RCS - Valeura Energy Inc. - Q4 and Year-end 2022 Results and Reserves

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03/04/2023 08:15

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RNS Number : 0387V  Valeura Energy Inc.  03 April 2023

Fourth Quarter and Year-end 2022 Results and Reserves

Calgary, March 31, 2023: Valeura Energy Inc. (TSX:VLE) ("Valeura" or the
"Company"), the upstream oil and gas company with assets in the offshore Gulf
of Thailand and the Thrace Basin of Turkey, reports its financial and
operating results for the three month period ended December 31, 2022 and the
year ended December 31, 2022, as well as its year-end 2022 reserves and
contingent resources.

The complete quarterly reporting package for the Company, including the
audited financial statements and associated management's discussion and
analysis ("MD&A") and the 2022 annual information form ("AIF"), are being
filed on SEDAR at www.sedar.com (http://www.sedar.com) and posted to the
Company's website at www.valeuraenergy.com (http://www.valeuraenergy.com) .

Financial and operating results presented in this announcement, together with
the financial statements, the MD&A and the AIF, reflect the Company's
assets and operations as of December 31, 2022, and accordingly do not include
the results of operations from the assets acquired through the Company's
recent Thailand acquisition, which was announced on December 6, 2022 and was
completed on March 22, 2023.

Highlights

·    The Company entered into a sale and purchase agreement to acquire the
upstream Thailand oil producing portfolio of Busrakham Oil and Gas Ltd., a
subsidiary of Mubadala Energy (the "Mubadala Acquisition"), which subsequently
closed on March 22, 2023;

·    Total year-end Proved Plus Probable reserves in the Wassana oil field
of 6.1 million bbls;

·    Cash and cash equivalent resources of US$17.5 million at year-end;

·    Progress toward resuming production operations at the Wassana oil
field;

·    Preparations for infill drilling in Thailand, including procuring a
drilling rig for an initial scope of work comprised of a five-well infill
drilling programme on Wassana; and

·    Subsequent to end of the quarter, the acquisition of the remaining
minority interest in the Company's special purpose vehicle subsidiary company,
Valeura Energy Asia Pte. Ltd. ("VEA"), which holds all of the Company's assets
in Thailand.

Sean Guest, President and CEO commented:

"2022 was a year of genuine transition for Valeura as we evolved our business
to focus on the Southeast Asia region, where we now own a significant
portfolio of cash generating assets.  Our financial results reflect the
decision to deploy resources toward inorganic growth in Thailand, and
thereafter toward the restart of production operations at the Wassana oil
field.

Looking forward, we are excited to begin demonstrating the results of
operations from our extensive oil producing portfolio.  Through our first
week of operations following completion of the Mubadala  Acquisition, oil
production has averaged approximately 21,500 bbls/d (net to Valeura's
interest), slightly above the October 2022 rates that we announced upon
agreeing to the deal in December, and a reflection of the ongoing opportunity
to keep growing through investment.  We intend to remain focused on safe,
reliable delivery, and are continuing to pursue our growth-oriented strategy
with vigour."

Financial Update

As of the end of Q4 2022, Valeura had cash and cash equivalent resources
totalling US$17.5 million.  This compares to a cash position of US$22.3
million at the end of the prior quarter.  The change in cash position during
Q4 2022 primarily reflects total draws of US$12.5 million from the Company's
facility arrangement (which is comprised of advances in support of Wassana oil
field operations and acquisition deposit noted below, as more fully described
in the AIF), offset by investing activity comprised primarily of a deposit
lodged in relation to the Mubadala Acquisition and by operating activities
focused on pre-production work for the Wassana oil field in addition to costs
associated with the Company's ongoing business development endeavours.

At the end of Q4 2022, the Company had debt of US$11.1 million under its
facility arrangement which provides for i) advances in support of Wassana oil
field operations and ii) a commercial contract relating to crude oil
production from the Wassana oil field.  US$5.9 million of the total debt is
current.

Operations Update

Valeura's operational focus during Q4 2022 was on preparing for the restart of
production operations at the Wassana oil field.  To this end, the Company
completed upgrades, maintenance, and inspection work on its Mobile Offshore
Production Unit Ingenium (the "MOPU"), to ready the facility for production.
The Company received formal notice of the MOPU's recertification in January
2023.

Separately, Valeura agreed to charter the MT Jaka Tarub oil storage vessel
(the "Vessel"), to be used as the floating storage vessel for the Wassana oil
field's production, and the Vessel was mobilised to the field in late March
2023.

