Moesia Oil and Gas plc Review

Transcription

1 Moesia Oil and Gas plc 2012 Review

2 Managing Director s Report 2012 was a significant year of progress and expansion for Moesia that saw a full year of activity in our six Romanian licences, the farm-out of the large EX-12 Crai Nou exploration block, and expansion of the business by the award of four exploration blocks in Bulgaria. The Company has conducted substantial database, environmental and geotechnical work programmes in Romania on all licences that have identified possible appraisal and exploration operations for consideration. The Board believes that the major opportunities and challenges facing Moesia in 2013, and beyond, are to maintain our ability to compete with larger and better funded companies when accessing new ventures and to conduct cost effective operations on active and awarded licences. This will require an imaginative, flexible and opportunistic approach to doing business and we are confident that this can be achieved. In June 2012 Moesia concluded a farm out agreement for the EX-12 Crai Nou exploration and production block with Naftna Industrija Srbije Gazprom Neft, ( NIS ), the vertically integrated Serbian company with interests across the upstream, midstream, downstream and power generation sectors. NIS is controlled by Gazprom Neft the oil wing of Russia s Gazprom, one of the world s largest petroleum and energy companies. It has a wealth of technical and operational experience in the Pannonian Basin, is financially robust and committed to expanding its interests in the central and south-eastern Europe region. In October 2012 the Bulgarian Council of Ministers announced that it had awarded Moesia the 1-5 Devetaki, 1-7 Tarnak, 1-9 Mizia and 1-10 Botevo Blocks following a delayed tender process conducted by the Bulgarian Ministry of Economy, Energy and Tourism. These four blocks are all located in an area of proven oil and gas production with a number of producing reservoirs and plays which also extend across the border to southern Romania. The Company succesfully concluded petroleum agreements for the blocks during May 2013 and believes that the blocks contain exciting re-development and exploration potential having already highlighted a number of conventional leads and potential prospects. Continued Business Development Moesia s business plan involves building and operating an asset base with near term production opportunities and adding low to medium risk exploration areas to the portfolio. The award of the four exploration blocks in Bulgaria during late 2012 is an important addition to the portfolio and strengthens the Company s reputation in being able to add significant onshore opportunities in a cost effective manner. Moesia was granted four non-exclusive Romanian Prospecting Permits in 2011 which provided full access to the historical database within the permit areas. Significant evaluation work was performed during 2011 and 2012 and final reports were submitted to the Romanian authorities during the autumn of 2012 upon relinquishment of the Prospecting Permits. An 11th National Bid Round is currently being discussed in Romania and Moesia believes that the insight gained by performing the Prospecting Permit work will be important in evaluating the acreage offered in the Bid Round plus future business development activities. The Company continues to evaluate additional opportunities in order to expand and strengthen its portfolio of opportunities. Financial and Portfolio Management Moesia s corporate structure is low cost and is designed to focus expenditure on adding value to the Company s existing assets and evaluating new business opportunities that are aligned with the corporate strategy and objectives. Throughout the year the Directors have continually reviewed the cash position and short to medium term financial requirements making appropriate amendments and ensuring that existing funds provided sufficient working capital for the Company to continue to operate into There are always 3

