15th Feb 2008 07:00
Meridian Petroleum PLC15 February 2008 15 February 2008 MERIDIAN PETROLEUM PLC ("Meridian" or the "Company") Strategy and Operations Update Meridian Petroleum plc (AIM: MRP), the US-focused oil and gas company willannounce its preliminary results for 2007 in the second half of April 2008 andis providing the following update on its strategy and operations in advance. Summary Meridian moved into a cash-generative position in Q4 2007, and 2008 has begunstrongly with record monthly production from Orion in January and a new dailyproduction record of over 4mmcfd achieved in early February. During 2007, the Company addressed weaknesses in its governance, management andcontrol structure and also took the decision to rationalise its asset base toconcentrate on US projects. Negotiations to dispose of the Australian assets areunderway. With a solid foundation in place, the Board has conducted a review of assets andstrategy to identify ways of delivering increased shareholder value and hasconcluded that the current asset portfolio needs strengthening. Consequently, the Board has decided to actively pursue deals to add existing andpotential near-term US production. There will be a particular focus onopportunities in Michigan, Louisiana and Texas, where the Company hasestablished working relationships and valuable experience with the localgovernment and infrastructure. The Board will pursue both asset and corporateacquisitions and merger opportunities. The Board would not rule out a sale of the company if it became clear that thiswould deliver enhanced value to shareholders, and as announced on the 6thFebruary 2008, the Board has engaged in early stage discussions which may or maynot lead to an offer being made for the Company. Strategy Update Following an assessment of the Company's assets and potential, the Board hasconducted a review of its strategy. Key points from this review are as follows: • The Orion 36 well has been highly successful, producing strong cash-flow. In the current market with firm US gas prices, the directors believe that this is a very valuable asset. • The Company will continue with plans to dispose of the Australian licences and the Middleton Creek and Hustler prospects in Mississippi, USA. • With the exception of Calvin Deep, the company's other US assets including the CBM acreage, are currently too small to drive strong growth in shareholder value. The Company plans to take a further look at these assets to determine the best course to improve their potential to add value. • Calvin Deep is a complex asset with significant potential, but is technically challenging and likely to be costly to develop. • The Board perceives that with limited short-term opportunities to create value from the existing assets, the Company will remain dependent on Orion and may not meet shareholder expectations for growth in the short-term. • The Board has decided to actively pursue deals to add existing or near-term US production, with a particular focus on further sour gas opportunities in Michigan, and oil and gas opportunities in Louisiana and Texas. • The scope of any deals could include asset and corporate acquisitions and mergers. Operations Update Orion After a record month in January, production from Orion 36 has continued toincrease in February. Average daily production for the month so far is 3.92mmcfdwith a new peak production level of over 4mmcfd on several days. Production ofnatural gas liquids has continued at the high level established in January,averaging 53bbls/day in February to date. The Company also benefited from better than expected gas prices in January andgross revenue in the month exceeded $1 million, with the Company's share afterroyalties and taxes exceeding $700,000. The second change-out of the Sulfatreat material is underway. The Company isworking with the local authorities in Michigan to minimise inconvenience to thelocal community from odours, and the change-out is consequently taking placeover an extended period. Following the first change-out in November 2007, theCompany invested some $200,000 in improvements to the processes and equipment,in particular installing a polishing sponge. This investment has produced animmediate return, extending the life of the Sulfatreat material to well over200mmcf of production and enabling the second change-out to take place withoutinterruption to production. The Orion 36 well has now been producing for nearly 6 months and cumulativeoutput is approaching 0.5bcf of gas. During this period the Company has beenstrongly committed to maintaining good operational performance with highstandards of safety and environmental care. This has been achieved but hasresulted in higher than expected monthly operating costs during the first fewmonths of production. These costs are expected to be lower in 2008 but, as Orionis the Company's only significant producing asset, the Board believes that thecontinued good performance of this well remains a key priority. Milford 36 Discussions with partners and the operator have been resolved and the Companywill now proceed with testing of the well, in which Meridian will take a 30%working interest. The operator expects to commence testing once personnel areavailable following the change-out of the Sulfatreat at Orion. The Company willmake a further announcement to confirm this in due course. Calvin Field The Company has decided to take steps to plug and abandon the Calvin 36-1 well,most likely by assigning its working interest to another operator and paying acontribution towards abandonment costs. The Company's investment in this well ofapproximately $2 million will be written off in the 2007 accounts. Following the re-assignment back to the Company of EnSight's interest in theCalvin Deep prospects, the Company is actively seeking a new partner to exploitthis asset. The Company has a 70% interest in several potential levels ofreserves in the field and the attraction to potential partners is enhanced byremaining uncommitted on drilling plans in the short-term. Consequently, theCompany has not yet committed any funds to the re-entry of the 5-29 well or anyother drilling plans. Asset Disposals Negotiations to sell the Company's Australian assets continue. The Boardbelieves that the terms tabled are attractive, but we have not yet secured thelevel of legal and financial commitment required from the buyer. If the disposalproceeds on the terms proposed, the Board believes that there is likely to be atax liability on the resultant capital gain. The Company is also making progress on the sale of its Mississippi assets, butwould seek to retain a royalty as part of any transaction. Stephen Gutteridge, Chairman, said: "We took a major step forward last year by bringing Orion into production, andthat gives us a platform to look at more aggressive approaches to deliveringvalue to our shareholders. Our current asset portfolio presents limitedopportunities to move quickly, so we plan to keep momentum going by addingproduction through acquisition or merger. We have solid US operating experienceand contacts and we are already seeing good potential opportunities in ourchosen areas." Ed Childers, the Company's Chief Operating Officer, who meets the criteria of aqualified person under the AIM guidance note for mining, oil and gas companies,has reviewed and approved the technical information contained in thisannouncement. - ends - For further information contact: Meridian Petroleum PlcStephen Gutteridge, Chairman+44 (0) 20 7811 0140 Ambrian PartnersTim Goodman+44 (0) 20 7776 6400 Parkgreen CommunicationsSimon RobinsonErica Nelson+44 (0) 20 7851 7480 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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