TIDMUOG
RNS Number : 8966N
United Oil & Gas PLC
26 January 2023
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil
& Gas
26 January 2023
United Oil and Gas plc
("United" or "the Company")
FY 2022 Trading and operations update and guidance for 2023
United Oil & Gas Plc (AIM: "UOG"), the full-cycle oil and
gas company with a portfolio of production, development,
exploration and appraisal assets , issues the following trading and
operations update summarising recent operational activities,
providing trading guidance in respect of the financial year to 31
December 2022, and initial guidance for 2023. This is in advance of
the Company's audited full year results which will be released in
April 2023. The information contained herein has not been audited
and may be subject to further review and amendment.
United Chief Executive Officer, Brian Larkin commented:
"Operationally 2022 was a very active year for the Company with
an extensive work programme executed in Egypt, generating good
operational cashflow despite mixed drill results. Over the three
years that United has held Abu Sennan, the production base has
generated material cashflows for the business. As the asset
matures, it is transitioning to a phase in its development where
operations are focused on maintaining and extending long term
production rates to generate operational cashflows for many years
to come. Egypt remains an integral part of our business providing
operational cashflow which supports the wider asset portfolio of
the Company and our strategy to grow through M&A.
"In Jamaica, the farm-out of our high impact exploration licence
with 2.4 billion barrels of unrisked mean prospective oil resource
is picking up pace with a timetable for receipt of indicative
offers due in Q2 2023. We continue to build on our excellent track
record of active portfolio management, adding value to our assets
and monetising them in excess of our investment, as seen most
recently with the sale of the Maria discovery.
"In line, with our continued focus on good capital allocation
and the recognition of the value disconnect between the business
valuation and the share price, United intends to seek the requisite
approvals from shareholders at our 2023 AGM to allow for a limited
buyback programme, should this be the best use of capital at the
time.
"I am excited about the potential for the Company as the
fundamentals of the business remain solid, and we remain committed
to our growth ambitions with the focus on new ventures in the
Greater Mediterranean and North Africa regions."
2022 Operational summary
-- Group full-year 2022 production averaged 1,312 boepd net
(1,137 bopd oil and 175 boepd gas) in line with revised 2022
guidance of 1,300-1,325 boepd
-- 2022 Egypt work programme completed, consisting of three
development wells, two exploration wells, and eight workovers
-- Safety and the environment - zero lost time incident
frequency rate and fatal accident frequency rate. No environmental
spills, restricted work incidents or medical treatment
incidents
-- In Jamaica, as part of the licence extension that was
granted, technical studies that have provided additional positive
support to the farm-out process have been completed
-- In the UK, the completion of low-cost technical studies and a
contingent resources report supported the negotiation of an
increased transaction value on the conditional sale of the Maria
discovery
2022 Financial summary
-- Group revenue for full year 2022 is expected to be approx.$16m(1) (FY 2021 : $19.2m)
-- The average realised oil price per barrel from Egypt achieved
was approx. $96/bbl (FY 2021 : $68.9/bbl)
-- Group Cash balances as at 31 December 2022 were approx. $1.4m
with Net Debt approx. $1.5m (2021 Cash balances $0.4m : Net Debt
$5.5m)
-- Cash capital expenditure was approx. $7m (FY 2021 : $5.5m)
-- Receivables of $4.2m (FY 2021 : $5.1m)
(1) 22% working interest net of Government Take
Corporate summary
-- Amounts due from Anasuria Hibiscus UK Ltd for Crown disposal
fully satisfied in the year ($2.5m)
-- A binding Asset Purchase Agreement signed for the conditional
sale of UK Central North Sea Licence P2519 containing the Maria
discovery for a maximum consideration of up to GBP5.7m
-- United intends to seek the requisite shareholder approvals at
this year's Annual General Meeting to approve a limited share
buyback programme, which will be subject to completion of the Maria
sale and market conditions
-- The Company initiated a full review of its G&A
expenditure in Q4 2022 and has commenced a programme to reduce
these costs by up to 15% in 2023 compared to 2022
2023 Outlook; production and capital expenditure guidance
-- 1H 2023 production guidance from Abu Sennan is 700-900 bopd
net. Note that this range comprises 100% oil production, as with
the installation of pumps at the ASH Field and expected
recompletions, the lower-value gas production in 1H 2023 is
expected to be negligible. The upper end of the guidance includes
risked contributions from the planned workovers and a pro-rated
contribution from the recently spud ASH-8 development well, which
is assumed will be brought onstream in May 2023
-- The development drilling planned in the first half of the
year has the potential to have a positive impact on production
levels in 2H 2023, and full year guidance will be provided once the
results of the ASH-8 and ASD-3 wells are available
-- 2023 Egypt work programme consists of two firm wells, and
eight workovers, with the potential to add additional wells to the
programme later in the year:
- 1H 2023 focus will be on development drilling and optimising
production from existing wells through low-cost workovers
- Two firm development wells are planned: ASH-8, which has now
commenced drilling, and ASD-3, which is looking to build on the
success achieved with ASD-2 in 2022
- The potential for additional drilling in 2023, which is likely
to focus on exploration, will be finalised with JV partners once
the results of the ASH-8 and ASD-3 wells are available
-- Farm-out campaign for the Walton Morant licence, Jamaica,
continues to accelerate with the appointment of Energy Advisors
Group ("EAG"), a Houston-based M&A advisory group, targeting US
companies and investment funds. Process is ongoing with indicative
offers due Q2 2023
-- Group cash capital expenditure for the full year is
forecasted to be approx. $4.4m, funded from existing operations,
with circa $4m to be invested in Egypt and up to $0.4m across the
other assets in the portfolio
-- ESG focus on evaluating emissions baseline in Egypt with
operator and contributions to social investment programmes
-- Continued evaluation of new opportunities in the Greater
Mediterranean area and North Africa regions to grow the business in
line with the strategy
Operations Update
Egypt, Abu Sennan licence (22% working interest)
Full year 2022 production averaged 1,312 boepd net (1,137 bopd
oil and 175 boepd gas), in line with revised production guidance of
1,300-1,325 boepd.
