REG - Cabot Energy PLC - Financial, Operational and Trading Update
Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. With the publication of this announcement, this information is now considered to be in the public domain.
1 April 2019
Cabot Energy Plc
("Cabot Energy", the "Group" or the "Company")
Financial, Operational and Trading Update
Cabot Energy (AIM: CAB), the AIM quoted oil and gas company focussed on creating predictable production growth in Canada, provides an update on the Company's financial position, operations and trading ahead of announcing its preliminary results for the year ended 31 December 2018 in late April 2019.
Update on Group financial position and fundraising
· Revenue for the year is expected to increase by 154% to US$12.2 million (2017: US$4.8 million).
· Unaudited cash on the balance sheet of US$1.0 million as at 29 March 2019 (31 December 2018: US$0.9 million).
· Successfully raised £2.53 million (US$3.35 million) in gross proceeds from a subscription and open offer, providing sufficient funding for the Group through to the end of April 2019. These funds also enabled the partial settlement of overdue Canadian trade creditors having secured voluntary binding agreements with a significant majority of creditors, by value, to reduce the settlement payments, to reschedule and defer these payments and to secure certainty about the future cost of supply terms during 2019.
· Notwithstanding the recent fundraise, there remains a risk to business continuity. As such, management are currently progressing discussions regarding debt financing options at the asset level in order to secure additional working capital, some or all the funding needed to commence a summer drilling programme in Canada and to support the growth of the business.
· At present, no assurances can be given that these debt finance discussions will lead to a positive outcome for Cabot Energy, but management are encouraged by the discussions that have taken place to date and further announcements regarding the Group's financial position will be made as soon as practicable.
Group production and sales
· Increased 2018 average annual gross oil production by 71% to 703 barrels of oil per day ("bopd") (2017: 411 bopd):
- H1 2018 gross oil production averaged 761 bopd, an increase of 112% on the same period in 2017 (359 bopd); and
- H2 2018 gross oil production averaged 645 bopd, an increase of 39% on the same period in 2017 (463 bopd), impacted by the cancellation of the 2018 summer work programme as previously announced.
· 2018 gross oil production exit rate (based on daily reports for the last week of 2018 and 2017) of 546 bopd (2017: 658 bopd).
· In January and February 2019, gross oil production has averaged 519 bopd with an average sales price in February of US$45.73 per barrel, reflecting the gradual restoration of the historic differential between the Edmonton Light Oil and West Texas Intermediate benchmark price.
Upgraded resources and reserves
Updated independent reserves report on the Company's predominantly 100% owned production and development assets in Canada at October 2018:
· 26% increase in Net Proven plus Probable ("2P") reserves to 3.6 million barrels of oil equivalent ("mmboe").
· Net present value (pre-tax), using a 10 per cent discount rate ("NPV10"), of the 2P reserves of US$48.3 million (net to the Company), or US$13.4/boe.
· 339% increase in net 2P reserves plus mid-case contingent and prospective resources of 42.2 mmboe was generated from a basin-wide study and land acquisitions.
· 282 nominal wells identified for potential drilling in the Company's Canadian mineral rights.
· Independent facilities review for all the Company's main processing and pipelines in the area confirmed a greater than 30,000 bopd capacity available for fluids processing and transportation.
Independent resources report on the Company's 100% owned and operated offshore permits in the Southern Adriatic and Sicily Channel:
· Total mean gross prospective resources of 933 mmboe (793 mmboe net to Cabot Energy), split between:
- gross 653 mmboe in the Adriatic Cygnus Prospect (513 mmboe net to Cabot Energy); and
- gross 280 mmbbl in the Sicily Channel Vesta Prospect (all net to Cabot Energy).
Update on Italian government exploration suspension
· On 12 February 2019, the Italian government signed a decree enacting the suspension of work on oil and gas exploration permits or applications for new exploration permits in Italy whilst an 18-month review is undertaken to determine which onshore and offshore territories are suitable for sustainable hydrocarbon prospecting, exploration and development activities.
· The Company has five permits and seven applications in process in total in Italy, all of which have already been subject to rigorous environmental assessments. As such, management are hopeful for a positive outcome but note that the Company would be entitled to seek compensation for exploration costs up to the withdrawal date should it be necessary.
· The Company is preparing to progress its licences as soon as the review is completed, subject to available funding.
Scott Aitken, CEO of Cabot Energy, commented: "We are pleased to have significantly increased our average annual gross production in Canada by 71% to 703 bopd. However, as became apparent during 2018, poor historic operational and financial planning and control meant that this increased production was accompanied by cost overruns. In the second half of the year, the restructured Board and management team significantly strengthened the Company's operational and reporting controls to address this issue and to ensure robust internal processes are in place.
"We believe Cabot Energy is now in a stronger operational position to recommence drilling and unlock the inherent value of its production and development assets, subject to the necessary funding being in place. During 2018, the technical team carried out extensive subsurface analysis, resulting in significant upgrades to our Canadian resources and reserves, increasing gross 2P reserves by 26% to 3.6 mmboe, and increasing gross reserves and resources by 339% to 42.2 mmboe.
"The Board is in the process of assessing the most effective financing options to provide additional working capital, recommence drilling and efficiently grow production. As previously announced, this may involve raising funds at an asset level - an option which has been made more attractive by the restoration to historic levels of the Edmonton Light Oil selling price - in addition to approaching the market for a further equity raise if needed. Although no guarantees can be given that such funds will be readily available or available on terms that are favourable to the Company, we are encouraged by the discussions we have had to date and look forward to providing shareholders with further updates regarding the Group's financial position as soon as practicable."
Enquiries:
Cabot Energy Plc
+44 (0)20 7469 2900
Scott Aitken, CEO
Petro Mychalkiw, CFO
SP Angel Corporate Finance LLP
+44 (0)20 3470 0470
Nominated Adviser and Joint Broker
David Hignell, Richard Hail, Richard Redmayne
GMP FirstEnergy
+44 (0)20 7448 0200
Joint Broker
Jonathan Wright, David van Erp
Luther Pendragon
+44 (0)20 7618 9100
Financial PR
Harry Chathli, Alexis Gore, Joe Quinlan
In Accordance with AIM Rules - Guidance for Mining and Oil & Gas Companies, the information contained in this announcement has been reviewed and signed off by the CTO of Cabot Energy, Mr Campbell Airlie, who has over 35 years' experience as a petroleum engineer. He has read and approved the technical disclosure in this regulatory announcement. The technical disclosure in this announcement complies with the SPE standard.
Note to Editors:
Cabot Energy (AIM: CAB) is an oil and gas company focussed on creating predictable production growth in Canada. Comprehensive information on Cabot Energy and its oil and gas operations, including press releases, annual reports and interim reports are available from Cabot Energy's website: www.cabot-energy.com
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