News

August 28, 2009

H1 2009 Interim Results Wrap-Up For Aminex, Tullow Oil, Melrose Resources And Premier Oil: Weaker Oil Prices Offset Production Rises

H1 2009 Interim Results Wrap-Up For Aminex, Tullow Oil, Melrose Resources And Premier Oil: Weaker Oil Prices Offset Production Rises

Despite delivering increased production, some of the main players in London’s E&P sector have reported lower revenues for the first half of 2009 as weaker oil prices took their toll on earnings. Aminex, for example, announced record gas production and a 50 per cent increase in oil production but its revenues were down 15.5 per cent at US$3.8 million. However, the London-listed company which is active in the US and Africa, still managed to reduce its pre-tax losses by 75 per cent to US$1.15 million as admin costs were stripped out.

The big news in the Aminex portfolio for the remainder of the year is the spudding of the Likonde-1 well in the Ruvuma Basin of Tanzania, one of the last under-explored river deltas in the world. Aminex has a 50 per cent stake in the Tullow Oil-operated project but is looking to farm this down to manage its exposure to this high impact wildcat. The Likonde well will be drilled to 3,200 metres to test multiple targets throughout the Tertiary, Cretaceous, Jurassic and Permo-Trias Karoo intervals. The well, which has the potential to hold up to 500 million barrels of oil, is expected to spud in early December.

Aminex’s partner in the Likonde well, Tullow Oil, also saw revenues slide over the first half of the year, down 23 per cent from £378 million in the first half of 2008 to US$291.3 million, while post-tax profits slumped 83 per cent to £21.4 million. This was in part due to lower oil prices and in part to a 16 per cent slip in production as Tullow focused its capital budget on its flagship projects in Ghana and Uganda. Production, on a working interest basis, was 59,265 barrels of oil equivalent per day and the average for the full year is expected to come in at 58,000 boepd.

 

The FTSE 100 company made good operational progress over the first half of the year, with the first phase of its Jubilee development offshore Ghana ontrack for first oil in the second half of 2010. The company is also lining up further projects for development, with a 90 per cent exploration strike rate in 2009 that should ensure a ready pipeline of appraisal and development opportunities for some years to come.

Melrose Resources, which has producing interests in Egypt, Bulgaria and the US, saw revenues slump from US$234 million in the first half of 2008 to US$97.6 million a year later while post-tax profits collapsed from US$76 million to US$1.9 million. The cause was, of course, the drop in oil prices, from an average of US$106.77 a barrel over the first half of 2008 to US$47.99 in 2009.

The Edinburgh-headquartered company reported average daily first half production of 34,600 barrels of oil equivalent per day (16,100 boepd on a net entitlement basis) and expects to report average production for the full year of 37,500 boepd, a nine per cent increase on the previous production guidance. This comes as Melrose successfully brought three fields in Egypt (NE Abu Zahra, S Zarqa and N Dikirnis) onstream ahead of schedule, which together now produce 63 million cubic feet of gas per day. Each of these fields was tied back to existing production infrastructure at a combined development cost of US$1.58 per boe, an enviable cost structure that allows the company to make money in the Egyptian gas market despite the state’s cap on gas pricing. Production guidance for 2010 has been set at 40,000 boepd.

Melrose is also moving into the gas storage business. It shut-in its Galata gas field offshore Bulgaria in January to start conditioning the field for conversion, with about 8.5 bcf of gas reserves left in the field to provide cushion gas. The field is now ready to commence gas injection once all the paperwork is finalised with the Bulgarian authorities.

The Galata platform, meanwhile, will be used to develop the recent Kaliakra (57 bcf) and Kavarna (24 bcf) gas discoveries, which Melrose hopes to bring onstream in 2010 at a combined rate of 45 million cubic feet per day. There is additional prospectivity here, such as the 19 bcf Kavarna East structure which lies between Kavarna and Kaliakra, and the North East and Kaliakra East prospects, with unrisked reserves of 55 bcf.

Premier Oil has also posted its results for the first six months of the year. The London-listed firm saw production climb four per cent to 39,700 boepd but cash flows slipped 40 per cent to US$113.4 million and post-tax profits were down 62 per cent at US$26.9 million. Full year production for 2009 is expected to be around 46,000 boepd and the company, which operates in the North Sea, Africa and Asia, said it is on track to hit its medium-term production goal of 75,000 boepd from existing projects.

 

The most important event of the period was the completion of its acquisition of Oilexco North Sea in May and Delek in July for a combined price tag of US$573 million. These were widely regarded as good deals for the London firm, which capitalized on the distress being felt throughout the E&P sector as the credit crunch and weak oil prices sent some companies to the wall.

 

The Oilexco North Sea acquisition, announced in March, was a major milestone for Premier, adding some 60 million barrels to the asset base at a favourable price. The deal is already making an impact, with the Shelley oilfield, a former ONSL asset which came onstream earlier this month, set to make a significant contribution to production in the second half of the year.

Despite delivering increased production, some of the main players in London’s E&P sector have reported lower revenues for the first half of 2009 as weaker oil prices took their toll on earnings. Aminex, for example, announced record gas production and a 50 per cent increase in oil production but its revenues were down 15.5 per cent at US$3.8 million. However, the London-listed company which is active in the US and Africa, still managed to reduce its pre-tax losses by 75 per cent...