2022 Egypt work programme
The 2022 work programme consisted of three development wells,
two exploration wells and eight workovers. The drilling programme
achieved mixed results, with production added from ASD-2 and ASH-4,
but with disappointing results from the two exploration wells. Q4
2022 production averaged 942 boepd net (884 bopd oil and 58 boepd
gas), reflecting the expected decline from the existing wells, a
proportionally higher decline in the lower-value gas volumes, and
the fact that a number of wells were shut in pending workovers to
return production. A number of these workovers which were planned
for late 2022 were delayed due to operational issues and are now
expected to be completed in Q1 2023.
Development drilling
The ASD-2 development well was brought onstream in March 2022 at
rates above expectations and has continued to outperform
projections throughout 2022. The AJ-14 development well found good
quality reservoir in the primary Abu Roash-C target, but due to
near-borehole formation damage, consistent flow was not
established. This well is now awaiting an imminent workover, with
commercial flow-rates in line with the pre-drill expectations of
approx. 300 bopd gross expected to be established once this is
completed. The ASH-4 development well encountered top Alam El Bueib
reservoir in an area that appears to be at least partially
separated from the previously producing wells. The well was brought
onstream in November 2022, and despite a steep initial decline,
production from the well has now stabilised.
Exploration drilling
Two of the larger, but higher risk, prospects in the Abu Sennan
exploration portfolio were drilled in 2022. The ASV-1X well spud in
April, and although there were some encouraging signs indicating
the presence of hydrocarbons, the well did not flow on test. The
ASW-1X well did not encounter hydrocarbons in any of the multiple
pre-drill targets and was plugged and abandoned at the beginning of
2023.
2023 work programme and 1H 2023 production guidance
The proposed 2023 Egypt work programme consists of two firm
wells and eight workovers. In 1H 2023 the focus will be on
development drilling and in optimising production from existing
wells through low-cost workovers. The first development well will
be the 60-day ASH-8 well, which spud on 22 January and the second
will be ASD-3, which is aiming to build on the success achieved
with ASD-2 in 2022. In parallel to the development drilling,
workovers in Q1 2023 are targeting enhanced production from
multiple reservoirs across a number of wells.
In line with previous years, where there has been flexibility in
the drilling programmes, we expect any additional drilling in 2023
to be finalised with partners once we have seen the results of the
two development wells. This contingent activity is likely to be
focused on the remaining high-graded exploration targets in Abu
Sennan. There remains a portfolio of additional prospects within
the Abu Sennan licence and future exploration drilling and its
potential to deliver a step-change in terms of production from the
licence continues to be considered carefully by the JV partners.
This will include the output from ongoing seismic reprocessing
.
1H 2023 production guidance is 700-900 bopd net. Unlike previous
years, where production has comprised circa 15% gas, the guided
range is based on 100% oil production, as with the installation of
pumps at the ASH Field and expected recompletions, the lower-value
gas production in 1H 2023 is expected to be negligible. The upper
end of the guidance includes risked contributions from the planned
workovers and assumes that the ASH-8 development well will be
onstream in May 2023. The development drilling planned in the first
half of the year has the potential to have a positive impact on
production levels in H2, and full year guidance will be provided
once the results of the ASH-8 and ASD-3 wells are available.
Jamaica, Walton Morant licence (100% working interest)
The farm-out campaign for the Walton Morant licence, Jamaica,
which has over 2.4 billion barrels of unrisked mean prospective oil
resource and the basin-opening Colibri prospect at a drill-ready
stage is accelerating as we seek to move this potentially
transformational project forward within our licence term. EAG have
been engaged alongside our existing advisors, Envoi Ltd, with the
aim of accessing capital from US companies and investment funds.