During start-up preparations, the third-party operated Vessel impacted the
field's Catenary Anchor Leg Mooring buoy, resulting in damage to certain
offloading components.  No personnel were injured, and as production had not
yet started, there was no discharge of fluids.

In keeping with Valeura's strict health, safety, and environmental standards,
the Company is working collaboratively with Thailand's upstream regulator, the
Department of Mineral Fuels, to ensure the safe re-start of production
operations, which will now entail a thorough inspection to assess damage and
verify the operational integrity of the complete offloading system before
startup.

The Company is also preparing for infill drilling operations in Thailand and
agreed in Q4 2022 to charter the PV Drilling I jack-up drilling rig to conduct
an initial scope of work comprised of a five-well infill drilling programme on
the Wassana oil field.  The Company began planning work for the drilling
programme, in addition to procuring long-lead items.  The PV Drilling I rig
is scheduled to arrive in the first half of Q3 2023.

Strategic Update

Valeura is pursuing a growth-oriented strategy, including both organic and
inorganic endeavours.  During Q4 2023 the Company's efforts focused on growth
opportunities within its portfolio, including preparing for the Wassana oil
field's 2023 infill drilling programme and continuing discussions in relation
to the Rossukon oil field with partners and regulators.

During Q4, the Company announced the Mubadala Acquisition, which is a
transformational inorganic growth transaction.  Upon completion on March 22,
2023, Valeura has become the largest independent oil producer in Thailand.

Valeura believes the inorganic growth opportunities it agreed in 2022 are
representative of additional potential mergers and acquisitions which may
become available within Thailand and the broader Southeast Asia region.  As a
result, inorganic growth remains part of the Valeura strategy, while remaining
focused on its strict screening criteria and biased toward potential
transactions which both generate near-term cash flow and provide opportunities
for follow-on investment.

In addition, Valeura's tight gas play in the Thrace basin of Turkey (the
"Tight Gas Play") remains a part of the Company's portfolio, and the Company's
strategy is to attract a farm-in partner before committing significant capital
toward the next phase of exploration and appraisal.  Valeura believes the
Tight Gas Play is a potentially significant source of potential value in the
longer term.

2023 Outlook

Following completion of the Mubadala Acquisition just one week ago, Valeura
has gained access to the full team of Thailand personnel, as well as all
business plan scenarios and technical data associated with the acquired
assets. The Company is working rapidly to support an independent third party
reserves and resources evaluation, and to align on business plans and
objectives for 2023.  Valeura intends to publish the results of its third
party independent reserves and resources evaluation and to provide a fulsome
guidance outlook within the coming weeks, which will be founded on the
following priorities:

 

·    Pursuing infill drilling, Nong Yao C field development and further
growth opportunities within the recently-acquired assets, with a view to
continuing the assets' long history of reserves renewal;

·    Safe production operations at the Wassana oil field and pursuing
production and value growth through infill drilling starting in early Q3;

·    Arriving at a decision for the Rossukon oil field;

·    Integrating the business acquired via the Mubadala Acquisition with
the rest of the Valeura organisation;

·    Seeking operational and financial synergies within the portfolio;

·    Continuing to pursue inorganic growth within the Southeast Asia
region; and

·    Attracting a suitable farm-in partner to pursue the next phase of
exploration and appraisal of the Thrace basin Tight Gas Play.

Year-end 2022 Reserves and Resources

As at December 31, 2022, all of the Company's reserves are associated with the
Wassana oil field, in the offshore Gulf of Thailand, where the Company holds
an 89% operated working interest through its subsidiary company, VEA.
Subsequent to year end 2022, Valeura's ownership stake in VEA increased to
100% on March 21, 2023.  An evaluation of the Wassana oil field reserves and
Licence G10/48 contingent resources was conducted by Netherland, Sewell &
Associates, Inc. ("NSAI") and are presented in a report dated March 29, 2023
and summarised below.

NSAI has also been commissioned to conduct a reserves and contingent resources
evaluation for all of the Company's Thailand assets, including those acquired
through the Mubadala Acquisition, effective December 31, 2022, and will
publish the results in due course.

