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 and posted to the Company’s website at 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.
- 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.”
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.
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.
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.
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 NPV10
|Total Proved (1P)||3,796||9.4|
|Total Proved Plus Probable (2P)||6,119||66.3|
|Total Proved Plus Probable Plus Possible (3P)||6,978||109.6|
(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
|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
Valeura Energy Inc. (Capital Markets / Investor Enquiries) +1 403 975 6752
Robin James Martin, Investor Relations Manager +44 7392 940495
Auctus Advisors LLP (Corporate Broker to Valeura) +44 (0) 7711 627 449
CAMARCO (Public Relations, Media Adviser to Valeura) +44 (0) 20 3757 4980
Owen Roberts, Billy Clegg
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 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 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.
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.
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.