There are a number of companies currently evaluating the
opportunity and a deadline for indicative offers has been set for
Q2 2023.
Financial Update
Revenues
Group Revenues for 2022 are expected to be circa $16 million (FY
2021 : $19.2 million), with increased commodity prices partially
offsetting reduced average production. The entire revenue for the
Group is generated from our 22% interest in the Abu Sennan
concession in Egypt and is stated after accounting for government
entitlements under the production sharing contract. The FY 2022
average realised oil price per barrel achieved was $96/bbl (FY 2021
: $68.9/bbl) (representing a discount to Brent of circa
$4/bbl).
Cash, Net Debt and Receivables
The company entered 2022 with a cash balance of circa $0.4m and
Net Debt of $5.5 million. The cash balance as at 31 December 2022
was circa $1.4 million with Net Debt reduced to circa $1.5 million.
The current BP facility is expected to be fully repaid in the
year.
The continued effect of global macroeconomic volatility on the
Egyptian economy has resulted in both a significant devaluation of
the Egyptian Pound in the year and ongoing restrictions on US
Dollar transfers by the Central Bank of Egypt. These restrictions
have made it challenging to repatriate cash from our Egyptian
operations. In order to manage the Group's exposure to the currency
devaluation risk of the Egyptian pound, in Q4 2022, United opted
not to accept the payment of our USD denominated receivables in
Egyptian pounds (EGP), unless required for operational purposes.
Whilst this policy has resulted in an increase in the receivable
balances in Q4 and a corresponding reduction in the cash balances,
holding USD denominated receivables mitigate the likely realised
foreign exchange losses from the devaluation of cash balances held
in EGP.
2022 has been a challenging year for the Egyptian economy
however recent developments in the last quarter including the
agreement of a $3 billion funding facility from the International
Monetary Fund (IMF) has brought increased stability to the EGP/USD
exchange rate. This stability has supported fund inflows to the
country and with it increased USD liquidity since the beginning of
2023. We therefore remain confident that our EGPC receivables
balance will reduce during 2023 and given the flexibility around
the capital expenditure programme in Egypt we are confident we can
continue to manage our working capital position to support our
business operations.
Cash Expenditure
The Group continues to engage in an active work programme across
our portfolio of assets with forecast cash capital expenditure for
2023 of $4.4 million, including $4 million on the drilling and
workover programme in Egypt and $0.4 million on Jamaica.
Group Overheads
The Company remains focused on reducing costs and allocating
capital where it delivers the best returns. Following the
announcement of the reduction in our operational footprint through
the conditional sale of our interest in the Maria discovery and the
forecasted reduction of production in Egypt in 2023, United
initiated a full review of its G&A expenditure in Q4 2022. The
Company has commenced a programme to reduce these costs by up to
15% in 2023 compared to 2022 which includes the Board agreeing to
an immediate 15% reduction in their remuneration. In addition,
following the stepping down of Tom Hickey from the Board in 2022,
the decision has been made to defer the appointment of a
replacement until the annual board effectiveness evaluation process
is completed.
Share buyback programme
The Board believes that the shares are trading at a discount to
the business value and in order to deliver returns to shareholders
will seek approval at the AGM to give it an option to initiate a
limited buy back process, subject to completion of the Maria
disposal, should the Board consider this to be the best use of
capital at the time, taking into account the market conditions,
operational performance and M&A activity.
Events today
Management is hosting a shareholder call at 11:00 GMT today.
Investors that wish to participate in the event, please click on
this link to register https://bit.ly/3wfx1xD .
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:
1H: First Half
2H: Second Half
Boepd: Barrels of oil equivalent per day
EAG: Energy Advisors Group (www.energyadvisors.com)
Q1: First Quarter
Q4: Fourth Quarter
M&A: Mergers and acquisitions
JV- Joint Venture Partners
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Sharan Dhami, Head of IR & sharan.dhami@uogplc.com
ESG
Beaumont Cornish Limited (Nominated
Adviser)
Roland Cornish | Felicity Geidt +44 (0) 20 7628 3396
Tennyson Securities (Joint
Broker)
Peter Krens +44 (0) 20 7186 9030
Optiva Securities Limited (Joint
Broker)
Christian Dennis +44 (0) 20 3137 1902
Camarco (Financial PR)
Georgia Edmonds | Emily Hall +44 (0) 20 3757 4983 |
| Sam Morris uog@camarco.co.uk
Notes to Editors
United Oil & Gas is a full-cycle oil and gas company with a
portfolio of low-risk, cash generative production, development,
appraisal and exploration assets across Egypt, UK (subject to
conditional sale) 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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