RCS - Valeura Energy Inc. - Second Quarter 2022 Results

Equinor ASAAnnouncement

05/08/2022 08:15

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RNS Number : 0640V  Valeura Energy Inc.  05 August 2022

Second Quarter 2022 Results

Calgary, August 5, 2022: Valeura Energy Inc. (TSX:VLE) ("Valeura" or the
"Company"), the upstream oil and gas company with assets in the Thrace Basin
of Turkey and in the offshore Gulf of Thailand, reports its unaudited
financial and operating results for the three and six month periods ended June
30, 2022.

In Q2 2022, Valeura signed and then closed a share purchase agreement to
acquire KrisEnergy International (Thailand) Holdings Ltd. which owns and
operates two licences in the offshore Gulf of Thailand (the "Acquisition").
The Acquisition includes the suspended Wassana oil field and the fully
appraised Rossukon oil field. Additionally, through a separate agreement, the
Company has agreed to acquire the Mobile Production Unit Ingenium ("MOPU")
which is on location at the Wassana oil field.

Highlights

·    Announced the independent third-party reserves and resources
assessment associated with the Acquisition: proved and probable (2P) reserves
of 6.5 million bbls of oil at Wassana, best estimate (2C) unrisked contingent
resources of 4.7 million bbls of oil at Rossukon (development pending), on a
net working interest basis(1);

·    Commenced planning and procurement activities to re-activate
production at the Wassana oil field, with aim of restoring up to 3,000 bbls/d
net production in Q4 2022(1);

·    Planning for Q3 2022 inspection works to re-certify the MOPU;

·    Advanced commercial discussions regarding procurement of a Floating
Storage and Offloading vessel ("FSO") for Wassana;

·    Continuing safe operations on the MOPU, with no recorded health or
safety incidents;

·    Commenced technical and commercial work for the development to
support a final investment decision later this year on development of the
Rossukon oil field; and

·    Continuing efforts to secure a suitable farm-in partner for the
Turkey tight gas play.

1 Throughout this announcement, net interests in Licence G10/48, Licence
G6/48, the MOPU and in their associated fields' production, reserves, and
resources are presented on a working interest acquired basis to the
Valeura-controlled special purpose vehicle, Panthera Resources Pte. Ltd., in
which Valeura holds 85% of the share capital.

 

Sean Guest, President and CEO of Valeura commented:

"During the second quarter, we agreed, announced, and then closed our Gulf of
Thailand acquisition, a transaction which is exactly in line with our strategy
to provide near-term cash flow and mid-term growth through the mergers and
acquisitions market. For total consideration of US$19.3 million (including
initial and contingent consideration and the MOPU acquisition), we have
acquired 6.5 million bbls of 2P oil reserves in addition to 2C contingent oil
resource volumes of 4.7 million bbls on an unrisked, best estimate basis, with
an assessed 84% chance of development.

We have moved quickly to integrate the Thailand business into our Company, and
have set our sights on restoring production from the Wassana oil field during
the fourth quarter of this year. To that end, offshore operations have begun
to ensure readiness of the MOPU and to conduct a major facility inspection to
complete its mandatory re-certification - expected to be completed in Q3. In
addition, we are now in advanced negotiations to lease a suitable FSO for
Wassana's production and have begun discussions regarding timing for
development of the Rossukon oil field with our partner and with the Thailand
regulator. Elsewhere in our business, we are continuing efforts to find a
farm-in partner for our Turkish deep gas play, where several parties are
currently evaluating the opportunity.

Our financial position at the end of the quarter remains strong, with no debt,
and nearly US$30 million in cash on hand. This sets us up well to bring the
Wassana field on production and continue our M&A-led growth strategy,
where we are actively pursuing additional targets in the Southeast Asia
region."

 

Financial Update

As of the end of Q2 2022, Valeura had cash and cash equivalent resources
totalling US$29.7 million, and no debt. This compares to a cash position of
US$39.8 million at the end of the prior quarter. The change in cash position
during Q2 2022 primarily reflects the Acquisition. Cash associated with the
Acquisition of US$4.1 million comprising mainly the maintenance and
administrative costs between the effective date and close, and US$4.2 million
in phased payments towards the purchase of the MOPU.

As the Acquisition closed just prior to the end of Q2, 2022, the Company has
now begun recording expenses, spending, etc., in relation to the Thailand
business from that date forward.

The Company received no revenue attributable to petroleum and natural gas
sales or royalties during Q2 2022. However, given strong gas prices in Turkey,
the Company is entitled to receive the full US$2.5 million capped maximum
royalty payment in relation to the 2021 sale of its Turkey gas producing
business. The remaining royalty amount to be paid to Valeura is approximately
US$0.4 million, which has been invoiced and recorded as a receivable.

