TIDMUOG
RNS Number : 7763Z
United Oil & Gas PLC
27 January 2022
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil
& Gas
27 January 2022
United Oil and Gas plc
("United" or "the Company")
FY 2021 Trading and operations update and guidance for 2022
United Oil & Gas PLC (AIM: "UOG"), the growing oil and gas
company, issues the following trading and operations update to
summarise recent operational activities, to provide trading
guidance in respect of the financial year to 31 December 2021 and
to provide initial guidance for 2022. This is in advance of the
Company's Audited results which will be released in April 2022. The
information contained herein has not been audited and may be
subject to further review and amendment.
A shareholder and an analyst call will take place this morning,
details are below.
United's Chief Executive Officer, Brian Larkin commented:
"United and its JV partners had a 100% success rate for the five
exploration and development wells in the 2021 drilling campaign in
Egypt. All of the wells encountered oil and were quickly brought
into production generating revenue for the company, with the
exploration successes de-risking further upside on the license.
"Our fully funded 2022 Egypt drilling programme has commenced
with the ASD-2 development well which has spud. The two exploration
wells in the 2022 programme will be targeting a potential of more
than 10mmbbls of gross mean recoverable resources, with the
potential to provide a step up in production levels during a time
of significantly increased commodity prices.
"In Jamaica, we continue to receive strong support from the
government, having been granted an extension on the Walton Morant
licence at the end of 2021. We now look forward to continuing the
farmout process with this licence extension in place.
"We have a low-cost producing asset base significantly leveraged
to the rising oil price and continue to evaluate new opportunities
to grow the business in line with our strategy. We look forward to
the coming year and growing the business via our existing portfolio
and potential new acquisitions."
2021 OPERATIONAL SUMMARY
-- United has continued to manage its operations carefully,
adhering to the COVID-19 procedures and restrictions put in place
by its host countries and operators, with negligible disruption to
operations in the period
-- Group full-year 2021 production averaged 2,327 boepd net
(1,869 bopd oil and 458 boepd gas), slightly above production
guidance of 2,100-2,300 boepd issued on 6 September 2021
-- Stabilisation of the decline in production from the ASH wells from September 2021
-- 100% exploration and development success rate from the Egypt
five well development and exploration drilling programme, replacing
reserves and accelerating production of existing reserves:
- Commercial oil discoveries at the exploration wells, ASD-1X and ASX-1X:
o Exploration success added 2.2mmboe 2P gross reserves (0.5mmboe
net)(1)
o Approvals granted from the Minister of Petroleum of the award
of two new 20 year development leases covering the new
discoveries
o Further de-risks future exploration on the licence
-- All five wells brought into production quickly, adding revenue to the company:
- Development wells onstream less than two weeks after completion
- ASX-1X exploration well onstream just three weeks after initial drilling results
- All wells have a short payback period of 3-12 months
-- In Jamaica the amendment to the Production Sharing Agreement
has received final signature from the Ministry of Science, Energy
and Technology; the Initial Exploration Period of the Walton Morant
licence, will now run to 31 January 2024
-- Divestments of non-core assets in UK CNS and Italy consistent
with the Company's strategy to reinvest the proceeds to support
growth
- Signed conditional SPA for sale of Italian interests for EUR2.165m (c. $2.54m)
- Signed binding SPA for the sale of UK Central North Sea
Licences for a consideration of up to GBP3.2m (c $4.4m)
-- Zero - Lost time incident frequency rate and Fatal accident
frequency rate. No environmental spills, Restricted Work Incidents
or Medical Treatment Incidents
(1) Operator estimates subject to independent certification with
publication expected H1 2022
2021 FINANCIAL SUMMARY
-- Total revenues for the year were approx. $19m
-- The average realised oil price per barrel from Egypt achieved
was approx. $68.90/bbl, representing a discount to Brent of circa
$1.85/bbl
-- Cash balances as at 3 January 2022 were approx. $1.2m
