Ophir Energy capex comes in below forecasts
By Josh White
Date: Tuesday 15 Jan 2019
(Sharecast News) - Ophir Energy updated the market on its trading and operations for the 12 months ended 31 December on Tuesday, reporting estimated capital expenditure including pre-licence expenditures of $122m, which was below its previous guidance of $145m.
The London-listed firm said its operational expenditure was estimated at $12 per barrel of oil equivalent (boe), highlighting the low cost and cash generative nature of its expanded production base.
Year-end net debt estimate was reduced to $35m from $65m year-on-year, as a result of lower capital expenditure.
Cash and cash equivalents were estimated at $323m at year-end, with gross liquidity available estimated at $390m.
The company said the 2018 leverage ratio was is estimated at 1.5, with the 2018 year-end gearing ratio estimated to be 32%.
On a net debt basis, the leverage ratio was estimated at 0.2, and the gearing ratio at 5%.
The company's balance sheet remained strong at year-end as a result, the board said.
On the operational front, Ophir noted the acquisition of interests in the Madura and Sampang PSCs in Indonesia and Block 12W in Vietnam from Santos, for $205m, which apparently materially increased production and cash flow.
It said those assets had performed better than expected, returning cash flow of approximately $110m in the full year, representing approximately half the initial purchase price.
Daily production averaged 29,700 boepd, which was 8% ahead of guidance with Madura, Sampang and Block 12W contributing 18,000 boepd.
The company de-risked the next phase of growth in the Sampang and Madura PSCs through the final investment decision of the Meliwis development and the Paus Biru exploration success.
It said those developments would not only bring new fields in the licences on stream, but also extend the economic life of the existing fields.
The firm continued to makes progress towards rationalising the wider frontier exploration portfolio.
A series of commercial agreements were under negotiation which, if successful, would reduce forecast exploration spend "significantly" in 2019, as well as reduce the future exploration commitment spend from its current level.
Ophir began the relocation of the corporate functions from London to Southeast Asia during the year, with the plan to complete the move by September 2019, which the board said would yield further significant costs savings during the coming year.
The company's 2018 financial statements were likely to include provisions of approximately $10m for restructuring and relocation costs, it explained.
Ophir completed the refinancing and expansion of its reserves-based lending facility (RBL) during the year, which was increased by $100m to $350m, with the maturity also extended by 18 months to 31 December 2025.
The borrowing base amount under the RBL was closed-out with the lenders at 31 December at $322m.
It said the expanded RBL was drawn by a further $100m to $250m on 2 January, to fully repay the outstanding amount of $103m against the $130m 18 months bridge facility.
Looking ahead, Ophir said daily production for 2019 was forecast in line with previous guidance at 25,000 boepd.
The company said it had two oil price hedges in place for 2019 - for the period to 6 September, it sold a Brent swap at approximately $70 per barrel, and purchased a Brent call at approximately $78 per barrel for 2,000 bpd.
For the full calendar year 2019, it sold a Brent swap at approximately $56 per barrel and purchased a Brent call at approximately $66 per barrel for 2,000 bpd.
Operational expenditure per barrel was expected to be $16 - an increase on the previous year due to workover drilling on the Kerendan field and ESP replacements for three wells on the Bualuang field.
Capital expenditure was expected to be approximately $150m, assuming various farm-outs were closed successfully.
The majority of the spending for 2019 - approximately $110m - would be development and production expenditure focussed on growing production and cash flow, including both Bualuang and Madura.
Ophir said the balance of spend was provided for exploration - predominantly exploration commitments as the company managed its exit from its deep water portfolio.
The company was seeking to reduce those commitments further where possible.
Year-end net debt was forecast at $70m, below the board's previous guidance of $105m.
Cash and cash equivalents, and gross liquidity, at year end 2019 were expected to total $230m.
That assumed the company reduced its total debt exposure by 2019 year-end to $300m, giving rise to a 2019 leverage ratio of 1.5, and a year-end gearing ratio of 30%.
On a net debt basis, the leverage ratio was forecast at 0.5, and the gearing ratio at 10%, demonstrating conservative leverage.
"With the successful integration of the Santos South East Asian assets, Ophir has significantly strengthened its production and development portfolio," said interim chief executive officer Alan Booth.
"We are now well positioned to generate significant free cash flow going forward. Our underlying business and balance sheet remain robust.
"As we announced on 5 January, the Block R licence in Equatorial Guinea has not been extended."
Booth said the company was in negotiations to rationalise parts of its frontier exploration portfolio with the potential to not only bring in cash, but also reduce its future exploration capital commitments and further improve its liquidity position.
He said the board remained mindful of the potential value of its gas assets in Tanzania, notwithstanding the uncertainty over timing for their development.
"As outlined in our strategy statement on 13 September, we are building a company with increasing cash generation, and declining risk capital expenditure.
"Our future investment decisions will continue to focus on maximising returns to shareholders."
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