24th Apr 2009 07:00
Emerald Energy Plc
24 April 2009
INTERIM MANAGEMENT STATEMENT
Emerald Energy Plc ("Emerald" or the "Company") is today issuing its Interim Management Statement for the period beginning 1 January 2009.
HIGHLIGHTS
Angus MacAskill, Emerald's Chief Executive Officer, said:
"We are very pleased with the results to date in 2009, with significant progress towards delivering the material production enhancement projects in the Khurbet East field in Syria and the Gigante field in Colombia. Delineation and appraisal activities have also advanced with greater understanding achieved in the Khurbet East and Yousefieh fields in Syria and also in the very material Capella field in Colombia, all of which will be used to optimise future developments. In exploration, we look forward to the results of the Gigante No.2 and Mirto No.1 wells in Colombia, and also to progressing the new exploration blocks in Colombia and Peru. Our cash and cash generation positions are strong, and we remain committed to investing in projects to deliver additional value to shareholders."
Colombia
Further to the operations reported in the preliminary statement of 2008 results announced on 16 March 2009, the following activities have taken place.
In the Ombu block, the Capella No.6 well, located 4.2 kilometres to the southwest of Capella No.1, was drilled to a total depth of 3,645 feet. The well encountered an exceptionally thick upper Mirador interval with net potential hydrocarbon pay of 80 feet of 37% porosity sand, greatly exceeding the previously recorded maximum net thickness of 23 feet encountered in the Capella No.2 well. The Capella No.6 well also encountered a lower Mirador gross conglomerate interval of 175 feet with hydrocarbon shows being recorded to a depth of 3,605 feet, some 130 feet deeper than recorded in previous wells.
An open-hole flow test was conducted over the full lower Mirador conglomerate interval from which flow is interpreted, using data from previous wells, to be largely from natural fractures in the conglomerate. During this testing over a period of 3 days, the production stabilised at a rate of approximately 295 barrels of fluid per day with a water cut of approximately 90%. Preliminary evaluation of the well data indicates that the water is flowing from high productivity fractures at the base of the section. The Company plans to isolate the lower water-producing section of the conglomerate and conduct another open-hole flow test of the oil bearing interval.
A cased-hole flow test was conducted over the upper Mirador sand interval. During this testing over a period of 5 days, the production stabilised at a rate of approximately 100 barrels of oil per day with a water cut of approximately 2%. Due to signs of early sand production from this unconsolidated interval, the rotational speed of the progressive cavity pump was restricted to approximately one quarter of that used for testing the same interval in the Capella No.2 well. The Company plans to clean the sand from the wellbore and conduct a further flow test.
The Company plans to drill one further well in the southern part of the Capella structure in 2009 and this well, located on the same surface location as Capella No.6, is planned to be the first horizontal well in the field and to target the upper Mirador sand. Following the environmental permitting of the northern part of the block, the Company plans further drilling in this area.
The extended production testing of Capella wells, commenced in February 2009 at an oil rate of 400 barrels per day, subsequently increased to over 700 barrels per day before being temporarily suspended in March due to marketing limitations experienced for the heavy crude oil. The Capella oil has, to date, been sold directly to industrial end users within Colombia but the Company expects that, during commercial development, the Capella oil will be delivered to existing pipelines following blending or upgrading. The Company is currently engaged in removing the existing marketing constraints and anticipates recommencing extended production testing in May.
The Gigante No.2 well, planned primarily as a development well in the producing Tetuan reservoir, has been drilled to a depth of approximately 13,400 feet and casing has been run and cemented in place. The total depth of the well, including the exploration target in the Caballos formation, is expected to be approximately 16,000 feet. The results of this well are expected in the middle of the year.
In the Jacaranda block, the Jacinto No.1 exploration well, designed to evaluate the potential of a stratigraphic exploration target in the Tertiary aged Carbonera formation, encountered a water-bearing sand channel and was plugged and abandoned. The remaining prospectivity in the block is being evaluated prior to making a decision by 10 May 2009 whether to enter the next phase of the contract which, if entered, will have a duration of 12 months and a minimum work programme including one exploration well.
In the Maranta block, preparations are at an advanced stage to drill an exploration well to a depth of approximately 11,000 feet on the Mirto prospect which Emerald estimates may contain unrisked prospective resources in the range 5 to 15 million barrels. Drilling operations are expected to commence in May 2009. The Company has entered into a previously announced farmout agreement, subject to the approval of the ANH, under which Emerald retains 80% working interest and operatorship of the block.
Emerald has formally signed the exploration and production contract for Block VSM32, located in the Upper Magdalena Valley adjacent to the company's Matambo block. Under the contract, Emerald has 100% working interest and operatorship of the block. The Company believes the block may contain exploration potential analogous to the nearby Gigante field. The work commitment during the first phase of the ANH exploration and production contract, lasting 36 months, consists of the acquisition of 137 km of new 2D seismic data and the drilling of one exploration well.