-- Total Cash Collections of approx.$17.3m
-- Cash Capital Expenditure approx.$ 5.5m
2022 Outlook; production and capital expenditure guidance
-- H1 production guidance is 1,500-1,650 boepd. At this stage
this guidance only includes forecast production from existing wells
and one development well, ASD-2, which has spud
-- Full-year guidance will be provided once initial results of
2022 drilling programme have been assessed
-- Approved fully funded 2022 Egypt drilling and work programme
consisting of four firm wells, and eight workovers
- Two firm development wells: ASD-2, which commenced drilling on
the 25 January, and ASH-5, targeting the prolific Alam El Bueib
(AEB) reservoir
- Two firm exploration wells, ASF-1X and ASV-1X, will target
combined mean recoverable resources estimated by United at c.10
mmbbls (2.2 mmbbls net)
- Additional fifth well (an injector in the Al Jahraa SE field)
is contingent on the results of technical work currently underway;
decision anticipated in Q1 2022
- Flexible programme allowing drilling of exploration well to be
brought forward if injector well is deferred
- Seismic reprocessing of a 452km(2) area of the Abu Sennan 3D
seismic volume is currently underway and will help optimise well
locations for the ASH-5 development well and exploration wells
ASF-1X1
- Electrical Submersible Pumps will be installed into the
current ASH wells, aiming to maintain the flow rates, optimise
production and extend the life of field
-- Renewed farm-out campaign for the Walton Morant licence, Jamaica, post licence extension
-- Group cash capital expenditure for the full year is
forecasted to be approx.$6m, fully funded from existing operations,
with circa $5.5m to be invested in Egypt and up to $0.5m across the
other assets in the portfolio
-- Clear ESG focus and actions including evaluation of emissions
baseline in Egypt with operator and contributions to social
investment programmes
-- Continued evaluation of new opportunities to grow the business in line with the strategy
CORPORATE
Joint Broker Appointment
United are pleased to announce the appointment of Tennyson
Securities to act as the Company's Joint Broker with immediate
effect.
Pre-payment facility
The Company is in advanced discussions to extend the final
maturity date on its existing prepayment facility from 30 September
2022 to 31 December 2023. This extension which will significantly
lower the monthly repayments, will provide additional flexibility
for the execution of the 2022 drilling programme and general
working capital management. The Company will update the market in
due course. United continues to have in place a framework for
potential future offtake and financing undertaken by the
Company.
Divestments
Crown disposal milestone payment
The disposal of United's interest in the licence containing the
Crown discovery to Anasuria Hibiscus UK Ltd.(Hibiscus) completed in
December 2019 and United received $0.95m on completion. A further
$2.85m was payable to United on completion of certain milestone
events, or the licence could have been returned to United. In
October 2021, Hibiscus informed United that the licence terminated
on 30 September 2021. As announced in October, United sought legal
advice. Based on that advice the Company remains confident of its
legal position. Further progress is anticipated in February and
United looks forward to updating the market.
UK CNS
United entered into a binding sale and purchase agreement (SPA)
with Quattro Energy Limited to sell its UK Central North Sea
Licences; P2480 and P2519 for a consideration of up to GBP3.2m (c
$4.4m). In December 2021 United announced that the t he long stop
date for satisfaction of the SPA conditions was extended to 28
February 2022.
Italy
United signed a conditional SPA with PXOG Marshall Limited, a
subsidiary of Prospex Energy PLC for sale for the sale of 100% of
the share capital of UOG Italia Srl for a consideration of
EUR2.165m (c. $2.54m). UOG Italia Srl holds a 20% non-operated
interest in the Podere Gallina licence which contains the Selva gas
development project in Italy. United received a deposit of
EUR108,235 (c.$150,000) in August 2021. The balance of the
consideration and any working capital adjustment are payable on
completion. The sale is conditional upon the receipt of approval of
the Italian Authorities to the change of control of UOG Italia Srl
and Prospex Energy PLC completing a fundraising process. The
longstop date for completion is 6 April 2022.
