Oryx Petroleum Second Quarter 2017 Financial and Operational Results
Stable production and payment for oil sales; successful drilling and completion of the ZAB-1 sidetrack well; restructuring of obligations and equity recapitalization completed
CALGARY, Aug. 2, 2017 /CNW/ - Oryx Petroleum Corporation Limited ("Oryx Petroleum" or the "Corporation") today announces its financial and operational results for the three and six months ended June 30, 2017. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.
Q2 2017 Financial Highlights:
-- Total revenues of $7.1 million on working interest sales of 168,800
barrels of oil ("bbl") and an average realised sales price of $37.93/bbl
-- The Corporation has received full payment in accordance with
production sharing contract entitlements for all oil sales into the
Kurdistan Export Pipeline through May 2017
-- Operating expenses of $4.0 million ($23.89/bbl) and a negative Oryx
Petroleum Netback(1) of $1.15/bbl
-- Lower operating expenses versus Q1 2017
-- General and administrative expenses of $2.5 million
-- Unchanged versus Q1 2017 but higher than Q2 2016 due to the
inclusion of approximately $0.8 million of costs for technical
support that had been applied to capital projects in periods prior
to 2017
-- Net loss of $9.2 million ($0.03 per common share) versus net loss of
$11.4 million ($0.05 per common share) in Q2 2016
-- Net cash used in operating activities of $1.2 million versus $0.9
million in Q2 2016. Q2 2017 result consists of negative Operating Cash
Flow(2) of $2.1 million partially offset by a $0.9 million decrease in
non-cash working capital
-- Net cash used in investing activities was $10.9 million and includes
payments related to drilling and facilities work in the Hawler license
area, seismic processing and interpretation costs in the AGC Central
license, and the settlement of the finance lease obligation related to
the Hawler production facilities
-- $57.4 million of cash and cash equivalents as of June 30, 2017
Operations Update:
-- Average gross (100%) oil production of 2,900 bbl/d in Q2 2017
-- Production impacted by a planned shut-in of the Zey Gawra-1
sidetrack well ("Zeg-1ST well") for eight days in May in connection
with the drilling of the ZAB-1 sidetrack well ("ZAB-1ST well")
-- Average gross (100%) oil production of 2,900 bbl/d in July 2017
-- Drilling and completion of the ZAB-1ST well
-- The ZAB-1ST well was drilled to a measured depth of 2,069 metres and
completed in the Cretaceous reservoir in the Zey Gawra field of the
Hawler license area
-- The well was successfully completed and allowed to flow through a
small choke while cleaning up with bottom hole and surface pressures
being monitored. During the clean-up flow period that spanned
approximately a week production of the 35 degree API oil was
restricted to approximately 350 barrels per day with gas-oil ratio
varying from 950 to 1,150 standard cubic feet per barrel and with
the water cut varying from 0 to 3%. Initial results indicate that
the well has a higher productivity than the Zeg-1ST well prior to
acid stimulation. The well is currently shut-in for a final pressure
build up measurement and an acid stimulation treatment will be
performed within the next few days.
-- Data collected during drilling of the ZAB-1ST well included
measurements of pressure at a series of points in the Zey Gawra
Cretaceous reservoir providing a basis for estimating the depths of
the gas-oil contact and the free water level in the reservoir. This
information together with well performance data to be acquired over
the coming weeks will provide an improved basis for estimating the
maximum efficient rate of withdrawal and ultimate recovery from the
Zey Gawra Cretaceous reservoir and, consequently, determining future
development plans and estimating oil reserves.
-- The Tertiary reservoir was also evaluated during the drilling of the
ZAB-1ST well. The presence of an oil column was confirmed based on
logging and pressure data collected. However, the Corporation does
not believe the oil column is of sufficient size to warrant drilling
targeting the Tertiary reservoir at Zey Gawra in the near term
-- Workovers of the Demir Dagh-8 and Demir Dagh-7 wells in the Cretaceous
reservoir
-- The rig used to drill the ZAB-1ST well has now moved to the Demir
Dagh field to recomplete the Demir Dagh-8 and Demir Dagh-7 wells
targeting the Cretaceous reservoir. These operations are expected to
be completed in Q3 2017
-- Preparations for the drilling of additional wells at the Zey Gawra field
targeting the Cretaceous reservoir are ongoing with drilling now
expected to commence in Q4 2017 subject to performance of the existing
two producing wells over the coming weeks
-- Fast-track processing of 1,921 km(2) of 3D seismic data covering the AGC
Central license area is complete, with full processing and
interpretation ongoing
-- Preliminary interpretation of the data is positive with exploration
drilling expected to commence in late 2018 or early 2019
(_____________________________________
1) Oryx Petroleum Netback is a non-IFRS measure. See the table below for a definition of and other information related to the term.