3 opportunities to monetise assets, partially or in full, and this means that both the asset portfolio and the allocation of resources and capital within it are under constant review. The farm-out of the EX-12 Crai Nou licence enabled Moesia to recover various pre-farm-out new ventures and licence costs, and the Company is also receiving operating fees which assist the working capital position. The introduction of an appropriate partner, or partners, to the Bulgarian awards is a key business objective that will also contribute significantly to the financial position. Moesia has not sought to raise funds via a placing of new shares since November 2011 when an invitation only friends and family style placing was organised. The proceeds of this placing were used to perform Romanian environmental, database and technical work, plus other general corporate matters during Market conditions continue to be very challenging for companies such as Moesia. For example, the oil and gas sector of the FTSE 350 was ranked 35th out of 38 sectors during 2012 and equity trading volumes and investments are substantially reduced reflecting a general lack of opportunity resulting from several years of restricted activity. The Company continues to monitor matters with a view to widening the shareholder base in a fair and reasoned manner and currently plans to conduct a wider financing during late 2013 or In order to assist the short term working capital position the Directors have agreed to defer the bulk of 2012 fees and 2013 fees until a suitable time during 2013/14. Moesia remains free of debt. The technical and environmental work performed on the Romanian licences during 2012 was aimed at fully evaluating the existing licences with a priority given to the 9th Round licences in Southern Romania. Moesia now has a substantially improved understanding of these licences, including updated volumetric estimations, and has a range of options available for future work which will require additional funding and/or the farming out of equity. Moesia continues to discuss potential cooperation with other companies that are either active in or interested in becoming active in Central and Eastern Europe with a view to sharing technical, operational and financial risk. Business Development Obtaining licences via a focussed new ventures and business development programme has been the foundation of Moesia s success to date. This has opened up new opportunities for monetisation via selective development, farm-down or divestment creating potentially attractive returns. Whilst the Company has been very successful in delivering attractive assets and licences when compared to various peer companies, the competition for new opportunities continues to increase in a difficult market. Nonetheless the Board believes that Moesia is well placed to continue to compete in a cost effective manner. Accordingly the Company will continue to evaluate new business opportunities within Romania, Bulgaria and neighbouring Countries where the Company s knowledge and experience may be leveraged. During 2012 Moesia concluded evaluation work on the four non-exclusive Prospecting Permits which it was awarded during 2011 and continued to screen farm-in and other new business opportunities but decided not to proceed with projects as they were deemed not to fit with the Company s technical, financial and operational requirements. Clear progress made within challeneging economic environment growth strategy Bulgarian Awards As previously reported to shareholders, Moesia participated in a number of petroleum tenders in Bulgaria which were deemed to be attractive projects for the Company as they fit well within the strategic and technical requirements. Unfortunately the tender processes became stalled in various administrative and political processes and consequently did not conclude according to the planned timeframe. Following a lengthy but successful administrative process, the procedures were re-opened during 2012 and the Bulgarian Council of Ministers met and decided to award four exploration permits to Moesia. These decisions were formally published in the Bulgarian State Gazette during October The Ministry of Economy, Energy and Tourism then met with Moesia in late 2012 and early 2013 in order to discuss the detailed texts of petroleum agreements, one for each of the four blocks. Significant progress was made in these discussions but a series of unrelated anti-austerity protests escalated causing a political crisis that resulted in the resignation of the Government on 20th February A caretaker administration was emplaced during March 2013 but political uncertainty dominated the agenda and there was an early general election. Moesia continued to engage with the authorities and successfully concluded petroleum agreements during May The Company is now looking forward to commencing work on these extremely interesting and attractive blocks. Clear Strategy and Consistent Business Plans Moesia is clear on its business plan for the next three years which is developed from and supports the Company s strategy that is consistent, repeatable and seeks to deliver sustainable growth. Our medium-term objective is to build a business with a production output and operational cash flow that is capable of funding significant appraisal, development and exploration programmes. This requires on-going attention to portfolio management and monetisation options and the development of a suitable corporate finance plan. Our business plans are: Review