Prior to first gas which is expected at the end of Q1-23, a 12
month environmental monitoring programme is required. This work has
been started and funded 100% by the Operator Po Valley Energy,
earlier than the required 12 months and in advance of the award of
the Production Concession at which time it becomes a firm
commitment which all Joint Venture Partners have agreed to fund.
The Joint Venture partners, being PXOG and UOG have agreed to fund
their share of this work and all development costs when the
Production Concession is awarded. However, Po Valley has alleged
that UOG and PXOG failed to agree to fund any commitments under the
Joint Operating Agreement when they become due and that as this
could be construed as notification to relinquish their
participations in the licence and have purported to elect to take
over the partners' participating interests. The Joint Venture
partners refute that Po Valley has the right to do so and do not
intend to relinquish their interest in the Licence and have
informed Po Valley accordingly. Further updates will be made in due
course.
OPERATIONAL UPDATE
Egypt (22% non-operated working interest, operated by Kuwait
Energy Egypt)
Production
F ull-year 2021 production averaged 2,327 boepd net (1,869 bopd
oil and 458 boepd gas), slightly above the production guidance of
2,100-2,300 issued on 6 September 2021. Production from Abu Sennan
has remained stable through the second part of Q3 and Q4, with net
rates of 1,817 boepd recorded at the beginning of September,
compared to Q4 2021 average net production of 1,838 boepd.
ASH field
Since the beginning of September 2021, the ASH wells (ASH-1ST2,
ASH-2 and ASH-3), have been monitored and left to flow on a
constrained choke, and both the decline of the production and the
increase in water-cut has been stable since September 2021.
Electrical Submersible Pumps (ESP) will be installed in all
three producing wells located in the ASH field and are part of the
2022 work programme. The ESPs will be aiming to maintain the flow
rates, optimise production and extend the life of field.
2021 Abu Sennan Work Programme
The 2021 work programme at Abu Sennan consisted of five wells
and six workovers. All five wells encountered oil and were quickly
brought into production. The drilling programme began with the
ASH-3 development well which was brought onstream in March. The
ASD-1X exploration well was found to be a commercial discovery in
May and was brought into production within two months. Approval was
granted from the Minister of Petroleum of the award of a 20-year
development lease covering the new discovery. The AJ-8 development
well was the third well in the campaign and began production in
September followed by another commercial discovery at the ASX-1X
exploration which began production in October, three weeks after
initial results. This was also granted approval from the Minister
of Petroleum of the award of a 20-year development lease covering
ASX-1X. The final well in the 2021 drilling campaign, the AJ-13
development well, spudded in December and came on stream 11 January
2022. The Al Jahraa field is now the largest producing field on the
licence.
2022 work programme and 1H 2022 production guidance
H1 production guidance is 1,500-1,650 boepd. At this stage this
guidance only includes the forecast production from the existing
producing wells and the forecast production from the ASD-2
development well, expected to come onstream in Q2. Full-year
guidance will be provided once initial results of 2022 drilling
programme have been assessed .
The 2022 approved work programme consists of four firm wells
(two development and two exploration wells) and eight workovers. A
fifth well (a water injector into the Al Jahraa SE field) is
contingent on the results of ongoing technical studies.
Seismic reprocessing of a 452km(2) area of the Abu Sennan 3D
seismic volume is currently underway. This reprocessing work will
cover the ASH field and neighbouring AEB targets, as well the ASF
prospect (to be drilled in 2022). Additional seismic reprocessing
in the north-east of the licence area is planned to be carried out
later in 2022.
The drilling programme has now commenced with the ASD-2
development well. This well is a follow-up to the successful ASD-1X
exploration well drilled in 2021. ASD-2 is targeting the
north-western culmination of the ASD structure and will seek to
prove the gross upside volumes in the Abu Roash C reservoir
(estimated by the Operator to be 5.5 mmbbls STOIIP), accelerate
production from the field, and test a secondary target in the Abu
Roash E reservoir.
