Circle Oil plc H Interim Results Presentation

Transcription

1 Circle Oil plc H Interim Results Presentation 29 September

2 Disclaimer The information contained in this document ( Presentation ) has been prepared by Circle Oil plc (the Company ). While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers give, have given or have authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this Presentation, or any revision thereof, or of any other written or oral information made or to be made available to any interested party or its advisers and liability therefore is expressly disclaimed. Accordingly, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of such information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation. Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any transaction and the right is reserved to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent. This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. In particular, this Presentation does not constitute an offer or invitation to subscribe for or purchase any securities and neither this Presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters. This Presentation contains forward looking information which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company, its subsidiaries and its projects, the future price of oil and gas, the estimation of oil and gas reserves and resources, the conversion of estimated resources into reserves, the realisation of oil and gas reserve estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of oil and gas; the future costs of capital to the Company; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the oil and gas industry; political instability, terrorist attacks, insurrection or war; delays in obtaining governmental approvals or financing or in the completion of development or construction activities. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward looking statements contained herein are made as of the date of this Presentation and the Company disclaims any obligation to update any forward looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking statements. 2

3 PRESENTATION TEAM Steve Jenkins, Chairman Founded Nautical in 2005, sold in 2012 for 414 million Extensive MENA experience through 11 year role with Nimir Petroleum Fellow of Geological Society of London and Chairman of Oil & Gas Independents Association Mitch Flegg, Chief Executive Officer 34 years' industry experience, spanning a wide variety of exploration and production projects at all levels Previously Chief Operating Officer of Serica Energy BSc in Physics from Birmingham University and is a member of the Society of Petroleum Engineers (SPE) Susan Prior, Finance Director Previously a Transaction Services Director at PricewaterhouseCoopers LLP in their oil and gas deal team 15 years at EY LLP during which time she was a senior manager in EY's Perth and London offices, and a Partner/Principal in New York 3

4 H1 HIGHLIGHTS (6 months to 30 June 2015) Operational Highlights Gross Production 9,648 boepd in Egypt (40% of which is net to Circle) 6.2 MMcf/d in Morocco (75% of which is net to Circle) Cash production operating costs US$4.34/bbl in Egypt US$0.65/Mcf in Morocco Drilling programme ongoing in Morocco Three year extension to Mahdia permit in Tunisia Financial Highlights Operating Profit of US$5.5 million (H US$12.3 million) Revenues of US$22.3 million (H US$47.8 million) Gross Profit as a percentage of revenue increased to 43.4% (from 34.3% in H1 2014) Focus on aggressive cost reduction Net debt position of US$64.4 million* (H US$47.8 million) Post period end, agreement in principle reached with IFC to extend term of RBL by one year Addressing Legacy Issues New management team in place Rebuilding key relationships Significantly enhanced corporate governance Two newly appointed Non-executive directors with extensive expertise Operational and financial systems strengthened Exited Oman * Includes convertible loan 4

5 MANAGEMENT FOCUS Reviewing Operational Focus Optimise existing producing assets and focus on low cost production Increase production and sales in Morocco Field management in Egypt Focus on production as opposed to exploration Improving Operational Efficiency Drilling performance significantly improved in terms of timing and cost in Morocco Supply chain strengthened Leveraging 40% ownership stake in Egyptian acreage to take a more pro-active role with operator Addressing the Financing Position Agreement in principle reached with IFC to extend term of RBL by one year provides financial flexibility Demonstrates a significant show of support from IFC Extension of convertible loan note with KGL Investment Ongoing review of the capital structure Strengthening of Systems & Controls Board strengthened with the addition of operational and finance focused non-executives Finance function centralised and strengthened In-country management significantly strengthened 5

6 MOROCCO - OVERVIEW Operational Focus Increase production and sales volumes Existing off-take customers looking to increase demand Circle has its own pipeline to Kenitra with significant additional capacity Government initiative to transform Kenitra into an industrial hub, creating further demand Capitalise on Attractive Pricing and Fiscal Regime Upward pricing pressure and strong fundamentals for a growing market for gas Stable fixed price system Improve operational efficiencies Better well planning and contractor selection Strengthening personnel in country Improved cost performance and efficiency Renegotiation of contracts Grow the Reserve Base Opportunity to add further reserves through ongoing drilling programme and adding incremental acreage Circle s pipeline to Kenitra ensures threshold for commerciality is low in surrounding acreage Small scale discoveries can be tied back to the existing infrastructure Excess capacity for additional production 6

7 Opex ($/Mcf) Production (million m 3 ) MOROCCO PRODUCING ASSET BASE Overview Gross Historic Production Largest Gas producer in Morocco Circle 75% WI in producing Sebou permit Cumulative gross production to date of 8.59 bcf Current gross production of 6.2 MMcf/d Fixed price gas contracts: Independent of Oil Price Realised average US$8.66/Mcf in H Circle benefiting from previous investment in 75% owned 55km pipeline from Sebou to Kenitra Operating costs extremely low at US$0.65/Mcf H Opex ($/Mcf) Opex / Mcf H

