Canada NewsWire
CALGARY, Aug. 11, 2016
CALGARY, Aug. 11, 2016 /CNW/ - Valeura Energy Inc. ("Valeura" or the "Corporation") (TSX: VLE) is pleased to report highlights of its unaudited financial and operating results for the three and six month periods ended June 30, 2016 and an update on subsequent developments including progress towards closing the Statoil farm-in transaction on Valeura's two 100% owned and operated Banarli licences in the Thrace Basin of northwest Turkey. The complete quarterly reporting package for the Corporation, including the unaudited financial statements and associated management's discussion and analysis ("MD&A"), has been filed on SEDAR at www.sedar.com and posted on the Corporation's website at www.valeuraenergy.com.
"We expect that the Statoil farm-in at Banarli will be a game-changer for Valeura and we look forward to completing the definitive agreements later this month," said Jim McFarland, President and Chief Executive Officer. "Valeura and Statoil have continued to diligently pursue completion of the farm-in transaction. Following execution of the definitive agreements, the necessary licence interest transfer applications will be submitted to the GDPA for approval, which is a key condition to close the transaction. In parallel, we have continued our operational activities in the shallow formations at Banarli. Progress on the farm-in transaction and operational activities have not been negatively impacted by the recent political developments in Turkey," adds McFarland.
"We also recorded another quarter of solid results in the second quarter of 2016, realizing continued strong natural gas sales price realizations and operating netbacks in Turkey averaging $9.44 per Mcf and $43.06 per boe, respectively, and delivering $2.1 million in funds flow from operations. Net sales in the second quarter were up 18% from the first quarter of 2016 due to a full quarter of production from the Banarli licences, which contributed 43% to total sales.
"The Statoil farm-in agreement at Banarli has cast a new light on the potential for a basin-centered gas play in the Thrace Basin and we will try to translate that achievement into securing a joint venture partner on certain TBNG JV lands that have similar deep potential. Concurrently, we are eager to get back to work on the shallow formations on the TBNG JV lands to complement the shallow program at Banarli and are exploring various options to enable this," he adds.
Q2 2016 RESULTS AT A GLANCE
(See below for definitions and advisories)
OPERATIONAL HIGHLIGHTS
Thrace Basin – Banarli Licences (Valeura 100% Working Interest)
Farm-in With Statoil
Bati Gurgen-1 Well
Bati Gurgen-2 Well
Yayli-1 Well
Thrace Basin – TBNG JV (Valeura 40% Working Interest)
FINANCIAL HIGHLIGHTS
Table 1 Financial and Operating Results Summary (1)
(thousands of Canadian dollars, except share |
Three Months |
Three Months |
Six Months |
Three Months |
Six Months | |
Financial |
||||||
Petroleum and natural gas revenues |
4,809 |
4,328 |
9,137 |
5,642 |
12,809 | |
Funds flow from operations (1) |
2,098 |
1,969 |
4,067 |
2,963 |
6,636 | |
Net loss from operations |
(642) |
(992) |
(1,634) |
(787) |
(680) | |
Capital expenditures |
3,215 |
2,704 |
5,919 |
4,916 |
6,351 | |
Net working capital surplus |
5,741 |
6,467 |
5,741 |
10,007 |
10,007 | |
Cash |
4,611 |
3,726 |
4,611 |
7,750 |
7,750 | |
Common shares outstanding |
||||||
Basic |
58,452,801 |
57,906,135 |
58,452,801 |
57,906,135 |
57,906,135 | |
Diluted |
63,367,301 |
63,696,135 |
63,367,301 |
76,487,352 |
76,487,352 | |
Share trading |
||||||
High |
1.44 |
0.83 |
1.44 |
0.71 |
0.71 | |
Low |
0.60 |
0.60 |
0.60 |
0.50 |
0.36 | |
Close |
1.24 |
0.68 |
1.24 |
0.53 |
0.53 | |
Operations |
||||||
Production |
||||||
Crude oil (bbl/d) |
7 |
9 |
8 |
8 |
9 | |
Natural Gas (Mcf/d) |
5,560 |
4,697 |
5,129 |
6,219 |
6,743 | |
boe/d (@ 6:1) (2) |
933 |
792 |
862 |
1,045 |
1,133 | |
Average reference price |
||||||
Brent ($ per bbl) |
57.81 |
46.47 |
51.31 |
75.81 |
71.37 | |
BOTAS Reference ($ per Mcf) (2) |
9.78 |
10.26 |
10.01 |
10.14 |
10.57 | |
Average realized price |
||||||
Crude oil ($ per bbl) |
54.41 |
39.75 |
46.09 |
57.84 |
53.56 | |
Natural gas - Turkey ($ per Mcf) |
9.44 |
10.05 |
9.72 |
9.89 |
10.42 | |
Average Operating Netback ($ per boe @ 6:1) (1) |
43.02 |
45.85 |
44.31 |
45.90 |
47.87 |
Notes: | |
(1) |
The above table includes non-IFRS measures, which may not be comparable to other companies. Funds flow from operations is calculated as net income (loss) for the period adjusted for non-cash items in the statement of cash flows. Operating netback is calculated as petroleum and natural gas sales less royalties, production expenses and transportation costs. See MD&A for further discussion. |
(2) |
