15th Sep 2016 09:37
LONDON (Alliance News) - Global Energy Development PLC on Thursday said it has a large pile of cash in the bank, remains debt free, and is continuing to evaluate acquisition opportunities, stating it has not limited itself to looking at "traditional" plays within South America.
The oil and gas firm operating in Colombia through the Bolivar and Bocachico contracts, the company said it had USD21.0 million in the bank at the end of June.
"The group has been actively vetting acquisition prospects in both the petroleum development sector as well as the oilfield services sector during the first half of 2016," said Chairman Mikel Faulkner.
"Global has not limited itself to looking at traditional petroleum exploration and production plays and has expanded its geographical research to cover potential opportunities outside of our current South America focus," he added.
Global Energy said it restructured its personnel and work functions in the first half to streamline the business, which currently generates negligible revenue. The reduction in costs in the first half of the year, albeit small, did allow the pretax loss to come in narrower than last year.
The very small amount of revenue being generated comes from the company's sole producing well, Torcaz-2, which only managed to pump out an average of 22 barrels per day in the first half, lifting a total of 3,946 barrels, down from 5,862 barrels last year.
Lower prices exacerbated the decline in production, dropping to USD21.38 per barrel from USD37.10 last year, reducing revenue to USD84,000 versus USD217,000 last year.
Operations were nowhere near profitable, with costs outstripping revenue as they amounted to USD269,000, which can be compared to USD411,000 last year.
Administrative costs were cut to USD2.3 million from USD2.5 million and finance income, as a result of the healthy cash balance, rose to USD606,000 from a tiny GBP1,000 a year earlier.
However, those were partly offset by a USD194,000 loss on foreign exchange and a USD184,000 impairment.
Overall, that resulted in a pretax loss for the first half of 2016 amounting to USD2.3 million compared to the USD2.8 million loss in the first half of 2015.
Global Energy is looking to use the current downturn in worldwide oil and gas markets to capitalise on opportunities, stating there are "multiple sectors" within the industry that offer "buy low", "hold" and "sell high" scenarios.
"We believe that over the next eighteen months there will be an opportune period to consolidate and acquire within the energy industry at low prices in order to expand and create a more diversified portfolio of assets and or companies that can take advantage of a future oil price stabilisation and longer term recovery," said Faulkner.
Global Energy made the decision to perform a portion of its remediation obligations related to the Bocachico and Bolivar contract areas in Colombia during the upcoming year rather than upon expiration of the contracts.
"This decision was made in order to take advantage of lower oilfield service pricing during depressed industry conditions in Colombia and to also reduce future environmental obligations," said Faulkner.
The move means short-term provisions have increased to USD912,000 from USD184,000 for the first half of 2016, as the projects and their related costs were reclassified from non-current and increased to their present values, the company said.
In February, the business amended the secured, short-term loan note supplied to Everest Hill Group Inc, agreeing to loan Everest an additional USD2.0 million and to extend the maturity by six months to Thursday, before extending it further until October 15.
Overall, Global Energy's outstanding loan note has a balance of USD10.0 million and, after the amendment, the note continues to be subject to an interest charge of 12% per annum, payable monthly in arrears. Everest paid to Global Energy a 2% transaction fee of USD40,000 upon the closing of the amendment.
Global Energy shares were down 12% to 24.60 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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