With technical work ongoing, there is flexibility in the
drilling schedule after the completion of the ASD-2 development
well. As currently planned, the second firm development well,
ASH-5, will be drilled in the ASH field, targeting the prolific
Alam El Bueib ( AEB) reservoirs that have so far delivered in
excess of 3.5 million barrels of oil from the field. Analysis of
the ASH field incorporating the results of the ASH-3 well indicates
a large in-place oil volume estimated by United to be in the range
of 14-16 mmbbls gross, with significant potential remaining within
the structure. Seismic reprocessing is currently underway to ensure
that this development drilling is located optimally in the
field.
The two exploration wells in the 2022 programme, ASF-1X and
ASV-1X (previously named AST-1X), both have the potential to
deliver large reserves and production additions. The ASF-1X well
has been high-graded by United, and will target mean recoverable
resources estimated by United at c.8 mmbbls gross in the AEB and
Abu Roash reservoirs to the south-west of the ASH field. The well
location will be finalised using the reprocessed seismic data. The
ASV-1X exploration well is the second high impact well in the 2022
programme, targeting mean recoverable resources estimated by United
at c.2.6 mmbbls gross. The primary targets are Abu Roash
reservoirs, similar to those currently in production at the Al
Jahraa field.
Jamaica (100% working interest)
In November 2021 United announced that the request for a
two-year extension to the Initial Exploration Period of the Walton
Morant Licence, Jamaica, was granted by the Jamaican Cabinet. Final
signature from the Ministry of Science, Energy and Technology to
the amended Production Sharing Agreement has now been received. The
Initial Exploration period will now run to 31 January 2024.
It is anticipated that with an approved 2022 work programme for
the licence, guided by the results of the work completed last year,
and the licence extension and industry sentiment returning to
exploration, the farm-down process will continue with renewed
optimism building on the significant interest shown to date.
Events today
Management are hosting a call today at 0900 BST for analysts.
For dial in details please contact Tessa Gough-Allen at Camarco
0203 781 9245 or tessa.gough-allen@camarco.co.uk
Thereafter, a shareholder call will take place at 1130 BST
today. Should investors wish to participate in the event, please
click on this link to register https://bit.ly/3qXhYHf
Confirmation email with the details of the dialling in process
will be sent to your email address.
**ENDS**
This announcement contains inside information for the purposes
of Article 7 of Regulation 2014/596/EU which is part of domestic UK
law pursuant to the Market Abuse (Amendment) (EU Exit) regulations
(SI 2019/310). .
Glossary:
bopd - barrels of oil per day
boepd - barrels of oil equivalent per day
mmbbls - million barrels of oil
STOIIP - Stock-tank oil initially in place
Enquiries
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Sharan Dhami, Head of IR & ESG sharan.dhami@uogplc.com
Beaumont Cornish Limited (Nominated
Adviser) +44 (0) 20 7628 3396
Roland Cornish and Felicity Geidt
Optiva Securities Limited (Joint
Broker) +44 (0) 20 3137 1902
Christian Dennis
Tennyson Securities (Joint Broker) +44 (0) 020 7186 9030
Peter Krens
Camarco (Financial PR/IR) +44 (0) 20 3757 4983
Billy Clegg | James Crothers | Tessa uog@camarco.co.uk
Gough-Allen
Notes to Editors
United Oil & Gas is a high growth oil and gas company with a
portfolio of low-risk, cash generative production, development,
appraisal and exploration assets across Egypt, UK, Italy and a high
impact exploration licence in Jamaica.
The business is led by an experienced management team with a
strong track record of growing full cycle businesses, partnered
with established industry players and is well positioned to deliver
future growth through portfolio optimisation and targeted
acquisitions.
United Oil & Gas is listed on the AIM market of the London
Stock Exchange. For further information on United Oil and Gas
please visit www.uogplc.com
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