Page 14 - Euroil Week 13 2020

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NEWS IN BRIEF
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Neptune Energy to slash spending by $300mn
Private equity-backed gas producer
Neptune Energy plans to cut its budget for development projects by around $300mn this year and will not pay a cash dividend to its owners Carlyle and CVC Capital Partners, it said on March 31.
Following the collapse in oil prices, UK-based Neptune said it now expects its spending on development projects to total $750mn to $850mn this year and its future exploration plans for 2020 were under review.
In November, when oil prices stood at around $63 per barrel, Neptune forecast it would spend between $1bn and $1.1bn on developing projects in 2020. On March 31 the oil price stood at around $23 per barrel.
The company said it expects annual production of between 145,000 and 160,000 barrels of oil equivalent per day, which at the lower end would be flat on last year.
Neptune was formed when its owners acquired oil and gas assets in 2017 from French Engie for $3.9bn, one of a number of deals that moved fields from major producers into the hands of small private groups.
The suspension of the dividend highlights the challenges in monetizing such investments as appetite for energy initial public offerings is low and some deals have ground to a halt as buyers were not willing to satisfy price expectations.
Oil and gas producers across the globe have slashed their budgets on the back of the price slump. For 2018, Neptune paid out $380mn to its shareholders and $200mn for 2019.
Last year it spent $825.5mn on development projects and had an operating cash flow of $1.3bn, slightly above the previous year. It had a cash pile of $1.3bn at the end of 2019 to pay for development projects and potential acquisitions.
It cost Neptune $10.3 to produce a barrel of oil equivalent last year and it expects this to stay stable this year.
It hedged around 27% of its 2020 oil production at a floor price of $60 per barrel and 84% of its gas output at $6 per million British Thermal Units.
Cairn Energy swings to a profit in 2019
Cairn Energy has posted a pre-tax profit of $119.5mn, up from a $1.21bn loss over the same period the previous year.
Revenue increased from $410.3mn in 2018 to $533.4m.
The FTSE 250-listed company said net oil production averaged 23,000 barrels per day (bpd) in 2019, at the upper end of guidance, and ahead of 2018’s 17,500 bpd. The energy firm estimates net production of 19,000 to 23,000 bpd next year.
Cairn announced that its North Sea wildcat well Chimera had come up dry in October, but reserve additions were made in Senegal and the North Sea.
Brent crude recovered after dropping 20% over the weekend as Saudi Arabia threatened to ramp up production amid a dispute with Russia.
CEO Simon Thomson said: “Cairn’s strong operational performance in 2019 was delivered through production and cash flow generation at the top end of guidance and the group ended the year with an increased net cash position and undrawn debt facilities.”
“The sale of Cairn’s Norwegian business, combined with exits from exploration positions in Ireland and Nicaragua, demonstrate continued focus on capital allocation as the company seeks to generate further value for shareholders on a sustainable basis.”
Despite swinging to a profit shares closed down 15.9%.
UK-based i3 Energy to acquire Toscana Energy for $2.82mn
North Sea operator i3 Energy has agreed to acquire Canada-based Toscana Energy. The latter company, in turn, owns Firenze Energy, which operates the company’s 13 fields onshore Canada.
Toscana’s reserves lie in Saskatchewan and Alberta lying in the Western Canadian Sedimentary Basin. The fields hold assets equal to 4.65mn barrels of oil equivalent (boe). Toscana has stakes in 255 wells and last year pumped these at an average rate of 1,065 boe per day.
Its average breakeven price is $21.74 per boe, a low figure which will help i3 battle the current low oil price. The purchased reserves hold 53% oil and 47% gas.
In a statement, i3 said it was purchasing Toscana “at a fraction of going market- based valuations”. After Toscana defaulted on its debt, i3 bought its debt facility
for roughly $2.4mn, 72% of i3’s net field payback.
The statement said i3 aimed to use
the purchase to diversify its portfolio. It says: “We have concluded that the WCSB provides a unique, time-limited opportunity
to build a portfolio of production assets on superior metrics not achievable elsewhere.”
It points to a “short to medium term lack of infrastructure” in transporting Canadian hydrocarbons as a problem for Toscana. With this, i3 says the growth of US shale gas has caused problems for companies which otherwise have “excellent, long-life, low- decline production assets”.
i3 Energy CEO Mafid Shafiq said: “In addition to diversifying our portfolio,
this transaction will help to stabilise our business with a steady revenue stream while adding considerable upside potential from within Toscana’s Clearwater acreage – an opportunity which is comparable to the growth potential of our Serenity discovery. We look forward to welcoming the Toscana management team and staff to i3 and working together to grow our business in the UK and Canada.”.
Spirit reports on successful drilling campaigns
Production has been boosted from two North Sea fields following successful drilling campaigns.
First gas from the new C6 well at Spirit Energy’s Chiswick field in the Southern North Sea was achieved on March 11 2020 and has added up to an additional 15mn cubic feet of gas per day to the field.
The Chiswick field, around 75 miles off the coast of Norfolk, has been producing gas since 2007. The new well brings overall production from the Greater Markham Area (GMA) to 110mn cubic feet of gas per day – enough to heat nearly 950,000 homes.
The development well, completed two months ahead of schedule, is expected to help extend life of the GMA hub to 2028.
Further, together with partner Dana Petroleum, Spirit Energy has completed drilling of a new production well at the Chestnut field, extending the life of that field by as much as three additional years. Initial expectation when the Chestnut field first came online more than a decade ago was for a little over two years’ production.
First oil from the new Chestnut well
was achieved on March 19 2020. Thanks to the £56mn investment from Spirit Energy and Dana Petroleum in the new well and a contract extension with Teekay Corporation for the Hummingbird Spirit FPSO, another 2.5mn barrels have been unlocked.
SPIRIT ENERGY
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Week 13 02•April•2020