tools to high-grade the wellwork
activities across the fields. Individual producing well
optimisation, common to all fields, will include the shared use of
field-based petroleum engineers to extend the fluid level-based
approach to maximising rates across all active wells. Initiatives
specific to each field, such as Goudron water injection pilot work,
is being assigned to teams responsible for implementation. This has
allowed a target-based approach to be adopted allowing peak rates
of 1,000 bopd to be set by year end.
Goudron:
Continued operation of the Waterflood Pilot "A" is planned in Q4
2018 to add to the cumulative 79,000 Barrels of produced water
already injected into GY-667. Following the injection of twice the
historical produced fluid volume of GY-667, the Company has
obtained positive evidence that the well is not in its own
compartment and pressure responses show evidence of reservoir
charge. This is a positive result within the expected water
injection timeframe and the Company will continue injection whilst
awaiting an oil response in the adjacent offtake wells.
Monitoring of offset wells for definitive production gains
continues with a decision on adding injection into GY-209 planned
by year end. The availability of over 1,500 BWPD of produced water
allows plans to be drawn up for submission of a separate Goudron
Mayaro reservoir layer water injection to complement the existing
Pilot A, "C" sand injection which targets prolific production wells
GY-664 and GY-665.
A reduction in workover rig activity has occurred in Q3 2018
which, although resulting in oil production compromises, has
resulted in higher positive cash generation. The activation of the
Columbus owned workover rig will form one focus of Q4 2018
activities.
Bonasse:
Three wells were reactivated in the Bonasse Field through
wellbore clean-out workovers in August 2018 - Bonasse -3, 5 and 10
to add to the active Bonasse-1, 2, and 4 production. Additional
productivity stimulation is planned on these active wells in
addition to the planned reactivation of wells Bonasse-8, 9 and
11.
Icacos:
Steady gross field production of 22-24 bopd continues on the
three active Icacos wells IC-1, IC-2 and IC-9 with the transfer of
operator responsibilities being planned during the course of the
quarter. Active wellwork on the Icacos Field and elsewhere within
the licence is being planned.
Innis Trinity:
A successful rig workover programme was performed in August
2018, resulting in the reinstatement of wells including AT-12 and
AT-80 allowing the highest production rates year to date to be
achieved in September with production peaking at 217 bopd.
Combined planning of well optimisation, well reactivation and
stimulations with ongoing Goudron operations is occurring,
including the benefits of active joint inventory optimisation to
fast-track positive gains and reduce incremental costs.
The facilitation of the planned pilot injection of Carbon
Dioxide (CO2) as an Enhanced Oil Recovery methodology suited to the
Innis Trinity Field is actively being planned with Predator Oil and
Gas.
South Erin:
Active well optimisation of South Erin wells is being practiced
including the application of potential well stimulation techniques
and sand production alleviation. The ER-105 well, delivering 65
bopd of the field typical 85 bopd monthly production has been the
focus of well optimisation efforts.
Drilling planning for a well targeting the ER-105 compartment
has involved the combined Columbus/Steeldrum subsurface team, as
well as additional appraisal well location reviews to work up a
multi-well drilling programme with the combined group assets.
Cory Moruga/Snowcap:
Columbus announced on 10 September 2018 that the Ministry of
Energy and Energy Industries in Trinidad (the "Ministry") had
granted an extension of the licence for the Cory Moruga Block (the
"Licence"). The Licence will now run until 2032.
The Company will now proceed with a phased development of the
Snowcap Field, the first step being commercial sales from the
Snowcap-1 well using existing infrastructure, with this being
funded from available cash resources. Columbus plans to commence
production as soon as possible now that the acquisition by Columbus
of Steeldrum has been completed.
Further field facilities and development wells will be added on
a phased basis in subsequent years based on initial production
performance.
Columbus is also considering other drilling opportunities on the
Cory Moruga Licence and also at South Erin and Innis-Trinity, all
to be funded from currently available resources. Further updates
will be announced in due course.
HEALTH, SAFETY & ENVIRONMENT ("HSE"):
The Company passed 500,000 manhours without a Lost Time Incident
("LTI") in the Goudron Field on 5 October 2018. Total Goudron field
manhours in Q3 2018 was 35,350, (24,526 manhours in Q2 2017) and
the milestone signifies over 40 months since the last LTI.
SOUTH WEST PENINSULA ("SWP"):
The Bonasse, Cedros and Icacos licences make up a dominant
position in the onshore acreage of the South West Peninsula of
onshore Trinidad. A geological review of the shallow, undrilled
exploration targets underlying the Bonasse Field was undertaken. A
decision on progressing with testing enhanced 3D seismic processing
techniques on the existing dataset, which can improve definition of
structural features used to identify hydrocarbon traps along the
Southern Anticline, is planned in Q4 2018.
SPAIN:
In Q3 2018, there was no material activity in Spain. The Company
continues to maintain the Ayoluengo Field on a "care and
maintenance" basis whilst awaiting the commencement of a new tender
by the Spanish authorities.
The Company incurred costs of approximately US$0.40 million in
maintaining its obligations in Spain during Q3 2018, with this
including US$0.17 million of taxation payments to the Spanish
authorities relating to the staff redundancy process undertaken in
Q2 2018 and a further US$0.15 million placed in escrow relating to
a historical legal issue which the Company is challenging.