 

Operations Update

Valeura's operations are squarely focused on resuming oil production at the
Wassana field in Q4 2022. Offshore work continues to be performed safely, with
no recorded incidents as the team performs ongoing routine maintenance work on
the MOPU. Subsequent to the end of the quarter, work has commenced on the MOPU
to ensure its readiness for production operations. The Company will shortly
complete the inspection work relating to the mandatory re-certification of the
facility. All of these key activities are expected to be completed in Q3
2022.

Valeura has also made strides toward securing a suitable FSO for Wassana, and
is in advanced commercial discussions. Timing for arrival of the FSO is
expected to drive the schedule for re-start of the Wassana oil field, expected
in Q4 2022 at an initial rate of up to 3,000 bbls/d (net working interest).

Separately, the Company has progressed its planning, technical and financing
arrangements for a five-well infill drilling programme on the Wassana field,
where it expects to commence drilling operations in late Q2 2023. The team are
currently finalising well designs and expect to hire a drilling rig and
procure the key long lead equipment this quarter. The Company is targeting an
increase in oil production rates to 4,500 bbls/d, consistent with the
externally-evaluated 2P reserves profile, which includes 6.5 million bbls of
oil (net working interest).

 

Commercial Update

Valeura is engaged in discussions with regulators and partners relating to
development of the Rossukon oil field. While a formal field development plan
was submitted by the previous operator and has been approved by regulators,
the Company is exploring the optimal timing and the potential for a phased
development schedule to bring Rossukon's 4.7 million bbls of 2C resources on
stream (unrisked, best estimate 2C resources, net working interest) in Q4
2023. Valeura will provide more clarity on the Rossukon development plan in
due course.

Valeura's Thrace basin tight gas play in Turkey continues to see interest from
potential farm-in partners, driven in large part by the substantial increase
in European gas prices. Several parties are evaluating a potential partnership
with the Company in Turkey, however, no assurances can be given that such
evaluations will result in a partnership with the Company.

 

Ongoing Strategy

Valeura has created a foundation in the Southeast Asia region and is well
positioned to grow further by way of mergers and acquisitions. As such, the
Company is continuing to evaluate additional targets that will further bolster
near-term cashflow while providing opportunities for additional medium-term
re-investment to generate value through further growth. In the longer-term,
Valeura continues to believe the 20 Tcfe prospective resources tight gas
appraisal play in Turkey represents a significant source of potential
long-term value.

 

Financial Statements

Valeura's condensed interim consolidated financial statements and Management's
Discussion and Analysis for the three and six months ended June 30, 2022 and
2021 are available on the Company's website at
www.valeuraenergy.com/investor-information/financials/
(http://www.valeuraenergy.com/investor-information/financials/) and will be
made available through www.sedar.com (http://www.sedar.com) .

 

For further information, please contact:

Valeura Energy Inc. (General Corporate
Enquiries)
+1 403 237 7102

Sean Guest, President and CEO

Heather Campbell, CFO
Contact@valeuraenergy.com (mailto:Contact@valeuraenergy.com)

Valeura Energy Inc. (Capital Markets / Investor
Enquiries)                       +1 403 975 6752

Robin James Martin, Investor Relations
Manager                                +44 7392
940495

IR@valeuraenergy.com (mailto:IR@valeuraenergy.com)

 

Auctus Advisors LLP (Corporate Broker to
Valeura)                                 +44
(0) 7711 627 449

Jonathan Wright

Valeura@auctusadvisors.co.uk (mailto:Valeura@auctusadvisors.co.uk)

CAMARCO (Public Relations, Media Adviser to Valeura)
+44 (0) 20 3757 4980

Owen Roberts, Billy Clegg
Valeura@camarco.co.uk (mailto:Valeura@camarco.co.uk)

 

About the Company

Valeura Energy Inc. is a Canada-based public company engaged in the
exploration, development and production of petroleum and natural gas in
Thailand and in Turkey, and is pursuing further inorganic growth in Southeast
Asia.

 

Oil and Gas Advisories

Reserves and contingent resources disclosed in this announcement are based on
an independent evaluation conducted by the independent petroleum engineering
firm, Netherland, Sewell & Associates, Inc. ("NSAI")  with an effective
date of March 31, 2022. The NSAI estimates of reserves and resources were
prepared using guidelines outlined in the Canadian Oil and Gas Evaluation
Handbook and in accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities. The reserves and contingent resources
estimates disclosed in this announcement are estimates only and there is no
guarantee that the estimated reserves and contingent resources will be
recovered.