Wassana Oil Field Gross Reserves Volumes and Values((1)(2))

The forecast prices used to calculate reserves value are based on a Brent
crude oil reference price of US$84.67/bbl in 2023, US$82.69/bbl in 2024,
US$81.03/bbl in 2025 and US$81.39/bbl in 2026, and apply a differential of
US$4.34/bbl, resulting in a forecast realised price of US$80.33/bbl in 2023,
US$78.35/bbl in 2024, US$76.69/bbl in 2025  and US$77.05 in 2026.  These
prices escalate at 2% per year going forward.  More details on the commodity
price assumptions are included in the AIF.

 

 Reserves Category                              Company Gross Heavy Oil Reserves  Company Gross Before Tax NPV(10)

(Mbbls)
(US$ millions)
 Proved
   Developed producing                          0                                 0
   Developed non-producing                      1,820                             (59.2)
   Undeveloped                                  1,976                             68.7
 Total Proved (1P)                              3,796                             9.4
 Probable                                       2,323                             56.9
 Total Proved Plus Probable (2P)                6,119                             66.3
 Possible                                       859                               43.3
 Total Proved Plus Probable Plus Possible (3P)  6,978                             109.6

Notes:

(1)  See Oil and Gas Advisories and Reserves Definitions below.

(2)  Due to rounding, summations in the table may not add.

Wassana Oil Field Gross Contingent Resources Volumes (Development Unclarified)

Contingent oil resources on Licence G10/48 are heavy crude oil classified as
"Development Unclarified" and carry an assessed chance of development ranging
from 10% to 22%.  These accumulations provide a future opportunity to access
additional hydrocarbon volumes.

 Resources Category  Company Gross Unrisked Resources  Company Gross Risked Resources

(Mbbls)
(Mbbls)
 Low Estimate (1C)   5,777                             1,039
 Best Estimate (2C)  8,004                             1,434
 High Estimate (3C)  13,030                            2,218

 

 

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, NSAI with an effective date of December 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.

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.

Developed reserves are those reserves that are expected to be recovered from
existing wells and installed facilities or, if facilities have not been
installed, that would involve a low expenditure (e.g. when compared to the
cost of drilling a well) to put the reserves on production.

Developed producing reserves are those reserves that are expected to be
recovered from completion intervals open at the time of the estimate. These
reserves may be currently producing or, if shut in, they must have previously
been on production, and the date of resumption of production must be known
with reasonable certainty.

Developed non-producing reserves are those reserves that either have not been
on production, or have previously been on production, but are shut in, and the
date of resumption of production is unknown.

Undeveloped reserves are those reserves expected to be recovered from known
accumulations where a significant expenditure (e.g., when compared to the cost
of drilling a well) is required to render them capable of production. They
must fully meet the requirements of the reserves classification (proved,
probable, possible) to which they are assigned.

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.

Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. It is unlikely that the actual remaining
quantities recovered will exceed the sum of the estimated proved plus probable
plus possible reserves. There is a 10% probability that the quantities
actually recovered will equal or exceed the sum of the estimated proved plus
probable plus possible reserves.

The estimated future net revenues disclosed in this announcement in respect of
the Acquisition do not necessarily represent the fair market value of the
reserves associated with the Wassana oil field.

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.

Contingent resources are further characterised 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
development unclarified. 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.

Please refer to the AIF for the specific contingencies which prevent the
classification of the contingent resources disclosed herein as reserves and
the significant positive and negative factors relevant to the estimate.

 

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.

Glossary

bbl       barrel

M US$ thousands of US dollars

Mbbl    thousand barrels

Advisory and Caution Regarding Forward-Looking Information

Certain information included in this news release 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 news release includes, but is not limited
to: the Company continuing to make progress toward resuming production
operations in the Wassana oil field; the Company's ability to continue
providing safe, reliable delivery; the Company's continued focus on a
growth-orientated strategy; the Company's ability to successfully work with
the Department of Mineral Fuels to successfully restart production operations;
the timing of the arrival of the PV Drilling I rig; the Company undertaking
the Wassana oil field's 2023 infill drilling programme; the availability of
potential mergers and acquisitions to the Company within Thailand and the
broader Southeast Asia region; the Deep Gas Play becoming a potentially
significant source of value in the long term; the Company pursuing infill
drilling and development at the Nong Yao C field and further growth
opportunities for the assets acquired pursuant to the Acquisition; the Company
arriving at a decision in respect of the Rossukon oil field; the Company
integrating the assets acquired under the Acquisition; the Company attracting
a suitable farm-in partner for the Deep Gas Play; and the Company publishing
the results of NSAI's evaluation of the reserves and contingent resources for
the Company's Thailand assets from the Acquisition and the timing thereof.