Boru Hatlari ile Petrol Tasima Anonim Sirketi ("BOTAS") owns and operates the national crude oil and natural gas pipeline grids in Turkey and purchases the majority of Turkey's natural gas imports. BOTAS regularly posts prices and its Industrial Interruptible Tariff benchmark is shown herein as a reference price. See the 2015 Annual Information Form for further discussion. |
OUTLOOK
The Corporation is targeting to complete the Definitive Agreements for the Statoil farm-in transaction on the Banarli licences by the end of August 2016, and to subsequently obtain Turkish government approval for the licence interest transfer applications and satisfy certain other conditions precedent as soon as possible. In parallel, Valeura and Statoil are advancing the necessary preparatory work to facilitate spudding the first deep well at Banarli under the farm-in by year-end 2016 targeting a potential basin-centered gas play.
Concurrently, the Corporation expects to continue its strategy to shift emphasis from its non-operated 40% working interest in the TBNG JV to exploration and development drilling in the shallow formations on the Banarli licences in which Valeura retains a 100% interest.
The Corporation currently expects to complete a capital expenditure program in the range of $13 to 15 million (net) in 2016 focused on natural gas development from the shallow formations on the Banarli licences funded from cash on hand and cash flow. The expected payment of US$6.0 million from Statoil at closing of the Banarli farm-in transaction, as a contribution to back costs incurred on the Banarli licences, will provide an important boost to working capital. The work program and budget aims to achieve the following key objectives in 2016:
(See advisories below regarding outlook disclosures)
ABOUT THE CORPORATION
Valeura Energy Inc. is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Turkey.
OIL AND GAS ADVISORIES
When used herein, the term "boe" means barrels of oil equivalent on the basis of one boe being equal to one barrel ("bbl") of oil or NGLs, or six thousand cubic feet ("Mcf") of natural gas. Barrel of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of 6.0 Mcf to 1.0 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The initial on-stream production rates disclosed in this news release are preliminary in nature and may not be indicative of stabilized on-stream production rates. Initial on-stream production rates are typically disclosed with reference to the number of days in which production is measured (e.g. IP30 refers to an initial on-stream average production rate measured over a 30-day period). Initial on-stream production rates are not necessarily indicative of long-term performance or ultimate recovery. To date, shallow gas conventional wells and fraced unconventional tight gas wells have exhibited relatively high decline rates at more than 50% and 75%, respectively, in their first year of production. All natural gas rates and volumes are presented net of any load fluids.
ADVISORY AND CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release contains certain forward-looking statements including, but not limited to: the ability to satisfy the conditions for closing pursuant to the Definitive Agreements, including securing GDPA approval for the transfer of the licence interests and the expected timing; the ultimate investment by Statoil under the Definitive Agreements and its ability to earn a 50% interest in the Banarli licences; the anticipated spud date of the Phase 1 well under the Statoil farm-in agreement; the expected US$6.0 million payment from Statoil at the closing of the Statoil farm-in; the Corporation's 2016 work program and budget, operational plans (drilling, completions and workovers), expected capital expenditures and target sales volumes; the results from the Yayli-1 and Bati Gurgen-2 completions in the Osmancik formation; the future completion of additional net pay in the Osmancik and Danismen formations in the Bati Gurgen-1 well and the timing thereof; the planned drilling program on the Banarli licences and the timing thereof; the potential for a basin-centered gas play on the Banarli licences and certain TBNG JV lands; the availability of operating cash flow and the ability to finance development from existing cash and operating cash flow; the ability to grow sales volumes and tie-in new wells and get these on-stream; the timing, estimated costs and ability to fund each of the foregoing; the plans to attract a joint venture partner to explore the deep formations on certain TBNG JV lands; the plan to pursue strategic acquisition opportunities; and the ability to find a viable option to re-start the drilling and fracing program in the shallow formations on the TBNG JV lands. Forward-looking information typically contains statements with words such as "anticipate", estimate", "expect", "target", "potential", "could", "should", "would" or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation's securities to not place undue reliance on forward-looking information, as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Corporation.