8 MOROCCO - EXPLORATION ASSETS Overview Ongoing drilling campaign commenced in early 2014 Focused on both Sebou and Lalla Mimouna Ability to tie in to existing infrastructure Sebou Two new wells drilled in H1-15, one currently at target depth, and one further well to follow in H2 Notable success of the SAH-W1 well Net pay of 15 metres from three zones within the target Guebbas sands Now connected to the Company s pipeline and is producing KSR-12 connected and brought on line at ~2MMcf/d Lalla Mimouna Three wells drilled, with mixed success The LAM-1 discovery, flowed gas from two targets The primary target flowed gas at a stabilised rate of 1.9 MMcf/d and the secondary at 1.1 MMcf/d Two further exploration wells, both encountered gas but the reservoir quality was below pre-drill expectations Further analysis of the results to date required before additional wells are drilled Stratigraphic trap Structural trap Exploration well Circle well 8

9 EGYPT - OVERVIEW Operational Focus Maximise the Potential of the Field Utilisation of new dynamic field model Successful workover early in 2015 Follow on 8 well programme now commenced Drilling programme (2 3 wells) to commence in Q Build on Strong Relationship with EGPC Payments notably improved and now at pre-arab spring levels Receive US Dollars Capitalise on Strong Commercial Backdrop Operating costs per barrel amongst the lowest globally Formalisation of gas revenue stream close to finalisation Potential for unitisation with operator of neighbouring block Utilise Material Ownership Position Provides significant operational influence Pro-active involvement with the operator Grow the Reserve Base Potential to add to portfolio through acquisition of non-core assets 9

10 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 EGYPT - PRODUCING ASSETS Overview Gross Historic Production (Annual Production - bbls) Circle 40% interest in NW Gemsa Cumulative gross production to date of 19.1MMbbls 4.5m 4.0m 3.5m 3.0m Current gross production of 9,648 boepd 2.5m 2.0m Low operating costs in-country US$4.34 per barrel 1.5m 1.0m 0.5m Benefitting from substantial historic capex programme 0.0m H programme to drill up to three new producers and up to eight workovers as necessary to maintain production $50m Receivables 10 Reservoir management ongoing using newly developed dynamic reservoir model $40m 8 $30m 6 Unitisation discussions with adjacent operator $20m 4 $10m 2 $0m 0 Accounts Receivable Months (RHS) Total Receiveable (LHS) 10

11 TUNISA - OVERVIEW Operational Focus Focus on Offshore Acreage Mahdia offshore acreage not materially impacted by security issues In light of concerns onshore Circle will continue to evaluate its commitments at Ras Marmour and Beni Khalled Monetise Significant Offshore El-Mediouni Discovery in Mahdia Permit Material asset, 100% owned by Circle, with substantial upside potential Significant industry interest despite oil price backdrop Significant de-risking of asset despite lack of logging Expect development to utilise an FPSO Utilise Strong Political Support for the Sector The oil and gas industry is a strategic political imperative Seen as a key vehicle for foreign investment into the country Strong and improving in-country relationships Capitalise on Growing Industry In-country Significant presence of international oil companies including BG, ENI, Perenco, Shell and Anadarko Opportunity to leverage Circle s existing footprint in Tunisia with additional acquisitions 11

12 TUNISA MAHDIA PERMIT Overview W EMD-1 E El Mediouni discovery a material addition to the Company s asset base The EMD-1 well encountered a 133 metre column of light oil in the Ketatna (Oligo-Miocene) carbonates Mud losses prevented log data acquisition Circle estimates an un-risked prospective recoverable resource in excess of 70MMboe from the structure. The EMD-1 well extends the boundaries of the previously mapped boundaries of the Petroleum System Next Steps 3 year permit extension announced in August 2015 Farm-out process commenced Pro-active initial expressions of interest already received from industry partners with the financial strength and industry experience to make them suitable joint venture partners. Farm-out strategy will minimise Circle s future financial commitment, reduce development risk, and still retain the benefits from the potential of the discovery The Mahdia Permit (3,024 km 2 ) also contains a number of similar prospects which are significantly de-risked by the EMD-1 well. These prospects will be the objective of future exploration work 12

13 RESULTS 6 months to 30 June 2015 FY2014 H H US$000 US$000 US$000 Revenue 84,624 47,785 22,290 Cost of sales (53,764) (31,370) (12,608) Gross profit 30,860 16,415 9,682 Decline in Cost of Sales is proportionally greater than fall in Revenue This is a function of the Cost Oil Mechanism in Egypt and also due to aggressive cost reduction in Morocco as evidenced by: Termination and renegotiation of numerous local supply contracts Re-assessment of staffing requirements Gross Profit as a percentage of revenue increased to 43.4% (from 34.3% in H1 2014) Administrative expenses (5,866) (2,956) (3,106) Share option expense (975) (863) (706) Exploration costs written-off (57,396) - (271) Impairment (13,936) - - Foreign exchange loss (706) (339) (149) The benefit of cost reduction measures implemented in H are not fully captured here due to restructuring costs such as: Contract Termination Costs Redundancy Costs Operating profit (48,019) 12,257 5,450 Finance revenue Finance costs (6,254) (3,004) (3,267) Profit/(loss) before taxation (53,915) 9,382 2,786 13

