2nd Sep 2014 08:24
LONDON (Alliance News) - Baron Oil PLC saw its shares slide Tuesday after it said it swung to a loss in the first half of the year, due to lower revenue after it sold a share in its Nancy Burdine Maxine oil field in Colombia and as it continued to write down goodwill and intangibles on its development assets.
The company, which has been restructuring its Colombian assets after running into financial problems, said it has now stabilised its financial position but is aware that it has to do more to drive value for its shareholders.
"It is clear to the management that the company has to look for opportunities to enhance shareholder value in the short to medium term. The company continues to review potential opportunities and we will report to shareholders if a successful conclusion is forthcoming," it said without detailing the opportunities it is reviewing.
The oil and gas exploration company swung to a pretax loss of GBP2.0 million in the six months ending June 30, compared with a GBP303,000 profit in the first-half of 2013, as revenue declined to GBP1.2 million, from GBP2.1 million. Cost of sales rose substantially, and it booked a intangible asset and goodwill impairment of GBP794,000, compared with a gain of GBP234,000 a year earlier when it also booked a loss on disposal of intangible assets of GBP673,000.
Revenue fell after Baron Oil sold 50% of its equity in Invepetrol, the entity that owns the Nancy Burdine fields, to C.I. International Fuels Ltd in April for USD2 million.
Its cost of sales jumped to GBP1.7 million, from GBP804,000 a year earlier, while administrative expenses rose to GBP794,000, from GBP684,000. The company claimed to be making progress in bringing down overheads, comparing it with the GBP2.0 million final bill for the whole of 2013.
In January, the company said "terrorist attacks" at its Nancy Burdine Maxine fields in Colombia had affected production at the end of 2013, causing both temporary shut down of oil production and damage to equipment. It increased security in the area to minimise the risks of future attacks, and Tuesday said it thought oil sales had held up well in the first half.
"The Nancy Burdine Maxine field in Colombia has still a significant amount of upside potential but with continuing difficulties in its operations, and ongoing licence extension negotiations, the company believes that by divesting 50% of its interest in favour of its new partner, CI International Fuels Ltd, it reduces its risk exposure," the company said in its statement.
Oil production at Nancy Burdine, in which it is now equal partner with CI International, has been above 450 barrels of oil per day on a daily average for most of the first half of 2014, Baron Oil said. The surface production plant has been modernized and upgraded to try and maximize the quality of the produced oil, it added.
The company also interests in exploration blocks onshore and offshore Peru.
"In Peru, we remain of the view that this region offers very good prospects for the future and we continue to develop these opportunities with our commercial partners," it added.
It expects to obtain the environmental impact assessment approval for its onshore block, Block XXi, within the next few months and a 2D seismic survey is being planned for next year to be closely followed by several exploration wells.
Baron Oil's shares were down 10% to 1.35 pence per share Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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