Forward-looking information is based on management's current expectations and
assumptions regarding, among other things: the ability of the Company to fund
the Acquisition from cash on hand and future cash flow; the Company's ability
to integrate the assets from the Acquisition; the ability to successfully
restart production from the Wassana oil field; the ability to achieve a
materially lower cost base for the Wassana oil field through the MOPU purchase
and other new facility leasing contracts; the ability to achieve oil sales
from the Wassana oil field and generate net cashflows at current commodity
prices; the ability to fully identify and execute infill drilling
opportunities in the Wassana oil field; the ability to achieve regulatory and
partner approvals to refine the field development plan in the Rossukon oil
field; the ability to successfully pursue further opportunities in Thailand
and achieve synergies; the ability to extend the exploration licences in the
Thrace Basin of Turkey for up to a further five years; the ability to identify
attractive merger and acquisition opportunities to support growth; the
continuation of operations following pandemics; continued safety of operations
and ability to proceed in a timely manner; the ability to satisfy the
conditions precedent under the Trafigura facility; the ability to meet and
maintain certain terms, conditions and covenants under the Trafigura facility;
future sources of funding; future economic conditions; the ability to manage
costs related to inflation; the ability of the Company to execute its
strategy; the Company's ability to effectively manage growth; political
stability of the areas in which Valeura is operating and completing
transactions; the success of the Deep Gas Play; the ability of the Company to
satisfy the drilling and other requirements under its licences and leases;
continued operations of and approvals forthcoming from the governments and
regulators in a manner consistent with past conduct; future seismic and
drilling activity on the required/expected timelines; the prospectivity of the
Company's lands; the continued favourable pricing and operating netbacks
across its business; future production rates and associated operating netbacks
and cash flow; the ability to reach agreement with partners; the ability of
the Company to maintain its directors, senior management team and employees
with relevant experience; the ability of the Company to successfully manage
the political and economic risks inherent in pursuing oil and gas
opportunities in Thailand and Turkey; field production rates and decline
rates; the ability of the Company to secure adequate product transportation;
the impact of increasing competition in or near the Company's plays; the
ability of the Company to obtain qualified staff, equipment and services in a
timely and cost efficient manner to develop its business and execute work
programmes; the Company's ability to operate the properties in a safe,
environmentally responsible, efficient and effective manner; the ability to
meet drilling deadlines and other requirements under licences and leases; the
timing and costs of pipeline, storage and facility construction and expansion;
future oil and natural gas prices; currency, exchange rates; interest rates;
the ability of the Company to maintain effective internal controls over
financial reporting; the regulatory framework regarding royalties, taxes and
environmental matters; the ability of the Company to successfully market its
oil and natural gas products; the continued minimal effect on the Company's
ability to operate from various geopolitical unrest; the state of the capital
markets; and the ability of the Company to obtain financing on acceptable
terms.  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 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, environmental risks and climate change risks); the ability
of management to execute its business plan or realise anticipated benefits
from the Acquisition; competition for specialised equipment and human
resources; disruption in supply chains; 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; the ability to maintain effective internal
controls over financial reporting; the ability to secure a new partner for the
Deep Gas Play; the ability to execute potential merger and acquisition
opportunities; the risk that the conditions precedent under the facility will
not be satisfied and that other financing may not be available; the risks of
further disruptions from pandemics; liquidity risk; uncertainty regarding the
sustainability of initial production rates and decline rates thereafter;
uncertainty regarding the contemplated timelines for further testing and
production activities; uncertainty regarding the state of capital markets and
the availability of future financings; the risk of being unable to meet
drilling deadlines and the requirements under licences and leases; uncertainty
regarding the contemplated timelines and costs for offshore development plans
in Thailand and the Deep Gas Play evaluation in Turkey; 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; the risks of increased costs
and delays in timing related to protecting the safety and security of
Valeura's personnel and property; political stability in Turkey; the risk of
changing commodity prices; the risk of foreign exchange rate fluctuations; the
uncertainty associated with negotiating with third parties; the risk of
partners having different views on work programmes and potential disputes
among partners; counterparty risks; the uncertainty regarding government and
other approvals (potential changes in laws and regulations); the risks
associated with weather delays and natural disasters; and the risk associated
with international activity. The forward- looking information included in this
new release is expressly qualified in its entirety by this cautionary
statement. See the most recent AIF and MD&A for a detailed discussion of
the risk factors.

The forward-looking information contained in this new release 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 new release
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
distribution would be unlawful.

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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