TIDMCERP
RNS Number : 5609M
Columbus Energy Resources PLC
09 January 2019
9 January 2019
COLUMBUS ENERGY RESOURCES PLC
("Columbus" or the "Company")
Business, Operational and Financial Update - Q4 2018
Columbus, the oil and gas producer and explorer focused on
onshore Trinidad with the ambition to grow in South America, is
pleased to provide an update on business, operational and financial
activities during Q4 2018.
Following the announcement by the Company of the completion of
the acquisition (the "Acquisition") of Steeldrum Oil Company Inc
("Steeldrum") on 8 October 2018, the Company incorporated
Steeldrum's business performance into Columbus' accounts with
effect from 13 July 2018, the effective date of the
Acquisition.
Key Highlights in Q4 2018:
Strategic and operational
-- Year-end target of peak production of 1,000 barrels of oil
per day ("bopd") achieved with production peaking at 1,021 bopd in
late December 2018 (Q3 2018: 879 bopd).
-- Average production of 670 bopd (Q3 2018: average of 735
bopd). Average production was adversely affected by extreme weather
conditions, with record rainfall and extensive flooding witnessed
during the period, severely hampering both routine operations and
incremental well work.
-- Integration of the Steeldrum assets and personnel into
Columbus successfully completed with the new Trinidad organisation
allowing more effective use of our operational and administrative
personnel. Columbus now operates six fields in Trinidad: Goudron,
Inniss-Trinity, South Erin, Bonasse, Snowcap and Icacos.
-- Safe and successful appraisal of the Snowcap-1 &
Snowcap-2 wells on the Cory Moruga block, resulting in initial oil
production of 70 bopd (which contributed to the peak production
volume).
-- In December 2018, the Company formally completed the Icacos
transaction (the purchase of 50% of the Icacos field from Primera
Oil and Gas Limited). This included transfer of operational
management of the Icacos field to the Company.
-- The Company continues to pursue M&A opportunities both in
Trinidad and South America that are value accretive for Columbus
shareholders with several formal proposals under consideration by
the relevant parties, such opportunities consistent with Company's
strategy roadmap.
Financial
-- Average realised sales price from operations in Q4 2018:
US$57.58/bbl (US$60.90/bbl in Q3 2018) - peaking at US$69.04/bbl in
October 2018 and reducing to around US$50/bbl in December 2018.
-- Gross Revenues of US$3.23 million achieved (Q3 2018: US$3.85
million) - reduction due to lower average production and lower oil
price achieved over the quarter.
-- Cashflow positive position maintained from operations
delivering an estimated US$0.37 million after taking account of
field maintenance and well workover campaign during Q4 2018 costing
US$0.77 million.
-- Successful GBPGBP2.5 million (gross) capital raise, US$1.25
million used to repay the outstanding loan to North Energy in late
November 2018.
-- Cash balance of US$2.60 million at 31 December 2018 (30 September 2018: US$1.97 million).
-- US$0.48 million of additional funds also held in escrow as restricted cash.
-- Debt outstanding reduced to US$0.40 million at 31 December
2018 (US$0.48 million at end September 2018).
Outlook
-- Following the Steeldrum acquisition, the focus of the Company
in Trinidad is to optimise cashflow and profits from our six
assets. This is possible given the differing commercial/licencing
structures associated with each asset. Greater cashflow returns and
profits can be achieved by producing more barrels in certain
fields, when compared to others, due to higher netbacks from sales.
The Company will target profit over "production per se".
-- Operational teams are continuing to implement newly
identified opportunities to increase cashflow from operations
across the expanded Columbus portfolio, all well activities to be
funded from production revenues and available cashflow. This
includes further appraisal activities on the recently re-activated
Snowcap field to determine how best to monetise this asset.
-- Group is forecast to remain operationally cash flow positive
despite the recent international oil price reductions, with
operational profits forecast to cover all Group costs in Q1
2019.
-- Good progress made with Predator Oil & Gas plc
("Predator") on their planned CO injection pilot project on
Columbus's Inniss-Trinity field to commence in 1H 2019. As operator
of the field, Columbus is working with Predator to help deliver a
successful project and views this as a win/win opportunity for both
parties.
-- Technical work, using external specialists, is continuing to
mature the optimal drilling locations for the South West Peninsula
("SWP") exploration programme, with commencement of drilling
activities still planned for mid-2019 onwards.
Leo Koot, Executive Chairman of Columbus, commented:
"The past three months has been very challenging as we sought to
complete the integration of the Steeldrum and Columbus teams in
Trinidad into one effective unit, whilst also striving to grow
production across our expanded portfolio. With the recent appraisal
of the Snowcap field and the transfer of operating management of
Icacos, Columbus is now operating six fields onshore Trinidad. This
provides us with many competing options to increase operational
cashflow and also reduces our reliance on just one or two fields
for our cashflow streams.