(2) Operating Cash Flow is a non-IFRS measure. See the table below for a definition of and other information related to the term.
Forecasted Work Program and Capital Expenditures:
-- Oryx Petroleum re-forecasted cash capital expenditures for the second
half of 2017 are $16 million, reduced from the previous forecast of $29
million:
-- Reflects a decision to reschedule further drilling at Zey Gawra to
Q4 2017 and the addition of the Demir Dagh-7 workover to the program
Restructuring of Obligations:
-- On April 28, 2017, The Addax and Oryx Group ("AOG") and the Corporation
agreed to amend the Loan Agreement dated March 11, 2015 (the "Loan
Agreement" and the "Loan Amendment")
-- Maturity date extended from March 10, 2018 to July 1, 2019
-- Interest accrued after May 11, 2017 to be paid out in common shares
of the Corporation ("Common Shares") approximately every six months,
rather than in cash upon maturity
-- The Loan Amendment has been approved by disinterested shareholders
and accepted by the Toronto Stock Exchange
-- As at June 30, 2017, the balance owed under the Loan Agreement was
$77.1, including $1.1 million in accrued interest which will be
settled through the issuance of Common Shares
-- An agreement was reached on June 7, 2017 with the vendor of the Hawler
license area to restructure the contingent consideration obligation. The
Corporation is obligated to make a further payment to the vendor of the
Hawler license area contingent upon the declaration of commerciality of
a second discovery in the Hawler license area
-- In consideration for the restructuring, a non-contingent and
non-refundable payment of $5 million plus accrued interest was
settled on August 1, 2017 and has been applied against the
contingent consideration obligation
-- Subject to the declaration of commerciality of a second discovery,
the remaining principal balance plus accrued interest is to be paid
in four annual instalments beginning September 30, 2018
-- As at June 30, 2017, the total balance of principal and accrued
interest owed under the obligation was $76.2 million (including the
payment of $5.4 million made on August 1, 2017)
Equity Subscriptions:
-- The equity subscriptions by AOG and Zeg Oil and Gas Ltd ("Zeg Oil and
Gas") for a total of 161,850,057 Common Shares for aggregate
consideration of $54.1 million (the "Shareholder Subscriptions") closed
on June 20, 2017
-- AOG subscribed for 131,933,226 Common Shares at $0.33426 per Common
Share, resulting in an aggregate subscription price of $44.1
million, $20 million of which was paid at closing in cash and the
balance of which was paid through the extinguishment of $24.1
million of principal and accrued interest owing under the Loan
Agreement
-- Zeg Oil and Gas subscribed for 29,916,831 Common Shares at $0.33426
per Common Share, resulting in an aggregate subscription price of
$10 million paid at closing in cash
Liquidity Outlook:
-- The Corporation expects that cash on hand as of June 30, 2017 and cash
receipts from net revenues will allow it to fund its forecasted cash
expenditures and operating and administrative costs and to meet its
obligations through the end of 2018. Capital expenditures beyond those
currently forecasted in 2018 will likely require access to additional
funding
CEO's Comment
Commenting today, Oryx Petroleum's Chief Executive Officer, Vance Querio, stated:
"During Q2 2017 we maintained fairly stable production and sales. Gross (100%) oil production averaged 2,900 bbl/d in Q2 2017 with all production sold via the export pipeline and payments for export sales through the end of May received in full.
