31st Mar 2016 10:49
LONDON (Alliance News) - Caza Oil & Gas Inc on Thursday said it hopes to accelerate its drilling activities over the next two years in an attempt to increase production, adding it will look for new opportunities as well, after the company reported a narrower loss for the last financial year.
The company, which is based in Texas and operates across the US, reported a pretax loss of USD5.1 million in 2015 compared to the USD7.1 million loss booked in 2014 as significantly lower costs and a lower level of impairments offset a dramatic fall in revenue, which more than halved in the year.
Revenue plummeted to USD10.1 million in the year from USD22.9 million a year before, but overall expenses, including cost of sales, impairments and exceptional items, also halved to only USD15.2 million from USD30.0 million.
The reduction in expenses was driven by production costs falling to USD4.2 million from USD6.1 million, administrative costs dropping to USD5.2 million from USD6.0 million, depreciation expenses declining to USD5.7 million from USD7.5 million and impairments falling to only USD142,100 from USD1.0 million.
The 56% fall in revenue during 2015 was caused by the fall in oil prices and a material decline in production to 706 barrels of oil equivalent per day, down 24% from the 923 barrels of oil equivalent being pumped out in 2014.
Although production was down, Caza's reserves were considerably higher at the end of 2015 compared to a year earlier. Proven reserves were 98% higher at the end of 2015, standing at 12.2 million barrels of oil equivalent, up from 6.2 million barrels at the end of 2014.
Proven plus probable reserves were 13% higher year-on-year, whilst proven, probable plus possible reserves were 42% higher.
The company is primarily focused in the Permian Basin of Southeast New Mexico and West Texas where it benefits from the vast production infrastructure in the region, and said its priorities moving forward are to increase production and reserves.
Caza has 226 drilling locations and 33 gross producing wells in the US at the end of the year lying within its leasehold position in the Bone Spring/Wolfcamp play, where it believes the best opportunity to increase production lies.
"Management believes that once drilling costs come down and commodity prices recover, accelerating and expanding drilling and completion operations on inventoried and producing properties will significantly increase both production and cash flows, which will allow the company to optimize its Bone Spring/Wolfcamp work program and drive economies of scale," said Caza.
"In this regard, the company has entered into the credit facility with JPMorgan and is constantly evaluating all available financing options that could provide the company with sufficient leverage and capital to adequately exploit current and future Bone Spring/Wolfcamp opportunities," the company added.
Caza said it wants to accelerate drilling within the next two years, but conceded that will depend on drilling costs and commodity prices. If the company does speed up its drill-bit activity, it will use the recently secured credit facility to fund the programme.
After clearing all of its debt owed to YA Global Master SPV Ltd and Apollo Investment Corp in 2015, Caza entered into a credit agreement for a five-year, senior secured, reserve-based, revolving credit facility with JP Morgan Chase Bank. That has a maximum limit of USD100.0 million with an initial USD15.0 million borrowing base.
"Management believes that, subject to a sufficient downward correction to drilling costs and positive recovery to oil prices, such a program can be accomplished by exploiting the company's existing asset/lease inventory," said Caza.
"However, management will also seek to identify appropriate corporate and asset acquisitions that may result from the current price environment, which will enable the company to increase its position in the horizontal Bone Spring/Wolfcamp plays in the Permian Basin," the company added.
Caza shares were down 12% to 0.569 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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