UN-AUDITED Q3 2018 FINANCIAL SUMMARY:
-- Gross Revenues of US$3.85 million achieved (Q2 2018: US$3.01 million)
-- 62,658 barrels sold in Trinidad during Q3 2018 (Q2 2018: 50,314 barrels)
-- Average realised sales price from Trinidad operations in Q3
2018: US$60.90 per barrel (US$60.00 per barrel in Q2) - peaking at
US$62.14 per barrel in September 2018
-- Cashflow positive position maintained from operations
delivering US$0.54 million after taking account of intensive field
maintenance and well workover campaign during Q3 2018 costing
US$0.72 million to grow production
-- Capex of US$0.17 million incurred in Q3 2018 (Q2 2018: US$0.5
million). Main cost focus in Q3 2018 has been on field optimisation
and workover activities (see above)
-- M&A costs of US$0.36 million in Q3 2018, including
US$0.12m relating to the Steeldrum acquisition and US$0.24 million
as part of the BOLT completion process.
-- London office closed in July 2018 to reduce G&A costs,
leaving a small office in central London for technical/engineering
support going forward.
-- Continued focus on capital discipline with cash balance of
US$1.97 million at 30 September 2018 (30 June 2018: US$2.35
million).
-- US$0.31 million also held as restricted cash at 30 September
2018, these payments made in Q3 2018 to address legacy Performance
Bond and abandonment fund requirements in Trinidad.
-- Lind Partners loan position: Loan balance reduced to US$0.48
million at end September 2018 (US$0.59 million at end June 2018)
with all monthly repayments made in cash during quarter. With the
acquisition of Steeldrum, the Group will have total loans
outstanding of approximately US$2.24 million upon completion.
Company will be drawing down a further US$1.25 million from a new
Lind Partners facility (the "2018 Lind facility"), announced on 13
July 2018 alongside the announcement of the Steeldrum acquisition,
to repay a US$1.25 million loan which Steeldrum holds with North
Energy Capital AS ("North Energy and "North Energy Loan"). The new
Lind loan that is drawn-down under the 2018 Lind Facility, which
was specifically envisaged within the 2018 Lind Facility when it
was established, will be repayable by the Company over a two-year
period at approximately US$62,750 per month. The Company has made
no decisions as to whether it will drawdown any of the US$2.0
million remaining under the 2018 Lind Facility, once the
above-mentioned US$1.25 million has been drawn-down for repayment
of the North Energy Loan.
-- All planned activities, business costs and liabilities in
2018 in Trinidad, Spain and London, including loan repayments, will
be funded from production revenues and available cash.
The Company continues to monitor its funding position and, as
noted above, is able to fund its planned activities in 2018. It
also has access to a further US$2 million from the 2018 Lind
Facility which was established as a "financial insurance policy"
given that there are always potential issues which may arise when
integrating a new entity. The Company needs to retain financial
flexibility going forward and continues to examine new business
opportunities and funding possibilities including debt, equity and
contractor financing for those opportunities with various external
parties.
M&A ACTIVITIES:
The Company continues to work actively on a number of
acquisition opportunities in Trinidad and elsewhere in South
America using the following investment screening criteria: onshore;
operatorship, easy export routes, mature oil provinces in the
Caribbean or South America; close to infrastructure; funded in a
manner which is accretive for Columbus' current shareholders.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Qualified Person's statement:
The information contained in this document has been reviewed and
approved by Stewart Ahmed, Technical Director (Trinidad), for
Columbus Energy Resources plc. Mr Ahmed has a BSc in Mining and
Petroleum Engineering and is a member of the Society of Petroleum
Engineers. Mr Ahmed has over 33 years of relevant experience in the
oil industry.
Contact Information
Columbus Energy Resources plc
Leo Koot / Gordon Stein +44 (0)20 7203 2039
VSA Capital Limited
Financial Adviser and Broker
Andrew Monk / Andrew Raca / Justin McKeegan +44 (0)20 3005 5000
Beaumont Cornish Limited
Nominated Adviser
Roland Cornish / Rosalind Hill Abrahams +44 (0)20 7628 3396
Camarco
Public and Investor Relations
Georgia Edmonds / James Crothers +44 (0)20 3757 4983
Notes to Editors:
Columbus Energy Resources Plc is an oil and gas producer and
explorer focused on onshore Trinidad with the ambition to grow in
South America. The Columbus Energy group has five producing fields,
one development project and a highly prospective exploration
portfolio in the South West Peninsula ("SWP"), which lies in the
extreme southwest of Trinidad and consists of stacked shallow and
deep prospects. Columbus is cashflow positive and aims to create
transformational growth by developing its portfolio in a capital
efficient and disciplined manner.
Columbus is guided by the following core values; safe and
sustainable, stronger together, creative excellence, positive
energy, totally trusted and personally responsible.
The Company is led by an experienced Board and senior management
team with supportive shareholders and intends on leveraging its
expertise and experience to build an attractive and diversified
portfolio of assets across South America in order to build an oil
production led South American exploration business.
To find out more, visit www.columbus-erp.com or follow us on
Twitter @Columbus_ERP.
Glossary
"bopd" Barrels of oil per day
"BWPD" barrels of water per day
"LTI" Lost Time Incident
"mmbbl" Million barrels of oil
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London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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