In recent weeks we have successfully drilled and completed the ZAB-1ST well as a producer in the Cretaceous reservoir at the Zey Gawra field. The well is now being prepared for acid stimulation and we expect to have it on production before the end of August at a rate similar to that of the Zeg-1ST well. The rig that was used to drill the ZAB-1ST well has now been moved to Demir Dagh where it will complete the workovers of the Demir Dagh-8 and Demir Dagh-7 wells both targeting the Cretaceous reservoir. Results of these wells are expected in Q3 2017.
Fast-track processing of the approximately 2,000 km(2) of 3D seismic data covering the AGC Central license area is complete with full processing and interpretation ongoing and expected to be completed later this year. Initial results are very encouraging with several large prospects identified. In the coming months we will begin preparations for an exploration drilling program that we expect to commence as early as late 2018. We expect the AGC Central license to be a very important determinant of our value in the future.
We have modified our capital program for the second half of 2017 and early 2018. We now plan to drill two rather than three further wells at Zey Gawra. The drilling of the next well targeting the Zey Gawra Cretaceous is now expected in Q4 2017 with spudding of the second well expected in Q1 2018. The third well originally planned to target the Tertiary reservoir at Zey Gawra has been deferred indefinitely. We have also added a workover of the Demir Dagh-7 well to the program.
In June, we completed the restructuring of our key obligations and a recapitalisation of our balance sheet. The agreement with AOG to amend the credit facility's repayment terms was approved by disinterested shareholders and accepted by the Toronto Stock Exchange. We also reached an agreement with the vendor of the Hawler license to restructure the contingent consideration obligation, and equity subscriptions by AOG and Zeg Oil and Gas in consideration for cash and debt extinguishment have closed. The restructuring of our obligations and the equity subscriptions have provided us with the liquidity and financial flexibility needed to execute our capital program in 2017 and 2018.
We look forward to implementing our plans for continued appraisal, development and exploration of our core assets."
Selected Financial Results
Financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") and the reporting currency is US dollars. References in this news release to the "Group" refer to Oryx Petroleum and its subsidiaries. The following table summarises selected financial highlights for Oryx Petroleum for the three and six month periods ended June 30, 2017 and June 30, 2016 as well as the year ended December 31, 2016.
Three Months Ended Six Months Ended Year Ended
June 30 June 30 December 31
------- ------- -----------
($ in
millions
unless
otherwise
indicated) 2017 2016 2017 2016 2016
----------- ---- ---- ---- ---- ----
Revenue 7.1 7.1 15.0 8.3 22.8
------- --- --- ---- --- ----
Working
Interest
Oil
Production
(bbl) 169,100 185,100 340,300 230,000 588,000
Average WI
Oil
Production
per day
(bbl/d) 1,900 2,000 1,900 1,300 1,600
Working
Interest
Oil Sales
(bbl) 168,800 186,000 338,500 239,200 593,300
Average
Sales Price
($/bbl) 37.93 34.15 39.94 31.05 34.61
------------ ----- ----- ----- ----- -----
Operating
Expense 4.0 3.2 8.3 6.7 12.6
Field
production
costs
($/bbl)(1) 18.25 13.28 18.71 21.49 16.28
Field
Netback
($/bbl)(2) 0.27 3.39 0.80 (6.33) 0.63
Operating
expenses
($/bbl) 23.89 17.37 24.46 28.11 21.28
Oryx
Petroleum
Netback
($/bbl)(3) (1.15) 3.09 (0.53) (9.50) (0.54)
----------- ----- ---- ----- ----- -----
Loss (9.2) (11.4) (5.1) (30.8) (65.7)
Loss per
Share
($/sh) (0.03) (0.05) (0.02) (0.16) (0.31)
-------- ----- ----- ----- ----- -----
Operating
Cash
Flow(4) (2.1) (1.2) (4.5) (6.9) (9.2)
Net Cash
generated
by (used
in)
operating
activities (1.2) (0.9) 1.0 (8.8) (11.5)
Net Cash
used in
investing
activities 10.9 13.9 14.3 21.8 34.7
Capital
Expenditure(5) 0.8 17.2 (5.1) 21.6 36.3
--------------- --- ---- ---- ---- ----
Cash and
Cash
Equivalents 57.4 56.4 57.4 56.4 40.7
Total Assets 774.8 787.8 774.8 787.8 766.4
Total
Liabilities 191.3 237.4 191.3 237.4 237.9
Total Equity 583.5 550.3 583.5 550.3 528.6
============ ===== ===== ===== ===== =====
(1) Field production costs represent Oryx
Petroleum's working interest share of
gross production costs and exclude the
partner share of production costs carried
by Oryx Petroleum.