14 SOURCES AND USES OF CASH SINCE DECEMBER 2013 $180m $160m $140m Increase in Net Debt throughout this period from US$4.6 million to US$64.4 million $120m Exploration and Evaluation costs include: $100m $80m EMD-1 (US$56.0 million) Shishr-1 (US$10.5 million) 27.3 $60m $40m $20m $0m 4.6 Net Debt: (Dec-13) Expl. & Eval. Prod'tn & Dev'ment Loan Costs Interest Paid G&A Cash Opex All Other Egypt Receipts Morocco Receipts 64.4 Net Debt: (Jun-15) 14

15 CONCLUSION Morocco Fixed price gas contracts at attractive pricing levels within a favourable tax regime Strong market dynamics with existing customers seeking further supply and the rise of Kenitra as an industrial hub Growing reserve base alongside improved operational efficiencies Existing Circle-owned pipeline in Morocco with excess capacity to accommodate future growth Opportunities exist to expand production portfolio in Morocco Egypt Low cost operating environment Receivables position notably improved and continuing to improve Drilling up to three new producers and up to eight workovers to maintain production levels Increasingly pro-active relationship with Joint Ventures partners Tunisia Recent commencement of the farm-out process for the Mahdia permit Proactive enquiries received from credible parties Offshore acreage largely unaffected by security issues Material asset with an estimated 70 MMbbls Corporate Strong relationships in country Ongoing focus on costs and operational efficiencies Continue to review the capital structure to ensure optimal balance Numerous asset / corporate opportunities in MENA region to be facilitated by Vastly experienced UK subsurface team with deep knowledge of region Established local offices (Rabat, Cairo, Tunis) with excellent in-country relationships 15

16 Appendix

17 ASSET OVERVIEW Morocco Reserves Acreage Gross Production Reserves* 2 blocks 6.2 MMcf/d (75% WI) 2P of 3.74mmboe Tunisia Acreage Resources** Current Status 3 blocks 100 mmboe (100% WI) Farm-out process ongoing Egypt Acreage Gross Production Reserves* 1 block 9,648 boepd (40% WI) 2P of mmboe * 31 December 2014 CPR ** Management estimates 17

18 BALANCE SHEET 30 June June 30 June 31 December US$000 US$000 US$000 Assets Non-current assets Exploration and evaluation assets 100, ,997 97,411 Production and development assets 150, , ,647 Property, plant and equipment Deferred transaction costs - 1, , , ,328 Current assets Inventories Trade and other receivables 25,334 48,117 31,164 Cash and cash equivalents 17,145 31,654 36,308 42,509 79,886 67,880 Total assets 293, , ,208 Equity and liabilities Capital and reserves Share capital 8,125 8,084 8,125 Share premium 167, , ,953 Other reserves 2,498 11,928 8,051 Retained earnings 17,679 67,949 8,634 Total equity 196, , ,763 Non-current liabilities Trade and other payables 670 1,575 1,062 Reserves based loan facility 55,251-43,427 Convertible loan debt portion 16,946 27,885 - Derivative financial instruments 2, Decommissioning provision 1,211 1,176 1,193 Total non-current liabilities 76,688 30,770 45,682 Current liabilities Trade and other payables 16,783 34,774 46,714 Reserves based loan facility - 25,000 - Convertible loan debt portion 4,000-29,025 Derivative financial instruments Current tax Total current liabilities 20,790 59,811 75,763 Total liabilities 97,478 90, ,445 Total equity and liabilities 293, , ,208 18

19 CASHFLOWS 6 months to 30 June months to 30 June months to 30 June 2014 Year ended 31 December 2014 US$000 US$000 US$000 Operating activities Net cash generated from operations 17,789 26;403 54,706 Taxes paid - - (25) Net cash inflow from operating activities 17,789 26,403 54,681 Cash flows from investing activities Investments in exploration and evaluation assets (15,959) (26,526) (60,737) Investments in production and development assets (24,258) (15,955) (25,703) Payments to acquire property, plant and equipment (10) (184) (260) Interest received Net cash used in investing activities (40,226) (42,660) (86,691) Cash flows from financing activities Issue of share capital Working capital facility - amounts repaid - (12,499) (12,499) Convertible loan repayment (6,000) - - Reserve based lending facility amounts drawn down 12,500 25,000 45,000 Loan transaction costs paid (960) (1,262) (2,539) Interest paid (2,261) (1,222) (2,349) Net cash from financing activities 3,279 10,017 28,524 Decrease in cash and cash equivalents (19,158) (6,240) (1,858) Cash and cash equivalents at beginning of period 36,308 37,938 37,938 Effect of foreign exchange rate changes (5) (44) 228 Cash and cash equivalents at end of period 17,145 31,654 36,308 19

20 Thank you