Calgary, November 11, 2022: Valeura Energy Inc. (TSX:VLE) (“Valeura” or the “Company”), the upstream oil and gas company with assets offshore Gulf of Thailand and the Thrace Basin of Turkey, reports (i) its unaudited financial and operating results for the three month period ended September 30, 2022, (ii) the signing by certain subsidiaries of the Company of a facility arrangement and commercial contract with Trafigura Pte. Ltd. (the “Facility”), and (iii) a contract for a Floating Storage and Offloading vessel (“FSO”) for its Wassana oil field.
- Strong financial position – Cash position of US$22.3 million at September 30, 2022;
- Increased liquidity – Facility provides (i) initial liquidity to support Wassana operations, and (ii) additional liquidity for potential future acquisition support, subject to satisfaction of certain conditions precedent;
- Near-term production – Procurement of an FSO to support production operations at the Wassana oil field at initial rates of up to 3,0001 bbls/d starting January 2023;
- Drilling programme progress – Chartered a drilling rig for the 2023 Wassana infill drilling programme, forecast to increase production rates to 4,500 bbls/d;
- Development planning – Ongoing planning for the Rossukon oil field development, with a target final investment decision expected later this quarter; and
- Strategy continuing – Pursuing additional near-term inorganic growth opportunities in Southeast Asia, while seeking a suitable partner to farm-in to the Company’s tight gas play in Turkey.
1 Throughout this announcement, net interests in Licence G10/48, Licence G6/48, the MOPU (defined below) and in the associated fields’ production and resources are presented on a working interest acquired basis to the Valeura-controlled special purpose vehicle, Valeura Energy Asia Pte. Ltd. (previously named Panthera Resources Pte. Ltd.), in which Valeura holds 85% of the share capital.
Sean Guest, President and CEO of Valeura commented:
“Our financial position remains strong, with over US$22 million in cash at the end of Q3, now bolstered by access to additional liquidity as a result of our Facility.
We are building momentum toward the re-start of production operations at the Wassana oil field with initial net production rates of up to 3,000 bbls/d. We have signed a letter of award to charter a suitable FSO which is due to arrive on location around the end of the year. Given this, we anticipate having production on line in January 2023.
Separately, our team has worked swiftly to prepare for growth in 2023, both by chartering a drilling rig to support our Wassana infill drilling campaign starting in late Q2 next year and by progressing our development plans for the Rossukon field, where we are targeting a final investment decision this quarter, leading to initial oil production starting in Q4 2023.
We are also continuing our search for additional inorganic growth opportunities in the Southeast Asia region and see many targets that offer valuable synergies with our existing portfolio.”
As of the end of Q3 2022, Valeura had cash and cash equivalent resources totalling US$22.3 million, and no debt. This compares to a cash position of US$29.7 million at the end of the prior quarter. The change in cash position during Q3 2022 primarily reflects operating activities relating to preparation for production restart at the Wassana oil field and the effect of investments classified as long term deposits mainly related to the recertification of the Wassana Mobile Offshore Production Unit during the quarter.
Subsidiaries of the Company have signed agreements with Trafigura Pte. Ltd. for the Facility, comprised of: (i) an agreement for advances in support of Wassana operations; and (ii) a commercial contract related to Wassana’s crude oil production. The Facility provides for advances in discrete tranches, up to an initial maximum capacity of US$30 million, subject to the satisfaction of a number of conditions precedent. There is provision to expand the maximum capacity, as may be required to support a potential future acquisition, subject to the satisfaction of certain conditions precedent.
Valeura is focused on the re-start of production operations at the Wassana oil field and is now targeting oil production in January 2023, after arrival of the FSO around the end of the year.
In Q3 2022, the Company completed all of the underwater survey work on the Wassana field’s Mobile Offshore Production Unit (“MOPU”) and the engineering reports have been submitted to support the re-certification of the facility for continued use. Additional offshore work, including maintenance, inspection, and minor upgrades, continues to be performed safely, with no recorded deviations from the Company’s safe operating practices. The Company anticipates receiving re-certification of the MOPU (amounting to a formal life extension of the facility) once the minor upgrades are completed later this month.
Separately, Valeura has contracted with PT Buana Lingas Lautan Tbk (“Buana”) relating to the charter of the MT Vula tanker, to be used as the FSO vessel for Wassana’s production. Valeura and Buana have entered into a Letter of Award detailing the key heads of agreement and are working to finalise the remaining commercial terms by way of a formal charter agreement. Valeura anticipates that the FSO will mobilise to the Wassana field by the end of 2022, pending routine customs clearances and safety inspections.
The Company anticipates an initial oil production rate of up to 3,000 bbls/d and is targeting an increase in rates to 4,500 bbls/d as a result of a five-well infill drilling programme planned to commence in Q2 2023. Valeura has chartered the PV Drilling 1 jack-up drilling rig and is now engaged in planning and procurement work relating to its 2023 drilling programme.
Valeura has substantially progressed its development plans for the Rossukon oil field and anticipates taking a final investment decision on the development before the end of 2022. While a formal development plan has already been submitted by the previous operator, Valeura’s plan seeks to optimise production start timing and to reduce the upfront capital that is required to commercialise Rossukon’s 4.7 million bbls of 2C resources (unrisked, best estimate 2C resources, net working interest).
Valeura aspires to increase its presence in Southeast Asia through further merger and acquisition-led growth, with a focus on opportunities that can both add to near-term cashflow and provide opportunities for value accretive re-investment. The Company is actively evaluating several such opportunities.
Valeura’s Thrace basin tight gas play in Turkey continues to see interest from potential farm-in partners, with several parties continuing to evaluate a potential commercial arrangement with the Company. While no assurances can be given that such evaluations will result in a partnership, the Company continues to believe the play is a potentially significant source of potential value and warrants further appraisal work.
Valeura’s condensed interim consolidated financial statements and Management’s Discussion and Analysis for the three and nine months ended September 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
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 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 contingent resources estimates disclosed in this announcement are estimates only and there is no guarantee that the estimated contingent resources will be recovered.
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.
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 use of liquidity under the Facility; the Company’s ability to complete the commercial arrangements required to facilitate resuming production from the Wassana field in January 2023 and the anticipated drilling programme thereon; expected near-term and forecasted production from the Wassana field; the expected arrival of the FSO to the Wassana field near the end of the year; the commencement of the Wassana infill drilling campaign in late Q2 2023; 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 and initial oil production starting in Q4 2023; finalisng the remaining commercial terms with Buana for the FSO vessel; 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 “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 January 2023; the ability to satisfy certain conditions precedent under the Facility; political stability of the areas in which the Company is operating; ability to achieve regulatory approvals in the normal course; the ability to finalise the remaining commercial terms with Buana for the FSO vessel; 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; 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 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 nine months ended September 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.