(2) Field Netback is a non-IFRS measure that
represents the Group's working interest
share of oil sales net of the Group's
working interest share of royalties, the
Group's working interest share of operating
expenses and the Group's working interest
share of taxes. Management believes that
Field Netback is a useful supplemental
measure to analyse operating performance
and provides an indication of the results
generated by the Group's principal business
activities prior to the consideration of
production sharing contract and joint
operating agreement financing
characteristics, and other income and
expenses. Field Netback does not have a
standard meaning under IFRS and may not be
comparable to similar measures used by
other companies.
(3) Oryx Petroleum Netback is a non-IFRS
measure that represents Field Netbacks
adjusted to reflect the impact of carried
costs incurred and recovered through the
sale of cost oil during the reporting
period. Management believes that Oryx
Petroleum Netback is a useful supplemental
measure to analyse the net cash impact of
the Group's principal business activities
prior to the consideration of other income
and expenses. Oryx Petroleum Netback does
not have a standard meaning under IFRS and
may not be comparable to similar measures
used by other companies.
(4) Operating Cash Flow is a non-IFRS measure
that represents cash generated from
operating activities before changes in non-
cash working capital and changes in the
retirement benefit obligation balance. The
term Operating Cash Flow should not be
considered an alternative to or more
meaningful than "cash flow from operating
activities" as determined in accordance
with IFRS. Management considers Operating
Cash Flow to be a key measure as it
demonstrates the Group's ability to
generate the cash flow necessary to fund
future growth through capital investment.
Operating Cash Flow does not have any
standardised meaning prescribed by IFRS and
may not be comparable to similar measures
used by other companies.
(5) Three month period ended June 30, 2017
includes a $2.4 million non-cash credit
related to revision of assumptions used to
calculate decommissioning obligations.
Capital Expenditure for the six month
period ended June 30, 2017 includes credits
of $7.3 million reflecting revisions of
previously estimated costs related to the
Hawler and OML 141 license areas.
-- Revenue was $7.1 million in Q2 2017 unchanged versus $7.1 million in Q2
2016 due to an 11% increase in average realised oil sales prices offset
by a 9% decrease in oil sales volumes. Gross (working interest)
production and sales of oil in Q2 2017 were 169,100 barrels and 168,800
barrels, respectively, versus 185,100 and 186,000 barrels, respectively,
for Q2 2016. The average oil sales price realised in Q2 2017 was $37.93
per barrel versus $34.15 for Q2 2016. In addition to oil sales, revenue
includes the recovery of carried costs.
-- Operating expenses in Q2 2017 increased 25% to $4.0 million from $3.2
million in Q2 2016 due to the costs associated with the operation of the
Zey Gawra field that commenced production in December 2016 partially
offset by lower operating costs at the Demir Dagh field resulting from
the implementation of a cost reduction program. Operating expenses on a
per barrel basis remain significantly higher than expected over the
longer term due to low production levels relative to expected field
plateau production levels. Per barrel operating expenses are expected to
improve in 2017 but will continue to be at elevated levels prior to
achieving production and sales levels closer to expected field plateau
production levels. Oryx Petroleum currently carries the Kurdistan
Regional Government's share of production costs. The Oryx Petroleum
Netback in Q2 2017 of negative $1.15 per barrel reflects the Field
Netback plus adjustments for carried costs.
-- Net loss for Q2 2017 was $9.2 million as compared to $11.4 million in Q2
2016. The reduced loss is primarily attributable to i) a $2.2 million
impairment expense recorded in Q2 2016 relating to a revision of an
estimate of previously recorded costs in the OML 141 license area
recorded during the three months ended June 30, 2016, and ii) a $0.8
million decrease in depreciation, depletion and amortization expense
recorded during Q2 2017 related to the decrease in depletion expense per
barrel in 2017. These positive factors were partially offset by a $0.8
million increase in operating expense for Q2 2017 versus Q2 2016.