Forward-looking information is based on management's current expectations and assumptions regarding, among other things: political stability of the areas in which the Corporation is operating and completing transactions, and in particular the aftermath of the recent failed coup attempt in Turkey; continued safety of operations and ability to proceed in a timely manner; the ability to reach Definitive Agreements with Statoil and the expected timing; the ability to complete the closing of the Statoil farm-in on the Banarli licences; continued operations of and approvals forthcoming from the GDPA in a manner consistent with past conduct; future seismic, drilling, fracing and re-completion activity on the expected timelines; the prospectivity of the Banarli licences; future production rates and sales volumes, capital efficiencies and associated cash flow; future capital and other expenditures (including the amount and nature thereof); the ability to meet drilling deadlines and other requirements under licences and leases; the ability to attract a partner for deep exploration on certain TBNG JV lands; the ability to successfully pursue strategic acquisition opportunities; the ability to find ways to re-start the drilling and fracing program on the TBNG JV lands; future sources of funding; future economic conditions; future currency and exchange rates; and, the Corporation's continued ability to obtain and retain qualified staff and equipment in a timely and cost efficient manner. In addition, the Corporation's work programs and budgets are in part based upon expected agreement among joint venture partners and associated exploration, development and marketing plans and anticipated costs and sales prices, which are subject to change based on, among other things, the actual results of drilling and related activity, availability of drilling, fracing and other specialized oilfield equipment and service providers, changes in the operator's or other partners' plans and unexpected delays and changes in market conditions. Although the Corporation believes the expectations and assumptions reflected in such forward-looking information are reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and unknown risks and uncertainties. Exploration, appraisal, and development of oil and natural gas reserves are speculative activities and involve a significant degree of risk. A number of factors could cause actual results to differ materially from those anticipated by the Corporation including, but not limited to: the risk of not reaching Definitive Agreements with Statoil; the risks of delay and ability to obtain GDPA approval for the Statoil farm-in on the Banarli licences in light of the recent failed coup attempt in Turkey and its aftermath; risks of achieving viable natural gas production rates from the Yayli-1 and Bati Gurgen-2 wells; risks associated with the oil and gas industry (e.g. operational risks in exploration, inherent uncertainties in interpreting geological data, and changes in plans with respect to exploration or capital expenditures, the uncertainty of estimates and projections in relation to costs and expenses, and health, safety, and environmental risks); uncertainty regarding the sustainability of initial production rates and decline rates thereafter, and the ability to mitigate these declines; uncertainty regarding the availability of drilling rigs and equipment and the ability to address technical drilling challenges and manage water production; uncertainty regarding the state of capital markets; uncertainty regarding the amount of operating cash flow and the ability to reduce costs and achieve capital efficiencies; the risks of disruption to operations and access to worksites, threats to security and safety of personnel and potential property damage related to political issues, terrorist attacks, insurgencies or civil unrest in Turkey; political stability in Turkey, including potential changes in political leaders or parties or a resurgence of a coup or other political turmoil; the risks of increased costs and delays in timing related to protecting the safety and security of Valeura's personnel and property; the risk of fluctuations in commodity pricing and BOTAS reference prices (denominated in Turkish Lira ("TL")); the risk of fluctuations in foreign exchange rates, particularly the TL; the uncertainty associated with negotiating with third parties in countries other than Canada; the risk of partners having different views on work programs and potential disputes among partners and service providers; the uncertainty regarding government and other approvals; potential changes in laws and regulations; risks associated with weather delays and natural disasters; the risk associated with international activity; and the uncertainty regarding the ability to secure a joint venture partner to pursue deep exploration on certain TBNG JV lands. The forward-looking information included in this news release is expressly qualified in its entirety by this cautionary statement. The forward-looking information included herein is made as of the date hereof and Valeura assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law. See Valeura's 2015 AIF for a detailed discussion of the risk factors.
Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, has been approved by management of Valeura. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
Additional information relating to Valeura is also available on SEDAR at www.sedar.com
Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this news release.
SOURCE Valeura Energy Inc.