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.
- 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 basis1;
- 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 20221;
- 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.”
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.
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).
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.
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.
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/ and will be made available through 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
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, 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 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 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 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.
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.