TIDMPCI
RNS Number : 2071C
Petroceltic International PLC
15 January 2015
Dublin
15 January 2015
Petroceltic International Plc
Operational Update, 2015 Production Outlook and Capital
Expenditure Programme
Petroceltic International plc (AIM: PCI) ("Petroceltic" or the
"Company"), the oil and gas exploration, development and production
company focused on the Middle East and North Africa, the
Mediterranean and Black Sea regions, today provides an operational
update and guidance for its 2015 production outlook and exploration
and development work programme.
Highlights
-- 2014 production at the top end of guidance range at 22.6
Mboepd; 2015 forecast production range of 16.5 to 18.5 Mboepd
-- Significant progress on the Ain Tsila project in Algeria;
Front End Engineering and Design and Gas Sales contracts awarded;
EPC contract award expected late 2015/early 2016
-- Operational delays on Shireen exploration well in Kurdistan - forward options being reviewed
-- Egyptian receivable decreased by 35% in the year to $53 million (2013: $81 million)
-- Year-end net debt significantly reduced to $153 million (2013: $246 million)
-- 2015 capital programme of $174 million, of which $80 million
will be carried under the terms of the Algeria farm-out
-- Organisation being restructured to enhance focus on core
assets, most notably Algeria and Egypt
-- North Port Fouad licence award offshore Nile Delta ratified in January 2015
-- Capital Markets Day to be held on 28 January 2015
Brian O'Cathain, Chief Executive of Petroceltic commented:
"Petroceltic's production and development business performed
well in 2014. Production was in line with guidance and a series of
important contract awards in respect of the Ain Tsila development
asset in Algeria are expected to enable the Engineering Procurement
and Construction contract to be awarded by early 2016. During 2015,
we will be focussing strongly on delivery from our core producing
assets and de-emphasising certain exploration initiatives, while
maintaining exposure to long term growth wherever possible.
The current volatility in oil markets, while challenging, has a
limited impact on our daily business, as most of our production is
fixed price gas in Egypt or Bulgarian gas priced on a long time
lag. Our Algerian gas and condensate production is not due on
stream until the second half of 2018, when most market commentators
and indeed the forward curve suggests that oil will be priced at a
significant premium to current levels. We expect to benefit from
the current price weakness in oil markets to attract competitive
bids for our main Ain Tsila EPC contract. "
Production Performance and Outlook
Average 2014 production from the Company's interests in Egypt
and Bulgaria was in line with prior guidance as upgraded at the
Interim Results at approximately 22.6 Mboepd on a working interest
basis (11.9 Mboepd on a net entitlement basis). Production for 2014
benefitted by 1.9 Mboepd due to reduced gas reinjection at the West
Dikirnis field in Egypt in response to requests from the Egyptian
Government to increase gas sales in the first three quarters of the
year. Production returned to normal levels in Q4 and is currently
17.4 Mboepd. The average daily production rate for 2015 is expected
to be in the range of 16.5 to 18.5 Mboepd, comprising approximately
85% gas and 15% liquids. Egypt and Bulgaria are expected to
contribute 90% and 10% of the total production volume,
respectively.
Financial Performance
The bulk of Petroceltic's 2014 production and receipts came from
Egypt, where improved availability of external capital to the
Egyptian Government facilitated material payments to international
oil and gas companies operating in the country, including
Petroceltic. As a result, the level of receivables in Egypt now
stands at approximately $53 million (2013: $81 million). Net debt
at year end was significantly reduced at $153 million (2013: $246
million).
Approximately 85% of the Company's production in 2015 will be
gas which is either sold under Egyptian fixed price contracts or
Bulgarian contracts which are linked to the cross border price of
gas into Bulgaria from Russia. Therefore, the recent decrease in
global commodity prices are expected to have a relatively limited
impact on revenues for H1 2015.
The current low oil price environment has, however, enhanced the
Company's focus on its core production and development assets,
optimising production volumes and costs and actively managing
activities and capital expenditures on the Algerian Ain Tsila
project to secure first gas production in 2018. The Company's 2015
exploration programme will consequently be restricted to core areas
and territories where material reserves additions are possible; a
number of farm-out initiatives are in progress and no significant
new venture activities are planned during the year. The Company is
also in the process of reviewing the organisation to ensure that it
is structured and resourced appropriately to effectively deliver
the planned work programme.