"All of our activities in Q4 2018 were undertaken at a time when
Trinidad was witnessing the worst weather conditions in many years
with record rainfall and resultant floods which impacted the lives
of many. These conditions severely hampered our operations on a
number of occasions, in particular gaining access to our wells
which needed operational support to maintain production. In many
instances, roads were flooded and impassable. This also had a knock
on effect on our rig campaigns to increase production. That said,
our operational and support teams performed admirably in very
difficult circumstances and our back-up power-generation
facilities, installed over the past year, ensured operations were
maintained when grid electrical power was lost due to the weather
conditions.
"I am therefore delighted to report that, despite these
challenges, we successfully achieved our year-end target of 1,000
bopd of peak production, with all six fields in Trinidad
contributing growing volumes of oil for sale. Achieving a peak of
1,021 bopd was an excellent achievement. We will now focus on a
level of production within that figure that will allow us to
high-grade our operations and well activities to achieve better
financial results, focussing on a level of production that
optimises profits ("better bang for our buck"), as opposed to
chasing production targets per se. The newly integrated
organisation appears to be working well, with staff and contractors
coming up with creative ideas on where we can grow cashflow further
in the months ahead.
"Another key focus in the next six months will be the ongoing
technical and commercial preparations for the planned drilling
campaign in the South West Peninsula, which we plan to commence
mid-2019. Work continues to identify the optimal drilling locations
and to help reduce risk and increase the chance of success. I
remain hugely excited at the opportunity presented by the SWP
exploration portfolio which could be transformational for the
Company in 2019, given the known prospectivity which exists in the
SWP.
"We have also been very active on pursuing M&A opportunities
in Trinidad and other South American countries and are continuing
discussions with a number of third parties. We are working hard to
find the right deal that is value accretive for Columbus's
shareholders.
"In summary, our newly integrated operational team and our
supporting contractors in Trinidad have faced many challenges in Q4
2018 but have proved the production potential and profitability of
our six fields. I look forward to progressing the various
opportunities we have in the coming months and hope 2019 can be a
year of real transformation for Columbus."
DETAILED INFORMATION
STEELDRUM ACQUISITION:
The acquisition of Steeldrum Oil Company Inc was completed on 8
October 2018. Through this acquisition, Columbus now has three
additional exploration and production blocks, consisting of the
Inniss-Trinity block, the South Erin block and the Cory Moruga
block. The acquisition has also bolstered the local talent of
Columbus with the strong human resources from Steeldrum being
assimilated into Columbus. Upon the closing of the Steeldrum
transaction, Columbus has been able to restructure and rationalize
the organizational staffing structure of the respective entities
which shall lead to significant savings in operational costs. The
closing of this transaction has also facilitated Columbus to
continue with its strategy to explore and exploit the vast onshore
potential of the SWP in Trinidad.
OPERATIONS:
Production performance
Year-end target of peak production of 1,000 bopd achieved with
production peaking at 1,021 bopd in late December 2018 (Q3 2018:
879 bopd).
Average production of 670 bopd (Q3 2018: average of 735
bopd).
Production was adversely affected by extreme weather conditions,
with record rainfall and extensive flooding witnessed during the
period, severely hampering both routine operations and incremental
well work. The Company encountered significant road access
difficulties, in many instances, roads were flooded and impassable.
This had a knock on effect on our rig campaigns to increase
production. That said, our back-up power-generation facilities,
installed over the past year, ensured operations were maintained
when grid electrical power was lost due to the weather
conditions.
Operating Strategy:
The Trinidad based wellwork team are focused on active daily
optimisation of the 100 plus active wells in the producing fields
and implementation of piloting field specific enhanced oil recovery
projects including water injection, CO injection and thermal
techniques. Rig wellwork is optimised based on short term
commercial return in the five producing fields and focussed
appraisal on the Snowcap discovery.
Goudron:
Rig and non-rig wellwork focus is based around low-cost repeat
stimulation jobs on higher potential wells, pump optimisation and
baseline protection workovers as well as continuing to implement
missed pay perforation opportunities. The GY-677 successful
perforation in the Goudron-Mayaro sands in December 2018 added
instantaneous oil rates of over 70 bopd.
The Water Injection Pilot A implementation that commenced in
July 2018 through injection into GY-667, showed evidence of direct
pressure communication with target offset production well GY-665.