-- Operating Cash Flow was negative $2.1 million for Q2 2017 compared to
negative $1.2 million in Q2 2016. The increase in negative Operating
Cash Flow is primarily due to higher cash operating and general and
administrative expenditures.
-- Net cash used in operating activities increased to $1.2 million in Q2
2017 as compared to $0.9 million in Q2 2016. The increase reflects an
increased negative Operating Cash Flow, partially offset by decreases in
non-cash working capital.
-- Net cash used in investing activities decreased to $10.9 million in Q2
2017 as compared to $13.9 million in Q2 2016.
-- Capital expenditures in Q2 2017 were $0.8 million, as compared to $17.2
million capitalized in Q2 2016. Capital expenditures during Q2 2017
included $3.3 million related to appraisal activities on the Zey Gawra
field, and $0.4 million related to the processing and interpretation of
3D seismic data in the AGC Central license area. These expenditures were
offset primarily by a $2.8 million non-cash credit primarily relating to
the revision of the discount and inflation rates used to calculate the
Hawler license area decommissioning asset.
-- Cash and cash equivalents increased to $57.4 million at June 30, 2017
from $39.6 million at March 31, 2017 reflecting receipt of proceeds from
the Shareholder Subscriptions offset by negative Operating Cash Flow,
capital expenditures, and movements in non-cash working capital.
-- In March 2015, Oryx Petroleum entered into a Loan Agreement with AOG
whereby AOG committed to provide a $100 million unsecured credit
facility to Oryx Petroleum. As of June 30, 2017 the balance owing under
the facility totalled $77.1, including $1.1 million in accrued interest
which will be settled through the issuance of Common Shares. On April
28, 2017, AOG and the Corporation agreed to amend the Loan Agreement
-- Maturity date extended from March 10, 2018 to July 1, 2019
-- Interest accrued after May 11, 2017 to be paid out in Common Shares
approximately every six months, rather than in cash upon maturity,
at the then current five day volume-weighted average trading price
for the Common Shares
-- The Loan Amendment was approved by disinterested shareholders and
accepted by the Toronto Stock Exchange
-- The Corporation is obligated to make a further payment to the vendor of
the Hawler license area contingent upon declaration of commerciality of
a second discovery in the Hawler license area. An agreement was reached
on June 7, 2017 with the vendor of the Hawler license area to
restructure the contingent consideration obligation.
-- Non-contingent and non-refundable payment of $5 million plus accrued
interest settled on August 1, 2017
-- Remaining principal balance plus accrued interest to be paid in four
instalments beginning September 30, 2018
-- $10 million plus accrued interest on such amount by September
30, 2018;
-- $20 million plus accrued interest on such amount by September
30, 2019;
-- $25 million plus accrued interest on such amount by September
30, 2020; and
-- $11 million plus accrued interest on such amount by September
30, 2021.
-- If the Corporation has not declared a second commercial discovery by
September 30, 2018, the above schedule of payments will no longer
apply and the contingent consideration obligation will revert to a
lump-sum payment obligation triggered by a second commercial
discovery
-- Interest has been accruing at an adjusted LIBOR rate plus 0.25% per
annum since the acquisition of the Hawler license area on August 10,
2011. After September 30, 2017, and subject to certain exceptions,
interest on the outstanding balance will accrue at a rate of 5% per
annum
-- As at June 30, 2017, the total balance of principal and accrued
interest owed under the contingent consideration obligation was
$76.2 million
-- As at August 2, 2017, 431,185,639 Common Shares are outstanding. As at
August 2, 2017 there are Long Term Incentive awards representing
2,803,317 Common Shares that have vested and are expected to be issued
in September 2017 and there are unvested Long Term Incentive Plan awards
which will result in the issuance of up to an additional 2,411,035
Common Shares upon vesting. The Corporation has issued warrants to AOG
to purchase twelve million Common Shares as part of the unsecured credit
facility provided by AOG in March 2015.