While the near term impact of global commodity prices on
Petroceltic's assets is limited, the Company is conscious of the
potential longer term impact and accordingly will review the
carrying value of its producing assets; any impairment identified
will be reflected in the 2014 annual accounts. The decision to
limit capital allocation to selected exploration assets may also
result in non-cash write downs in the 2014 full year results.
Capital Programmes
A relatively active exploration and development programme is
scheduled for 2015 with a capital expenditure budget of $174
million (with $80 million of this to be carried by Sonatrach
pursuant to the terms of the Algerian farm-out agreement completed
in July 2014). Some of this planned exploration expenditure could
be reduced if the farm-out initiatives currently under way are
successfully concluded. It is also possible that some of the
budgeted exploration activities may be deferred into 2016.
The overall planned 2015 programme is summarised as follows:
Development Exploration Total 2014**
--------------- ------------ ------------ --------- ---------
$million $million $million $million
--------------- ------------ ------------ --------- ---------
Algeria 80 (1) - 80(1) 10(1)
--------------- ------------ ------------ --------- ---------
Bulgaria 20 - 20 7
--------------- ------------ ------------ --------- ---------
Egypt 39 23 62 38
--------------- ------------ ------------ --------- ---------
Italy/Greece 5 5 3
--------------- ------------ ------------ --------- ---------
Kurdistan (2) - 7 7 33
--------------- ------------ ------------ --------- ---------
Romania - - - 10
--------------- ------------ ------------ --------- ---------
174(94)
Total 139(59)(1) 35 (1) 101
--------------- ------------ ------------ --------- ---------
1)Algeria costs covered by farmout carry arrangements; the 2015
numbers in brackets and the 2014 number represents net costs
attributable to Petroceltic post carry.
2) Budget prior to testing
** Subject to audit.
Exploration
Kurdistan Region of Iraq
Further to the temporary suspension announced on 11 August,
drilling operations resumed at the Shireen exploration well on 2
October 2014. Since recommencement, the well has encountered
challenges with casing and cementing at high elevation and above
the water table, which have been exacerbated by poor winter weather
conditions. Options to resolve these issues are currently being
reviewed by Hess as operator.
Egypt
During 2014, the ratification process for the award of the El
Qa'a Plain, North Thekah and South Idku exploration blocks was
concluded, increasing Petroceltic's Egypt acreage position by over
300%. In September, Petroceltic also announced the award of the
North Port Fouad exploration block, immediately adjacent to North
Thekah and this award has recently been formally ratified. On a
combined basis, these licences represent a material renewal of
Petroceltic's exploration inventory in Egypt and confirm our long
term commitment to investment in the country. The planned
exploration expenditures in 2015 include seismic data acquisition
on the El Qa'a Plain, North Thekah and South Idku blocks and
tenders to carry out these works are currently being evaluated.
Italy
Additional drilling activity may be undertaken in Italy, where
the Environmental Impact Assessment ("EIA") for the Carpignano
Sesia well in the Western Po Valley was presented by the Operator,
Eni, to the competent authorities in December 2014. If the licence
to drill this well is granted, drilling activities could begin in
Q4 2015. The company is well advanced in talks to farm-out most of
its cost exposure in this well.
Development
Algeria
During 2014, Petroceltic made significant progress on the Ain
Tsila development, following the establishment of the Groupement
Isarene ("Groupement"), the joint development organisation staffed
by seconded personnel from Petroceltic, Enel and Sonatrach. During
2014 a contract for Front End Engineering and Design ("FEED") was
awarded to Chicago Bridge and Iron Company, which will define the
detailed basis for Ain Tsila production facilities and
infrastructure. The outputs from the FEED will be used in 2015 to
tender the major Engineer, Procure and Construct (EPC) contract for
the project, with contract award and commencement of construction
planned for late 2015 / early 2016. This timing should allow the
project to benefit from an industry-wide softening in materials and
construction rates. The development plan remains on schedule, and
we are targeting first gas from the Ain Tsila field in the second
half of 2018.