Prospective resource disclosure in this announcement in respect of the
Company's tight gas appraisal play in Turkey is based on an independent
resources evaluation as at December 31, 2018 conducted by DeGolyer and
MacNaughton in its report dated March 13, 2019, which was prepared using
guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in
accordance with National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities, as adjusted to reflect Equinor's withdrawal from the tight
gas appraisal play in Q1 2020.

Reserves

Reserves are estimated remaining quantities of commercially recoverable oil,
natural gas, and related substances anticipated to be recoverable from known
accumulations, as of a given date, based on the analysis of drilling,
geological, geophysical, and engineering data, the use of established
technology, and specified economic conditions, which are generally accepted as
being reasonable. Reserves are further categorised according to the level of
certainty associated with the estimates and may be sub-classified based on
development and production status.

Proved reserves are those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves.

Probable reserves are those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated
proved plus probable reserves.

Contingent Resources

Contingent resources are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations using
established technology or technology under development, but which are not
currently considered to be commercially recoverable due to one or more
contingencies. Contingencies are conditions that must be satisfied for a
portion of contingent resources to be classified as reserves that are: (a)
specific to the project being evaluated; and (b) expected to be resolved
within a reasonable timeframe.

Contingent resources are further categorised according to the level of
certainty associated with the estimates and may be sub‐classified based on a
project maturity and/or characterised by their economic status. There are
three classifications of contingent resources: low estimate, best estimate and
high estimate. Best estimate is a classification of estimated resources
described in the Canadian Oil and Gas Evaluation Handbook as the best estimate
of the quantity that will be actually recovered; it is equally likely that the
actual remaining quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at least a 50
percent probability that the quantities actually recovered will equal or
exceed the best estimate.

The project maturity subclasses include development pending, development on
hold, development unclarified and development not viable. All of the
contingent resources disclosed in this announcement are classified as either
development pending or development unclarified. Development pending is defined
as a contingent resource where resolution of the final conditions for
development is being actively pursued. Development unclarified is defined as a
contingent resource that requires further appraisal to clarify the potential
for development and has been assigned a lower chance of development until
commercial considerations can be clearly defined. Chance of development is the
likelihood that an accumulation will be commercially developed.

Conversion of the development pending contingent resources referred to in this
announcement to reserves is dependent upon a final investment decision for the
oil development of the Rossukon field. The major positive factors relevant to
the estimate of the development pending contingent resources are the
successful appraisal of the Rossukon field through existing drilled and tested
wells and the existing Thailand Government approved development plan which is
economically attractive at current product prices and capital cost estimates.
The major negative factor relevant to the estimate of the contingent resources
is the pending nature of a finalised development plan and a final investment
decision required to proceed with development. If these contingencies are
successfully addressed, some portion of these contingent resources may be
reclassified as reserves.

The NSAI estimates have been risked, using the chance of development, to
account for the possibility that the contingencies are not successfully
addressed. Due to the early stage of development for the development
unclarified resources, NSAI did not perform an economic analysis of these
resources; as such, the economic status of these resources is undetermined and
there is uncertainty that any portion of the contingent resources disclosed in
this announcement will be commercially viable to produce.

Prospective Resources

Prospective resources are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective resources have both an
associated chance of discovery and a chance of development. The unrisked
estimates of prospective resources referred to in this announcement have not
been risked for either the chance of discovery or the chance of development.
There is no certainty that any portion of the prospective resources disclosed
in this announcement will be discovered. If a discovery is made, there is no
certainty that it will be developed or, if it is developed, there is no
certainty as to the timing of such development or that it will be commercially
viable to produce any portion of the prospective resources disclosed in this
announcement. Additional resources information is included in the Company's
annual information form for the year ended December 31, 2018.

Barrels of Oil Equivalent

A boe is determined by converting a volume of natural gas to barrels using the
ratio of 6 Mcf to one barrel. Boes may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf:1 boe is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Further, a conversion ratio
of 6 Mcf:1 boe assumes that the gas is very dry without significant natural
gas liquids. Given that the value ratio based on the current price of oil as
compared to natural gas is significantly different from the energy equivalency
of 6:1, utilising a conversion on a 6:1 basis may be misleading as an
indication of value.

