Monday, August 29, 2011
AWE Ltd.
AWE Limited has announced a statutory net loss of $117.6 million for the 12 months to June 2011. After adjustment for significant one-off, the underlying loss was $16.1 million.
The Company's production assets performed strongly with production of 6.1 million BOE. This delivered a 61% increase in after tax net cash flow from operating activities of $140 million, which included exploration expense of $21 million.
Investment in growth activities continued during the year, with $32 million invested in the completion of the Adelphi takeover, $69 million in exploration activities and a further $80 million in project developments (primarily BassGas MLE and Sugarloaf drilling).
The Adelphi Energy takeover, completed during the year, provides AWE with access to an exciting gas and liquids development project in the US, which is delivering strong initial production performance. Reserve reporting to date at Sugarloaf has highlighted the growth potential of the asset, with 2P reserves increasing to 8.5 million BOE at June, 2011.
The Company reported a cash position of $117 million, at June 30, 2011 with an undrawn $150 million loan facility.
Commenting on the result, AWE's Managing Director Bruce Clement said, "The Company's core business continues to perform well as evidenced by the increased operating cashflow of $140 million for the year, reflecting the strength and diversity of AWE's portfolio of production assets.
"The statutory loss of $118 million was impacted by a number of significant one-off factors, primarily asset impairments and the derecognition of previously booked tax losses.
"The second half of 2010/11 has been a period of consolidation for AWE following an extended period of major exploration activity.
"The Company's focus has been on delivering its core production operations, exploiting its existing asset base and establishing its tight gas and shale gas business through the Sugarloaf acquisition and the Perth Basin exploration initiatives. The Company has also completed a comprehensive review of its core assets.
"Looking forward, AWE has a strong balance sheet, robust future cash flow from its 66 million BOE 2P reserve base and significant potential in its Perth Basin gas exploration assets with access to premium domestic markets.
"The Company's near term plans will focus on continuing the strong performance of the base business, exploiting its tight gas and shale gas projects and pursuing selective growth opportunities.
"The Board and Management of AWE are confident about the Company's future. AWE is well positioned to build on its existing assets and to take advantage of opportunities in the current volatile business environment."
Finance
Operating cashflow was strong for the year, rising 61% to $140 million. The reported cashflow included exploration expense of $21 million and significant Tui and Cliff Head workover costs of $29 million.
The year-end financial position of the Company was strong, with cash of $117 million and no debt (and with a $150 million undrawn corporate debt facility available if required).
AWE's sales revenue fell 14% to $305 million for the year, with net field contributions also lower at $172 million. Total oil and gas sales volumes were in line with the prior year, although oil production was down by 36%, offset by increased gas and associated gas liquids sales over the period. Average received oil prices improved to approximately $91 per barrel, as a result in the stronger international prices partially offset by the stronger A$.
In accordance with AWE's successful efforts accounting policy, $63 million of exploration costs were expensed during the year. These costs were largely related to unsuccessful drilling activity in New Zealand, Yemen and Australia.
A net exploration impairment charge of $61 million (post tax) impacted the statutory results. This impairment included the write down of the Yemen and Bass Basin exploration assets acquired as part of the ARC Energy merger in 2008. In addition, a post-tax net oil and gas asset impairment of $15 million was also recorded (largely related to the Cliff Head project).
Subsequent to the end of the year, AWE sold its shareholding in Buru Energy Limited for a cash consideration of $17 million. These funds were received after year end and are not included in the reported results.
Exploration
Exploration expenditure for the year was primarily incurred on the conventional oil and gas exploration opportunities in Australia, New Zealand and Yemen.
In the latter part of year, AWE accelerated activities in tight gas and shale gas exploration in the onshore Perth Basin, where drilling of the Arrowsmith-2 well has been completed and hydraulic stimulations are being planned. Timing of the hydraulic stimulation activity is subject to the receipt of all regulatory approvals.
AWE continues to pursue further conventional and unconventional exploration opportunities, applying an added degree of financial and technical discipline.
Development
The Adelphi takeover was completed during the year, and development drilling activity in its USA operations has accelerated since the acquisition was finalised. An independent reserve statement was released in March 2011, which reported a 37% improvement (to 8.6 million BOE net to AWE) in existing 2P reserves in the Sugarloaf AMI. Further drilling activity is expected to see added conversion of possible reserves into the 2P reserves category during 2011/12.
The $346 million gross budget for first phase of the Yolla MLE project was approved during the year and significant progress has been made with the onshore fabrication of gas compression and accommodation modules and preparations for offshore installation at the end of 2011. An extended production shutdown is planned during the offshore installation activities (December to April).
The second phase of the development will incorporate the drilling of at least two additional development wells on the Yolla field and remains on schedule for late 2012/early 2013. Engineering planning, including the evaluation of additional upside potential in the field, is continuing with budget commitment expected by end 2011. Total expenditure to June 30, 2011 on the MLE project was $107 million.
Production well workovers were successfully completed on the Pateke and Cliff Head projects, with the Cliff Head-12 well workover increasing production from the Cliff Head field by over 1,500 bopd after coming on stream in August 2011.
2011-2012 guidance
Production guidance for the current financial year has been set at 5.0 to 5.5 million BOE, substantially impacted by the planned extended shutdown of the Yolla field for the offshore installation activities associated with the MLE project. Based on a A$100 per
barrel Brent oil price for the year, AWE expects oil and gas sales revenue to reach a range of $270 to $300 million. Planned exploration expenditure for the year is estimated at $50 million, with development expenditure planned to reach $150 million, the majority of which will be incurred on the BassGas MLE project.
With a net cash position of $117 million AWE is well positioned to further exploit those assets within the Company's existing portfolio and take advantage of opportunities to add to its asset base.
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