During 2014, Petroceltic successfully completed a second
farm-out of an 18.375% interest in the Ain Tsila project to
Sonatrach. The transaction required Sonatrach to pay Petroceltic an
upfront cash payment of $20 million, and fund $140 million of
Petroceltic's development expenditure obligations from the
effective date of 4 July 2013. As at 31 December 2014,
approximately $120 million of the carry remained available, and
based on forecast 2015 expenditure levels, the carry should ensure
that capex will be fully funded until after work has commenced on
the EPC contract and into Q2 2016. Post completion of the second
farm-out to Sonatrach in July 2014, Petroceltic has a 38.25%
interest, Sonatrach has a 43.375% interest and Enel maintains its
18.375% interest. Petroceltic remains operator of the licence.
Egypt
Egypt is a core area for Petroceltic and in 2014 $38 million was
invested in a range of development and exploration activities. In
2015, the work programme includes four new infill production wells
in the West Khilala and West Dikirnis fields and minor facilities
investments aimed at infrastructure rationalisation and hence the
reduction of long term operating costs. We also plan to convert
three additional wells in the West Dikirnis field to gas injection
to maximise hydrocarbon liquids recoveries.
Bulgaria
Petroceltic's main development activity in Bulgaria during 2015
will be the completion and tieback of the Kavarna East sub-sea
development well to the Galata platform for production in the third
quarter of the year. This is a relatively low volume (9.5 Bcf) but
highly profitable development given the competitive regional gas
prices and local fiscal regime. Petroceltic's current gas sales
arrangements with Bulgargaz, the state-owned gas utility company,
and Agropolychim, an independent industrial consumer, will continue
in respect of all 2015 production. The received price is expected
to average approximately $7.00 per Mcf in H1 2015 (2014: $8.34 per
Mcf) however the recent decline in oil prices may have an adverse
effect on gas realisations in H2 2015.
Capital Markets Day
As announced previously, Petroceltic will host a capital markets
day presentation at 9.30am on Wednesday 28 January 2015 at the
Lincoln Centre, Lincoln's Inn Fields, London WC2A 3ED. This will
ensure that shareholders are given the opportunity, at the same
time, to hear about the Company's assets, strategy and plans for
the business. Materials from the day will be available on the
Company's website www.petroceltic.com. If you would like to attend
the event, please contact Sarah Vethaak by phone (+44 (20) 3772
2512) or email (svethaak@bellpottinger.com).
Ends
For further information, please contact:
Brian O' Cathain /Tom Hickey, Petroceltic International Tel: +353 (1) 421 8300
Philip Dennis / Rollo Crichton-Stuart, Bell Pottinger Tel: +44 (20) 3772 2500
Douglas Keatinge / Joe Heron, Murray Consultants Tel: +353 (1) 498 0300
John Frain / Roland French, Davy Tel: +353 (1) 679 6363
Dr. Dermot Corcoran, Head of Exploration, Petroceltic
International plc, and the qualified person as defined in the AIM
Note for Mining and Oil and Gas Companies, June 2009, has reviewed
and approved the technical information contained in this
announcement. Dr. Corcoran has a B.Sc in Geology, a M.Sc. in
Geophysics, and a Masters degree in Business Administration, all
from the National University of Ireland, Galway. He also holds a
Ph.D in Geology from Trinity College, Dublin. Dr. Corcoran has over
20 years experience in oil & gas exploration and production,
and has previously worked at ExxonMobil, the Petrofina Group, and
Statoil.
Glossary:
Mboepd: Thousand barrels of oil equivalent per day
Mcf: Thousand standard cubic feet
Notes to Editors:
Petroceltic International plc is a leading Upstream Oil and Gas
Exploration and Production Company, focused on North Africa,
Mediterranean and Black Sea Regions, and listed on the London Stock
Exchange's AIM Market and the Irish Stock Exchange's ESM Market.
The Company has production, exploration and development assets in
Algeria, Egypt, Bulgaria, Romania, the Kurdistan Region of Iraq
Italy and Greece.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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