The second Pilot A injection well GY-209 is ready for conversion to
injection in Q1 2019 with the target of supporting well GY-664. To
date, the cumulative total of water injected into Goudron is over
201,946 barrels.
Innis-Trinity:
Higher production peaks were achieved through a combination of
swabbing and well reactivation work during the quarter.
The planned implementation in 1H 2019 of the Innis-Trinity CO
injection pilot with Predator made additional progress with the
submission of the Certificate of Environmental Compliance
documentation in December 2018 and presentation of the technical
submissions to Petrotrin and the successors in Heritage Oil
Company. As operator of the field, Columbus is working with
Predator to help deliver a successful project and views this as a
win/win opportunity for both parties.
Cory Moruga Block - Snowcap Appraisal:
The reactivation of the Snowcap-1 well was initiated in December
2018 following receipt of confirmation of the existing Cory Moruga
License status from the Ministry of Energy and Energy Industries.
The well was placed on pumped production towards the end of
December 2018 following over 3 years of shut-in status. The initial
objective of the reactivation is to establish maximum oil rates
from the well and understand the source of water production
observed during the 2015 flow periods.
The Snowcap-2 well was perforated in late December 2018 to allow
appraisal of two potential hydrocarbon layers downdip from the
Snowcap-1 well. The well is to be placed on pumped production to
confirm the hydrocarbon potential of the well with initial oil
presence indications being established following perforation.
South Erin:
Two non-rig jobs were performed, including one reactivation on
shut-in well ER-102 as the start of the extension of successful
Goudron field stimulation techniques to the other fields in the
portfolio.
Two remedial sand production related rig workovers were
performed in October on the main field production well ER-105
restoring sand-free production from the well to 40 bopd.
Drilling planning of an ER-105 compartment well was progressed
with this to be undertaken in Q1 2019.
Bonasse:
Oil and water separation challenges were overcome during the
quarter through optimisation of chemical treatment of the produced
fluids allowing a number of discrete oil sales in December 2018
with sales receipts being in US Dollars.
A steam perforation wash was conducted on Bonasse-5 during
December as a precursor to evaluating thermal recovery potential in
the field. Bonasse-8 continued to yield intermittent stop-cock
production allowing a rig workover to place this well on pump to be
planned during the upcoming quarter. Infill well drill options were
reviewed by the subsurface team with a view to inclusion in an
upcoming drilling campaign.
Icacos:
The assumption of field management of the Icacos Field and
license was agreed with Primera Oil and Gas Limited following
completion of the Sale and Purchase Agreement on 20 December
2018.
Optimisation work was managed in December on the field in the
form of a wax removal steam wash on Icacos-2. Columbus subsidiary
Leni Trinidad Ltd will assume full responsibility for the field
during 1Q 2019.
HEALTH, SAFETY & ENVIRONMENT ("HSE"):
No Lost Time Incidents were recorded during the quarter on any
of the field operations. The increased wellwork activity, with up
to four workover rigs in simultaneous operation and the challenging
weather conditions which resulted in significant road access
difficulties, were successfully managed by the integrated HSE
team.
Integration of the Columbus and Steeldrum HSE systems was
initiated and is a priority in 2019.
The Certificate of Environmental Compliance submission for the
planned Innis-Trinity CO injection pilot facilities was prepared
and lodged with the Environmental Management Authority in the
quarter.
Preparation for activation of the Columbus owned CESL-1 workover
rig was progressed with mobilisation of the rig to the Goudron
Field to complete the final work that will allow certification of
the rig by the authorities.
SOUTH WEST PENINSULA ("SWP"):
Technical work is continuing to mature optimal drilling
locations for the SWP exploration programme, with commencement of
drilling activities planned for mid-2019 onwards. Drilling is to be
funded from existing cash resources or through partnering with
appropriate third parties. Exploration success in the SWP could be
transformational for the Company, given the known prospectivity
which exists in the SWP and the commercial terms associated with
any discovery.
SPAIN:
In Q4 2018, the Company's Spanish subsidiary, Compañía
Petrolifera de Sedano S.L.U. ("CPS") received notification from the
Spanish Government that it should commence the decommissioning of
the Ayoluengo field. As previously announced, the Company was
expecting the Spanish Government to re-tender the La Lora
Concession and indeed had been waiting for the re-tender process to
commence since January 2017. No reasons were given by the Spanish
Government for the decision not to re-tender the La Lora Concession
and the Company is working with the Spanish authorities on agreeing
a decommissioning plan which it will commence in 2019 using local
staff and expects this decommissioning programme to continue for
some two to four years.
