22nd Sep 2014 11:11
LONDON (Alliance News) - Trap Oil Group PLC Monday said it is continuing to reduce costs to maintain its current assets and maximise its returns, after it swung to a half-year loss due to bad weather halting production at its Athena site in the North Sea.
It swung to a pretax loss of GBP8.4 million in the six months ended June 30, from a GBP1.4 million profit in the comparable period in 2013. Revenue halved to GBP8.6 million from GBP16.9 million a year before. Both were impacted by the weather-related downtime at Trap's Athena production site earlier in the year, which resulted in negative working capital movements.
It "has continued to be challenging for Trap Oil and other North Sea oil and gas exploration and production companies," said Chief Executive Mark Gidney.
Trap Oil have decided to reduce operating costs to a minimum in order to maintain the company's existing assets alongside seeking to maximise returns, in light of the poor levels of activity in the UK North Sea, it said.
As a result, a number of senior personnel and directors have left the business, and will continue to do so to save a minimum of GBP1 million a year from the start of 2015, the company said.
Trap Oil also cancelled its three-year credit facility with affiliate, GE Energy Financial Services, in order to minimise on-going financing costs to save USD900,000 a year, with a one-off cancellation payment of USD300,000, paid during the last financial period.
"As part of the solution to cut general and administrative expenses, certain senior management personnel agreed to leave the company, and so we reached the half-year stage with approximately GBP16 million of cash reserves in the bank and the ability to again significantly reduce the group's cash burn going forwards," said Gidney.
Bad weather resulted in production being shut-in for a period of time in the first quarter at its Athena site, Trap Oil said. Despite lost oil production ultimately being recovered, the company still had to contribute the full operating costs which were not offset by production income. Due to present uncertainties with the field, it has taken a GBP4.7m impairment charge in the period, it said.
On average, Trap Oil said it is seeing less than one tanker load of oil per month from its Athena site due to the bad weather, with some months not having any production income. This has impacted its cashflow and working capital position.
The operator of the Athena site, Ithaca Energy (UK) Ltd, is completing a workover of the well to reduce costs and improve efficiencies at the site, which is due to be completed by the end of October this year, it said.
Trap Oil's shares were down 4.8% to 7.26 pence per share Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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