Capital Expenditure Forecast
Oryx Petroleum reforecasted capital expenditures for the second half of 2017 are $16 million, which is a decrease of $13 million versus the previous forecast of $29 million. The decrease reflects the deferral of previously planned drilling at the Zey Gawra field into late 2017 and early 2018 partially offset by the addition of the Demir Dagh-7 workover to the drilling program:
Location License/Field/
Activity 2H 2017 Forecast
-------- --------------- ----------------
$ millions
----------
Kurdistan
Region Hawler
Zey Gawra-Drilling 8
Demir Dagh-Drilling 3
Other 3
Total Hawler 14
West Africa AGC Central 1
Other 1
===== ===
Capex Total 16
=========== ===
Regulatory Filings
This announcement coincides with the filing with the Canadian securities regulatory authorities of Oryx Petroleum's unaudited consolidated financial statements for the three and six months ended June 30, 2017 and the related management's discussion and analysis thereon. Copies of these documents filed by Oryx Petroleum may be obtained via www.sedar.com and the Corporation's website, www.oryxpetroleum.com.
ABOUT ORYX PETROLEUM CORPORATION LIMITED
Oryx Petroleum is an international oil exploration, development and production company focused in Africa and the Middle East. The Corporation's shares are listed on the Toronto Stock Exchange under the symbol "OXC". The Oryx Petroleum group of companies was founded in 2010 by The Addax and Oryx Group P.L.C. Oryx Petroleum has interests in five license areas, two of which have yielded oil discoveries. The Corporation is the operator in three of the five license areas. One license area is located in the Kurdistan Region of Iraq and four license areas are located in West Africa in the AGC administrative area offshore Senegal and Guinea Bissau, and Congo (Brazzaville). Further information about Oryx Petroleum is available at www.oryxpetroleum.com or under Oryx Petroleum's profile at www.sedar.com.
Reader Advisory Regarding Forward-Looking Information
Certain statements in this news release constitute "forward-looking information", including statements related to forecast capital expenditure for the second half of 2017, drilling plans, development plans and schedules and chance of success, future drilling of wells and the reservoirs to be targeted, approach to the development of the Hawler license area, ultimate recoverability of current and long-term assets, guidance regarding operating expenses on a per barrel basis, guidance regarding well specific production rates, plans to process and interpret 3D seismic data from the AGC Central license area which are expected to be completed later in 2017, possible commerciality of our projects, plateau production rates, future expenditures and sources of financing for such expenditures, expectations that cash on hand as of June 30, 2017, and cash receipts from net revenues will allow the Corporation to fund forecasted cash expenditures and operating and administrative costs and to meet its obligations through the end of 2018, the issuance of shares as a result of the vesting of Long Term Incentive Plan awards and exercise of outstanding warrants, future requirements for additional funding, estimates for the fair value of the contingent consideration arising from the acquisition of OP Hawler Kurdistan Limited in 2011, the expected timing for settlement of liabilities including the credit facility with AOG and the contingent consideration arising from the acquisition of OP Hawler Kurdistan Limited in 2011, and statements that contain words such as "may", "will", "could", "should", "anticipate", "believe", "intend", "expect", "plan", "estimate", "potentially", "project", or the negative of such expressions and statements relating to matters that are not historical fact, constitute forward-looking information within the meaning of applicable Canadian securities legislation.
Although Oryx Petroleum believes these statements to be reasonable, the assumptions upon which they are based may prove to be incorrect. For more information about these assumptions and risks facing the Corporation, refer to the Corporation's annual information form dated March 23, 2017 available at www.sedar.com and the Corporation's website at www.oryxpetroleum.com. Further, statements including forward-looking information in this news release are made as at the date they are given and, except as required by applicable law, Oryx Petroleum does not intend, and does not assume any obligation, to update any forward-looking information, whether as a result of new information, future events or otherwise. If the Corporation does update one or more statements containing forward-looking information, it is not obligated to, and no inference should be drawn that it will make additional updates with respect thereto or with respect to other forward-looking information. The forward-looking information contained in this news release is expressly qualified by this cautionary statement.
Reader Advisory Regarding Certain Figures
Unless provided otherwise, all production and capacity figures and volumes cited in this news release are gross (100%) values, indicating that figures (i) have not been adjusted for deductions specified in the production sharing contract applicable to the Hawler license area, and (ii) are attributed to the license area as a whole and do not represent Oryx Petroleum's working interest in such production, capacity or volumes.
SOURCE Oryx Petroleum Corporation Limited