4 1. Perform high quality technical and operational work in order to re-appraise near-term production opportunities 2. Conclude petroleum agreements for the Bulgarian block awards and introduce a suitable partner company, or companies 3. Establish early production, cash flow and demonstrate bankable reserves 4. Cost effectively explore the EX-12 Crai Nou Block and mature drillable prospects 5. Obtain additional licence interests via continued prudent screening of, and participation in, bid rounds, tenders and 3rd party transactions 6. Strengthen the Board and add to the Moesia Team 7. Develop and implement a long-term funding and portfolio management plan Corporate Governance The Board recognises the importance of good corporate governance and is fully committed to conducting its business in a thoroughly professional and ethical manner. Moesia complies with relevant national and international laws and regulations and expects all employees, advisors, consultants and agents to do the same whilst maintaining the highest ethical standards. Board of Directors Brian Hodgson and Robert Tapp joined the Board of Moesia on 22nd June Brian is a geophysicist with more than 33 years of industry experience whilst Robert has more than 29 years of legal and commercial experience within the oil and gas industry. I am delighted that both are part of the Board as they are highly experienced oil industry professionals who have also been involved with the Company, and our business, for some time. Bogdan Balan has recently indicated that he has decided to step down from the Board in order to focus on other interests. This will take effect on the 31 May 2013 but Bogdan shall continue to advise the Board on technical and other matters. Bogdan was a founding Director of Moesia and has made a significant contribution to the Company s development. On behalf of the Board and shareholders I would like to thank Bogdan for his contribution to the Company since incorporation in 2008 and am happy that he shall continue to advise the Board. We expect to make additional announcements concerning the Board later in EX-12 Crai Nou Farm-Out In June 2012 Moesia signed a binding farm-out agreement for the EX-12 Crai Nou Block in Romania with Naftna Industrija Srbije Gazprom Neft, ( NIS ), the vertically integrated Serbian company. NIS is controlled by Gazprom Neft the oil wing of Russia s Gazprom, one of the world s largest petroleum and energy companies. The Romanian National Agency for Mineral Resources approved the transfer of 50% working interest to NIS in late August 2012 and Moesia and NIS signed a Joint Operating Agreement during September NIS will pay 75% of the expenditure incurred during the first obligatory Phase 1 of the EX-12 Crai Nou Concession, which extends until May Moesia has retained a 50% working interest in the block and has remained as the operator of the block. This equity level and operatorship enables the Company to maintain an effective control over operations and expenditure whilst leaving sufficient room for an additional farm-down of equity in return for a supplemental or additional carry on future work. The farm-in of a sizeable regional player such as NIS, whose Serbian production is c.30,000 boepd, was a significant achievement for Moesia and demonstrates the potential of the Crai Nou licence. There are obvious potential benefits in Moesia and NIS working together in the Crai Nou area, where known plays and trends extend across the border between Romania and Serbia. NIS also made payments to Moesia in respect of historical pre-licence sunk costs, (exceeding 330,000), and costs incurred by Moesia directly attributable to the licence since it s registry by the Romanian authorities in November Moesia looks forward to working closely with NIS and the Romanian Authorities in the continued exploration of the Crai Nou Block. Outlook 2012 was an extremely busy year for Moesia in Romania with substantial work being performed on all six awarded and active licences. The introduction of a suitable partner company to the large EX-12 Crai Nou exploration block was finalised in good time and demonstrated the technical and commercial attractiveness of the block. The award of additional blocks in Bulgaria is a major addition to the Company s portfolio and whilst the blocks have yet to become active, we are hopeful that progress will be made enabling work to commence on these attractive areas during Moesia will now move to planning and developing new operational programmes designed to unlock the value that is present in the Company s assets. In order to do this the Board shall seek to secure new and additional sources of finance that will enable Moesia to continue to meet our commitments and goals. Given the continuing challenging economic and investment environment the Company shall be flexible and opportunistic in its outlook. The Company would like to thank our shareholders for their continued strong support which has enabled Moesia to build a substantial portfolio of licences in Romania, enter Bulgaria, introduce a strong partner to the EX-12 Crai Nou Block and continue new venture programmes. We believe that this support and the real and substantive progress made during 2012 will enable the Company to continue to add value during 2013 and beyond. We would also like to thank Moesia s employees, consultants and advisors for their hard work and commitment during the last year and look forward to continuing that through 2013 and beyond was a year of significant work and progress and as we continue to enact the business plan and strategy we are confident that 2013 will also be a year of continued development and achievement. I look forward to updating shareholders on our business in the year ahead. Colm Daly Managing Director 5