 

Advisory and Caution Regarding Forward-Looking Information

Certain information included in this announcement constitutes forward-looking
information under applicable securities legislation. Such forward-looking
information is for the purpose of explaining 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, such as making
investment decisions. Forward-looking information typically contains
statements with words such as "anticipate", "believe", "expect", "plan",
"intend", "estimate", "propose", "project", "target" or similar words
suggesting future outcomes or statements regarding an outlook. Forward-looking
information in this announcement includes, but is not limited to: the
Company's ability to complete the commercial arrangements required to
facilitate resuming production from the Wassana field in Q4 2022 and the
anticipated drilling programme thereon; expected production from the Wassana
field; the ability and timing to achieve re-certification of the MOPU;
statements with respect to achieving final investment decision for the
Rossukon field later this year; the alignment of the Acquisition with our
strategy to provide near-term cash flow and mid-term growth through the
mergers and acquisitions market; statements with respect to leasing a suitable
FSO for Wassana's production; the receipt of the remaining royalty amount in
Turkey; and statements with regard to the Company continuing to grow its
business through the mergers and acquisitions market and progressing its
appraisal of the tight gas play in Turkey. In addition, statements related to
"reserves" and "resources" are deemed to be forward-looking information as
they involve the implied assessment, based on certain estimates and
assumptions, that the resources can be discovered and profitably produced in
the future.

Forward-looking information is based on management's current expectations and
assumptions regarding, among other things: the ability to successfully
re-start production from the Wassana field in Q4 2022; political stability of
the areas in which the Company is operating; ability to achieve regulatory
approvals in the normal course; continued safety of operations and ability to
proceed in a timely manner; the ability to identify attractive merger and
acquisition opportunities to support growth; the prospectivity of the tight
gas appraisal play; future sources of funding and the ability to obtain third
party financing; future economic conditions; future currency exchange rates;
the ability to meet drilling deadlines and fulfil commitments under licences
and leases and the Company's continued ability to obtain and retain qualified
staff and equipment in a timely and cost efficient manner. In addition, the
Company's work programmes 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, high-pressure stimulation and
other specialised oilfield equipment and service providers for onshore and
offshore operations, changes in partners' plans and unexpected delays and
changes in market or regulatory conditions. Although the Company 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 and resources are speculative activities and involve a degree of
risk. A number of factors could cause actual results to differ materially from
those anticipated by the Company including, but not limited to: the ability of
management to execute its business plan or realise anticipated benefits from
the Acquisition; inability to secure a new partner for the tight gas appraisal
play in Turkey and execute potential mergers and acquisitions; evolving
impacts of the COVID-19 pandemic including disruptions in global supply
chains; the increase in activity in the global oil and gas industry and the
impact on access to equipment; the Company's ability to manage growth; the
Company's ability to manage the costs related to inflation; uncertainty in
capital markets and ability to raise debt and equity, as required,
particularly for companies with a small market capitalisation; the ability to
finance future development and/or inorganic growth; the risks of currency
fluctuations; changes in oil and gas prices and netbacks in Thailand and
Turkey; potential changes in joint venture partner strategies and
participation in work programmes; potential assertions of pre-emptive rights
by a partner or potential disputes with a partner in connection with the
Acquisition or in connection with future development plans; uncertainty
regarding the contemplated timelines and costs for offshore development plans
in Thailand and the tight gas appraisal play evaluation in Turkey; the risks
of disruption to operations and access to worksites (including the impact of
the COVID-19 pandemic); the ability of the Company to maintain its directors,
senior management team and employees with relevant experience; potential
changes in laws and regulations, and the uncertainty regarding government and
other approvals; counterparty risk; the ability of the Company to maintain
effective ICFR; counterparty risk; risks associated with weather delays and
natural disasters; and the risk associated with international activity. The
forward-looking information included in this announcement is expressly
qualified in its entirety by this cautionary statement. See the Company's
annual information form for the year ended December 31, 2021 and management
discussion and analysis for the three and six months ended June 30, 2022 for a
detailed discussion of the risk factors.

The forward-looking information contained in this announcement is made as of
the date hereof and the Company undertakes no obligation to update publicly or
revise any forward-looking information, whether as a result of new
information, future events or otherwise, unless required by applicable
securities laws. The forward-looking information contained in this
announcement is expressly qualified by this cautionary statement.

Additional information relating to Valeura is also available on SEDAR at
www.sedar.com
(https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00014898)
.

This announcement does not constitute an offer to sell or the solicitation of
an offer to buy securities in any jurisdiction, including where such offer
would be unlawful. This announcement is not for distribution or release,
directly or indirectly, in or into the United States, Ireland, the Republic of
South Africa or Japan or any other jurisdiction in which its publication or
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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.

 

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