18th Jan 2006 07:00
Burren Energy PLC18 January 2006 18 January 2006 Burren Energy Plc Trading Update Burren Energy Plc (LSE:BUR), the FTSE 250 independent oil and gas explorationand production company, today provides a trading update ahead of its preliminaryresults for the year ended 31 December 2005, to be announced on Thursday 30March 2006. The figures contained in this statement are preliminary and may besubject to change in the 2006 financial statements. Production and Cash Flow Group working interest production in 2005 averaged 31,310 bopd, an increase of72% over 2004 (18,230 bopd), with Turkmenistan and Congo contributing inapproximately equal shares. Year-on-year growth in production was 35% inTurkmenistan and 133% in Congo. Working interest production in December averaged34,480 bopd (Turkmenistan 14,770 bopd, Congo 19,710 bopd), up from an average of29,100 bopd in H1 2005. Entitlement production grew by 56% to average 22,050 bopd in 2005. This reflectsthe effect of high oil prices on Burren's entitlement production in Congo, wherefull recovery of historic costs was achieved around mid-year, resulting in anincrease in the state's percentage share of the gross oil. Average realized sales prices in 2005 were approximately US$48.8/bbl inTurkmenistan and US$47.2/bbl in Congo, giving a group average realized salesprice of US$48.0/bbl Burren generated significant free cash flow in 2005 despite a doubling ofcapital expenditure from US$91 million to approximately US$180 million, andfinished the year with cash balances of some US$124 million compared with US$40million at year-end 2004. Turkmenistan In Turkmenistan working interest production averaged 15,400 bopd over the year.In the second half of the year development drilling on the Burun fieldprogressively gave way to exploration drilling in the Nebit Dag PSA area. Overthe year 19 wells were drilled (13 shallow and six deep), of which five wereexploration wells (four shallow and one deep). All 14 development wells wereplaced on production. Whilst the exploration wells did not encounterhydrocarbons in commercial quantities they provided valuable data guidance aheadof the extensive exploration and development drilling programme planned for2006, as outlined below. The second well on the Nebit Dag East prospect (NDE002) was spudded at the end of November but the rig encountered mechanicalproblems in December and drilling has been temporarily suspended pending thearrival of spare parts. Drilling on NDE 002 is expected to resume before the endof January. Prospect mapping on the Nebit Dag exploration area is now largely complete.During 2006 Burren plans to drill at least five shallow exploration wells on theKara Tepe West and Urundzhuk prospects to the east of the area, and some 12 deepwells of which at least half will be exploration wells. Following completion ofthe NDE 002 well the rig will spud the third and last well on the Nebit Dag Eastprospect, NDE 003. A rig newly contracted from Saipem is now in the country andexpected to spud its first well, B64 on the south flank of the Burun field, byend February. The planned 5000 bwpd pilot water injection scheme on the Burun field willbecome operational during H1 2006. Congo Four rigs are in operation on the M'Boundi field where 24 wells were drilledlast year of which 20 are on production. Gross M'Boundi field production at yearend was just over 57,000 bopd. Development drilling is expected to continue at asimilar rate in 2006, but there will be increasing focus on the explorationprogramme where some six exploration wells are planned during the year to testthe lateral limits of the M'Boundi field and on other prospects within theKouilou license area. Interpretation of the 320 km of 2D seismic data overcertain Kouilou prospects is now complete and prospect mapping is under way witha view to prioritizing targets, with drilling expected to commence in Q1 2006. 2006 will also see the start-up of a 20,000 bwpd pilot water injection project,intended to reduce the decline in well flow rates and enhance oil recovery. Theresults of this pilot will not be available before year-end. If successful it isintended to extend water injection across the whole field from 2007 onwards. Twoadditional drilling rigs are being mobilized for the exploration programme andfor water injection well drilling. The new throughput arrangements at the Djeno terminal, whereby the M'Boundipartners are entitled to lift N'Kossa rather than Djeno blend, have now becomeeffective. This will result in a material improvement in realized sales price :in the region of Brent minus US$1.0 / bbl compared with an average of Brentminus US$6.9 / bbl in 2005. Egypt In the East Kanayis block four exploration wells targeting Cretaceous prospectsare planned, the first of which will be spudded in mid February. A contract hasbeen awarded for the acquisition 520 sq. km. of 3D seismic commencing in Marchto survey the deeper Jurassic potential. On the North Hurghada Marine block work on remapping the area and planning forseismic acquisition is under way. The North Lagia block is still awaitingparliamentary ratification which is expected during Q1 2006. India Drilling of two offshore wells in the Cauvery basin, a development well on thePY-1 block and an exploration well on the neighbouring CY-OSN-97/1 block, isexpected to commence in Q2 2006. We continue to work closely with the managementof HOEC on progressing their various development projects. New Exploration Interests On 16 January 2006 the Company announced the signature of new explorationinterests in Yemen and Oman. In Yemen this consisted of a new production sharingagreement on Block 6, an onshore interest, in which Burren will be operator witha 92% working interest. In Oman the Company has signed a farm-in agreement toacquire a 40% non-operated interest on offshore Block 50. Shipping Burren has entered into an agreement to sell its ship management business to aninternational shipping group for a cash consideration of US$4.2 million.Completion is expected shortly. The sale includes 3 tug / barge combinations,together with associated leasing obligations and relieves the Group's balancesheet of all shipping related liabilities other than working capital. Burrenretains the strategic use of 8 bareboat chartered vessels, which have twelvemonth charters for 2006 in place and continue to operate profitably in theCaspian Sea and Russian river system. Rig Purchase Burren is purchasing a new onshore rig, which is currently under construction inChina and is expected to become available in Q3 2006. The rig will be a Groupresource to provide dedicated drilling capacity in any of Burren's areas ofoperation given the expectation of continued tightness in the rig market. 2006 production and expenditure In the absence of contributions from successful exploration and appraisaldrilling, production in 2006 is expected to average between 36,000 and 37,000bopd on a working interest basis. Entitlement production is expected to be inthe region of 21,000 bopd assuming an average Brent price of US$55 / bbl, asmall reduction on the 2005 average owing to the higher state share of grossproduction in both Turkmenistan and Congo. Capital expenditure is expected to be some US$180 million in 2006 , an increaseof around 25% on 2005 (excluding the US$26 million investment in HOEC from 2005expenditure), which at current oil prices would be financed fully from cash flowfrom existing production. The increase can be attributed to explorationexpenditure, which will amount to some US$67 million including expenditure onthe recently announced new interests in Yemen and Oman. Approximately 80% ofcapital expenditure is expected to be in Turkmenistan and Congo. Finian O'Sullivan, Chief Executive Officer, commented: 2005 was a very successful year for the Company and in order to continue thismomentum Burren has an extensive programme planned for 2006, which combinesrecovery enhancement, development drilling, exploration drilling and newprospect development. It provides significant potential upside throughout theCompany's geographically expanded portfolio, with the aim of achievingcontinued and sustainable growth." Enquiries: Burren Energy Tel : 020 7484 1900 Finian O'Sullivan, Chief Executive OfficerAndrew Rose, Chief Financial Officerwww.burren.co.uk Pelham PR Tel: 020 7743 6676 James HendersonAlisdair Haythornthwaite EDITORS NOTES Burren Energy is an independent oil and gas exploration and production group,headquartered in London. It is focused on four principal regions: the Caspianregion of the former Soviet Union, West Africa, the Middle East and, through astrategic investment stake in the Hindustan Oil Exploration Company, India. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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