5 ROMANIA EX-12 Crai Nou (10th Round) EX-12 Crai Nou is located in the eastern edge of the Miocene aged Pannonian Basin which extends from Croatia and Slovenia in the west through Hungary to Romania in the east. The internal structure of the Pannonian Basin is complex and it is in effect an assemblage of several sub basins which evolved during the development of the Carpathian chain. A technical evaluation and database rationalisation project commenced mid-2012 and this was completed at end February The main structural elements were mapped and proven petroleum plays and systems analysed. Moesia believes that the Block has significant remaining potential and a number of areas of interest have been highlighted. These range from deep basinal fault blocks to shallow high basement blocks. Some of the shallow high blocks have a number of previous gas wells located on them. Moesia is confident that identified leads may be matured whilst additional leads and prospects ought to be identified with the emplacement of a modern and considered exploration programme. 9th Round Licences Database, technical re-evaluation and independent environmental baseline work was performed in each of the five blocks that contain more than 90 exploration, appraisal and development wells with a wide range of associated historical information. New geological and structural models were constructed to update estimates of the original hydrocarbon volumes, recovery factors and remaining producible volumes. Moesia is now considering the interpretations and their conclusions in order to design future seismic and well operations. These may include the drilling of new appraisal and development wells and the refurbishment or installation of new production facilities and pipeline infrastructure. The table below shows a simple summation of hydrocarbon volume estimates representing 50% and 10% probability levels. The Company considers there to be scope for increasing the ultimate recovery and produced volume from such assets but stresses the fact that significant work needs to be done before these volumes could be considered reserves. Probability Level Hydrocarbon Volume 2012 Estimate (mmboe) Hydrocarbon Volume 2011 Estimate (mmboe) Additions/ (reductions) P P th Round Licence volumetric estimate summary (unaudited estimates) P IX-12 Șilindru P IX-9 Otelec E X-12 Crai Nou P IX-14 Vârfuri P IX-8 Lăculeţe P IX-1 Berte Bucureș 9 th E X-12 Crai Nou Block Km

6 BULGARIA Moesia participated in a number of tenders for areas located in northwest Bulgaria which had been delayed for some time. In September 2012 the Bulgarian Council of Ministers decided to award the 1-5 Devetaki, 1-7 Tarnak, 1-9 Mizia and 1-10 Botevo Blocks to Moesia. The Government decisions were formally published in the Bulgarian State Gazette during October 2012 and the Ministry of Economy, Energy and Tourism, (the Ministry ) was authorised to conclude petroleum agreements with Moesia in relation to the four blocks. Geologically the blocks are located in the Moesian Platform in areas of proven oil and gas production with a number of producing reservoirs and plays. The Company recognised a number of technical and potential operational synergies between these tender areas and regions in Southern Romania where it already has interests. Little re-appraisal and modern field rehabilitation work has been conducted in the region whilst there is substantial conventional and non-conventional exploration potential. Moesia proposed comprehensive work programmes that include the reprocessing of existing seismic data, the acquisition of new seismic surveys and the drilling of new wells and will conduct environmental studies and technology transfer projects during an initial five year exploration period with two contingent extension periods of two years each also provided for. The blocks are ideal fits for Moesia s portfolio. In addition to proven play exploration targets, two previously producing gas condensate fields are located within the block boundaries. These abandoned marginal fields will be evaluated with a view to future re-appraisal and redevelopment work that may lead to early production. The areas are also thought to have significant unconventional potential and this will also be evaluated in the coming period. A suitable partner company, or companies, will be introduced and Moesia has already received several expressions of interest from potential farminees. Bulgaria has a very strong internal market for oil and gas and Moesia is confident that any produced volumes will be important contributions to the national energy sector which is currently highly dependent on imports. The Company looks forward to expanding and developing its interests there. Petroleum Agreements The Company concluded four petroleum agreements with the Ministry during May 2013 following a comprehensive negotiation process and intends to commence environmental, technical and operational work shortly. Whilst a number of unrelated political developments delayed matters Moesia is now looking forward to commencing work and introducing a suitable partner company in the short to medium term Review

7 Moesia Oil and Gas plc. 6 Northbrook Road Dublin 6 Ireland 8