The Company already carries sufficient provision in its accounts
for decommissioning costs. There are various assets on site,
including equipment, and these will be moved to, and utilised in,
the Trinidadian operations or sold to offset any such costs. No
material cash expenditure is expected to be made by the Company in
relation to the decommissioning of the La Lora Concession.
UN-AUDITED Q4 2018 FINANCIAL SUMMARY:
-- Gross Revenues of US$3.23 million achieved (Q3 2018: US$3.85
million) - reduction due to lower average production and lower oil
price achieved over the quarter.
-- Average realised sales price from operations in Q4 2018:
US$57.58/bbl (US$60.90/bbl in Q3 2018) - peaking at US$69.04/bbl in
October 2018.
-- Cashflow positive position maintained from operations
delivering an estimated US$0.37 million after taking account of
field maintenance and well workover campaign during Q4 2018 costing
US$0.77 million.
-- Capex of US$0.18 million incurred in Q4 2018 (Q3 2018:
US$0.17 million). Main cost focus in Q4 2018 has been on field
optimisation and workover activities (see above).
-- M&A costs of US$0.26 million in Q4 2018, including
US$0.23m relating to the BOLT completion process and US$0.03
million as part of the Steeldrum completion process.
-- Successful GBP2.5 million (gross) capital raise completed
following approval for the placing at a General Meeting on 2
November 2018. Net proceeds from placing (after fees) was GBP2.38
million (approximately US$3.0 million). From the capital raise,
US$1.25 million was used in late November 2018 to repay the
outstanding loan to North Energy Capital AS which was inherited as
part of the Steeldrum transaction.
-- Cash balance of US$2.60 million at 31 December 2018 (30
September 2018: US$1.97 million) after full repayment of North
Energy loan in late November 2018 and inclusion of US$0.54 million
for oil sales made in November 2018.
-- US$0.48 million also held as restricted cash at 31 December
2018, these payments made in Q3 & Q4 2018 to address legacy
Performance Bond and abandonment fund requirements in Trinidad.
-- Lind Partners loan position: Loan balance reduced to US$0.40
million at end December 2018 (US$0.48 million at end September
2018) with all monthly repayments made in cash during quarter. Due
to the above-mentioned capital raise, the Company has not
drawn-down any funds from the US$3.25 million Lind Partners
facility (the "2018 Lind Facility"), announced on 13 July 2018
alongside the announcement of the Steeldrum acquisition. The 2018
Lind Facility was established by the Company as a form of
"financial insurance policy" and terminates in early January 2019
if funds are not drawn-down.
M&A ACTIVITIES:
The Company has looked at a number of opportunities, both in
Trinidad and South America, and made a number of formal proposals,
some of which are still under consideration by the relevant
parties. The Company is actively pursuing transactions that are
value accretive for Columbus' shareholders.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Qualified Person's statement:
The information contained in this document has been reviewed and
approved by Stewart Ahmed, Technical Director (Trinidad), for
Columbus Energy Resources plc. Mr Ahmed has a BSc in Mining and
Petroleum Engineering and is a member of the Society of Petroleum
Engineers. Mr Ahmed has over 33 years of relevant experience in the
oil industry.
Contact Information
Columbus Energy Resources plc
Leo Koot / Gordon Stein +44 (0)20 7203 2039
VSA Capital Limited
Financial Adviser and Broker
Andrew Monk / Andrew Raca +44 (0)20 3005 5000
Beaumont Cornish Limited
Nominated Adviser
Roland Cornish / Rosalind Hill Abrahams +44 (0)20 7628 3396
Camarco
Public and Investor Relations
Georgia Edmonds / James Crothers +44 (0)20 3757 4983
Notes to Editors:
Columbus Energy Resources Plc is an oil and gas producer and
explorer focused on onshore Trinidad with the ambition to grow in
South America. The Columbus Energy group has five producing fields,
one appraisal/development project and a highly prospective
exploration portfolio in the South West Peninsula ("SWP"), which
lies in the extreme southwest of Trinidad and consists of stacked
shallow and deep prospects. Columbus is cashflow positive and aims
to create transformational growth by developing its portfolio in a
capital efficient and disciplined manner.
Columbus is guided by the following core values; safe and
sustainable, stronger together, creative excellence, positive
energy, totally trusted and personally responsible.
The Company is led by an experienced Board and senior management
team with supportive shareholders and intends on leveraging its
expertise and experience to build an attractive and diversified
portfolio of assets across South America in order to build an oil
production led South American exploration business.
To find out more, visit www.columbus-erp.com or follow us on
Twitter @Columbus_ERP.
Glossary
"bopd" Barrels of oil per day
"BWPD" barrels of water per day
"LTI" Lost Time Incident
"mmbbl" Million barrels of oil
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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