Syria
Further to the operations reported in the preliminary statement of 2008 results announced on 16 March 2009, the second Khurbet East field delineation well, Khurbet East No.8, located in the southern part of the field, encountered a 23 metre gross oil column (15 metre net) within the Cretaceous Massive reservoir. Wireline logging indicated an average porosity in the net oil bearing interval in excess of 23% but did not identify a definitive oil-water contact as the porous oil-bearing reservoir lies directly above a low porosity and permeability interval. During flow testing of the full reservoir interval, following acid stimulation, the well produced, under artificial lift, 23 degree API oil at an average rate of 617 barrels per day over an 8 hour period with a water-cut of less than 2% and at an average oil rate of 120 barrels per day under natural flow.
The updated independent reserves evaluation of the Massive reservoir, taking into account seismic, well and production information acquired since the last evaluation, is expected to be concluded in the second quarter of 2009.
The Khurbet East field production performance has been excellent with the cumulative gross oil production of 2.5 million barrels recently being reached, minimal water production to date, and little reservoir pressure depletion being recorded. As a result of the early field performance, work is now underway to expand the capacity of the field's gathering, processing and loading facilities to 18,000 barrels of fluid per day as an interim expansion prior to the full field development of the Khurbet East field. This interim expansion of capacity, consisting of the installation of additional surface equipment and the drilling of three further development well, is expected to be operational in the third quarter of 2009. The first of these additional development wells, Khurbet East No.9 commenced drilling in April.
Peru
Emerald has formally signed the exploration and production contract for Block 163. The contract was awarded by PeruPetro S.A., the state company administering the hydrocarbon resources in Peru. Under the contract, Emerald has 100% working interest and operatorship of the block, Emerald's first in Peru. The work commitment during the first phase of the exploration and production contract, lasting twelve months, consists of technical studies.
Production
During the period to 30 March 2009 the Company benefited from production in Colombia and Syria as shown below.
|
Q1-2009 |
Q1 2008 |
FY 2008 |
|
|
Bopd |
bopd |
bopd |
|
|
Gross production: |
|||
|
Colombia |
4,196 |
2,979 |
3,530 |
|
Syria |
9,996 |
- |
3,863 |
|
Working interest production: |
|||
|
Colombia |
3,042 |
1,799 |
2,475 |
|
Syria |
4,998 |
- |
1,932 |
|
8,040 |
1,799 |
4,407 |
|
|
Net entitlement production: |
|||
|
Colombia |
2,748 |
1,622 |
2,246 |
|
Syria |
2,945 |
- |
1,139 |
|
5,693 |
1,622 |
3,385 |
Financial Position
In the first quarter of this financial year, Emerald reports the following unaudited results:
|
Q1-2009 |
Q1 2008 |
FY 2008 |
||
|
$ '000 |
$ '000 |
$ '000 |
||
|
Revenue from oil sales |
(a) |
14,219 |
12,961 |
86,041 |
|
Adjusted EBITDA |
(b) |
9,933 |
8,355 |
65,729 |
|
Profit after tax |
4,637 |
3,540 |
35,645 |
|
|
Cash and cash equivalents at period end |
(c) |
59,018 |
41,173 |
74,447 |
(a) In the three months to 31 March 2009, revenue from oil sales increased by 10% in relation to the revenues achieved in the same period of last year. This growth resulted from a substantial increase in the invoiced production, which totalled 439 mbbl, compared to 156 mbbl achieved in the same quarter of last year. This increase in invoiced production was substantially, but not entirely, offset by the a combination of the decline in the oil prices, with WTI benchmark averaging $43 per barrel in the three months to 31 March 2009 compared to $98 per barrel experienced in the same quarter of last year, and an increase in oil inventories of 73 mbbl resulting in the quantities of oil sold in Colombia being 70% of the produced volume.
(b) EBITDA is earnings before interest (and other finance income and costs), tax, depreciation, depletion, amortisation and write-offs of oil & gas assets. Adjusted EBITDA is calculated before share based payments, charged to the income statement under IFRS 2.
(c) Cash decrease of $15.429 million was in line with the Company's 2009 budget with cash and first quarter cash flow funding capital projects.
Conversion of Series B Convertible Bonds
In April, the entire outstanding principal amount of the Series B US$15,000,000 4.875 per cent senior unsecured convertible bonds were converted into 2,754,229 of the Company's ordinary shares. The Company agreed to pay to the holder of the bonds, on conversion, an amount of $914,062.50 equal to the interest due on the bonds in the period to 30 June 2010, the interest payment date prior to the earliest date on which the Company may have been entitled, subject to a number of conditions, to redeem the bonds. Following this transaction, the issued share capital of the Company is 62,440,373 ordinary shares.
The early conversion of the Series B Bonds has eliminated any uncertainty related to the occurrence and timing of conversion of these bonds and reduced the Company's balance sheet liabilities.
Enquiries: Lisa Hibberd 020 7925 2440
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Emerald Energy