6th Oct 2014 08:42
LONDON (Alliance News) - Europa Oil & Gas PLC Monday said it swung to a pretax loss due to an impairment against one of its prospects and lower revenue and production, but added it still hopes to make a substantial oil discovery in the second half at its UK assets.
The company swung to a pretax loss of GBP682,000 for the year ended July 31, from a GBP454,000 profit in the 2013 financial year. The loss is due to a decrease in revenue and a GBP1.2 million impairment against the West Firsby field in the UK, due to a lower assumed oil production rate.
Revenue decreased to GBP3.9 million for the 2014 full year, from GBP4.5 million a year earlier. The decline was due to lower production levels of 165 barrels of oil equivalent per day from its three UK onshore fields for the 2014 financial year, compared to 182 barrels of oil equivalent per day a year earlier.
"As these are mature fields, production is in long-term decline, but thanks to our active field management programme we have improved operational performance, resulting in lower costs," said the company in a statement.
The company has exploration projects in France, offshore Ireland and the UK, where it also has three producing assets.
The company began exploration in July at its Wressle-1 license in east Lincolnshire, which is targeting a prospect of 2.1 million barrels of conventional oil. Over 30 metres of potential hydrocarbon pay have been identified in three main intervals. Testing is now required to determine if it is a commercial discovery and scheduled to commence in the second half, said Europa.
Exploration at Wressle-1 will be followed by the drilling of the Kiln Lane prospect on the neighbouring licence, targeting 2.9 million barrels of oil. Kiln Lane is a larger prospect than Wressle and a discovery would open up a new conventional oil and gas play and significantly de-risk additional leads identified on the licence, it added.
Europa said it is fully funded to drill the Kiln Lane prospect in the fourth-quarter of 2014, reporting a cash balance of GBP4.5 million.
"The next six months are going to be very exciting for Europa. We will be production testing the Wressle well, drilling the Kiln Lane exploration well, and hopefully finding 2.9 million barrels of oil, and perhaps most importantly getting the prospect inventory for our Irish licences," said Chief Executive Hugh Mackay.
"Subject to the results of Wressle and Kiln Lane, 2015 could see us undertake further drilling on already identified prospects on these licences," said Chairman Bill Adamson.
"In parallel we are working to add new prospects and projects to the portfolio through corporate activity and participation in licensing rounds including the 14th UK onshore, the Irish Atlantic and others around Europe," added Mackay.
Kosmos Energy, the operator of Europa's two Irish licenses, is due to deliver a new prospect inventory in the fourth-quarter of 2014 and could elect to drill the first offshore well in Ireland in 2016. "We estimate the minimum economic prospect size to be 100 plus 20 million barrels, so if Kosmos do elect to drill, Europa will have a carried 15% interest," Europa said.
Following favourable rulings by both the UK Court of Appeal and the High Court announced in June in relation to drilling a temporary exploratory well at the Holmwood prospect, Surrey, the company aims to drill the well within the next 12 months, subject to planning approval and funding.
Europa is working to secure a farm-out for its two wholly-owned French permits, with a mean unrisked resource of 107 billion cubic feet, as it continues to discuss opportunities with interested parties, it said in a statement.
During the period Europa disposed of its Romanian subsidiary for a nominal sum, it said.
"We will continue to evaluate new projects and ventures that match our investment criteria. With all this activity in mind, shareholders can look forward to an exciting year ahead," said Adamson.
Europa shares were down 0.3% to 7.35 pence per share Monday morning. The stock had fallen to 7.02p at the open.
By Joshua Warner; [email protected]; @JoshAlliance
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