23rd May 2016 09:45
LONDON (Alliance News) - Andes Energia PLC Monday said its operational performance in 2015 led to a significant rise in production which has continued into 2016 but reported a wider loss following a large rise in administrative and financing costs.
The company producing in Colombia and Argentina said a 39% rise in revenue in 2015 to USD66.8 million from USD48.2 million in 2014 was not enough to stop its pretax loss widening to USD12.4 million from the USD7.9 million loss a year earlier.
The two main drivers of the wider loss were the 76% rise in administrative costs to USD17.6 million from only USD10.0 million last year and the 84% lift in finance costs to USD24.6 million from USD13.4 million. Distribution costs also increased 51% to USD4.7 million from USD3.1 million.
Notably, those increases in costs were partly offset by a huge lift in finance income to USD9.3 million from USD3.8 million and by the absence of a USD3.8 million impairment that was booked in 2014 and was not repeated in 2015.
The large lift in revenue in the year led to a 20% rise in gross profit to USD21.1 million from USD17.6 million and Andes Energia also booked an extra USD4.0 million from other income compared to only USD996,000 in 2014, helping to push the operating profit up 65% to USD2.8 million from USD1.7 million.
"During 2015 we accomplished very demanding objectives, significantly increasing revenues, completing the acquisition of an interest in Interoil and continuing the successful drilling program in the Chachahuen block," said Chief Executive Alejandro Jotayan.
The acquisition of a stake in Interoil in the year was one of the reasons Andes Energia reported a huge rise in borrowings over 2015. Total borrowings amounted to USD99.0 million at the end of the year, 72% higher than the balance of USD57.7 million at the end of 2014.
Importantly, net current liabilities have fallen 57% over 2015 to stand at USD800,000 at the end of 2015 as its cash resources increased to USD27.3 million from USD10.6 million at the end of last year.
"Andes management believes the current cash position together with the free cash flow generated from existing activities will be sufficient to meet its ongoing working capital requirements and investment commitments. The directors will not be recommending the payment of a dividend," said Andes Energia.
Andes Energia struck a deal right toward the end of 2014 to acquire a 51% stake in Interoil, a producing company working in Colombia, for USD5.0 million but then struck a collaboration agreement with Canacol Energy Ltd to reduce its holding to 26% in return for USD3.2 million - meaning Andes Energia effectively paid USD1.8 million for its current stake in Interoil.
However, Argentina is the company's main area of interest as the country generated just shy of three-quarters of the company's overall revenue in the year whilst Colombia contributed just over a quarter of revenue.
Overall earnings before interest, tax, depreciation and amortisation rose to USD16.7 million from USD8.8 million. Stripping out the earnings lost to corporate costs, Argentina contributed 61% of overall Ebitda with Colombia generating the other 39%.
However, Argentina delivered an ultimate pretax loss of USD4.1 million in the year, with the USD2.5 million profit coming from Colombia helping to partly offset that. Other corporate activities of USD10.9 million made up the rest of the pretax loss in 2015.
Argentina delivered a pretax loss because of the rise in financing costs attributed to the ongoing development work in the country.
However, both Argentina and Colombia delivered losses once tax was paid, with Argentina producing a USD5.8 million post-tax loss whilst Colombia delivered a USD1.8 million loss. Other corporate activities helped push the loss after tax to a total of USD18.4 million in 2015 from the USD10.9 million loss last year.
Andes Energia delivered a solid operational performance in 2015 after managing to increase production from its producing fields in Colombia and Argentina by 88% to 3,211 barrels of oil equivalent per day from only 1,700 barrels a day in 2014, driven by Interoil and the rise in production from the Chachahuen field in Argentina where work is continuing on an ongoing basis.
Andes Energia drilled 57 development and appraisal wells on Chachahuen in the year which allowed an 87% rise in production from that field to 1,325 barrels a day from 709 barrels. A further 42 wells will be drilled on the field, of which 30 have already been completed.
Once those wells are completed, a new campaign will begin in the second half when Andes and its partner will drill another 90 wells - more than double the amount of wells to be drilled under the current programme.
The effects of the work that has continued since the end of 2015 can be demonstrated by the ongoing rise in production since the start of this year. Current production across the group is running at 3,540 barrels of oil equivalent per day - more than 10% higher than the 2015 average.
Andes Energia also benefited from strong prices during 2015, averaging USD62 per barrel extracted from Argentina, which was partly driven by the new government that took over late last year, whilst prices for oil extracted from Colombia averaged USD40 per barrel over the year.
The company said prices in Argentina have risen further since then to USD67.5 per barrel, whilst Brent was trading at over USD48 per barrel on Monday.
"In 2016 we will continue to focus on our drilling program in the Chachahuen block and the development of our other assets. Furthermore, the new government, elected in November 2015, has already implemented changes that are expected to benefit the Argentine oil and gas industry and attract foreign capital into the country," said Jotayan.
Andes Energia shares were up 1.0% to 19.69 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.