567220d8-24f0-412e-8c51-b1a8b330421b.pdf
27 January 2016
Key features Q2 FY16
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Production steady: 123 kbbl in the 3 months to 31 December, vs previous quarter of 125 kbbl and up 2% on pcp of 118 kbbl
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Revenue of $7.0 million: down from $7.6 million in previous quarter due to lower average oil price. Average oil price of A$58.60/bbl vs $62.54/bbl in September quarter
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Operating costs reduced further: direct operating costs of A$29.68/bbl, reduced 10% on previous quarter
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Strong hedge book: hedging provides average floor price of A$68.50/bbl for approximately 50% FY16 second half production
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Sole Gas Project on schedule and within budget: FEED proceeding with costs at 81% of budget and on track for September quarter 2016 FID
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Sole Contingent Resource upgrade: 2C Contingent Resources upgraded 14%
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Financial position: cash and investments of $30.3 million at 31 December
Managing Director's comments
"The December quarter confirms the benefit of our focus on low cost production which can retain healthy margins notwithstanding the current low oil prices. We have a strong hedge book and have been successful with significant and ongoing reductions to capital and overhead expenditure. Our clear focus on containing costs whilst delivering key projects will be maintained.
"Cooper Energy is set for an intense six months as we progress the development of the first of our cost competitive Gippsland Basin Gas Projects - ideally located to supply eastern Australia gas customers.
"The Sole Gas Project can transform the company and is on schedule and below budget for FID in the September quarter of this year. Our decision to open a data room for the Gippsland Basin Gas Hub has generated interest from a range of domestic and international companies".
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Further comment and information:
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David Maxwell +61 8 8100 4900
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Don Murchland +61 439 300 932
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Managing Director
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Investor Relations
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Overview
The financial results and position at 31 December include higher year to date production and 36% lower sales revenue year to date due to lower oil prices.
The oil price impact is being managed through a combination of hedging, reduced operating costs per barrel, reduced capital expenditure and actions that have reduced the monthly Australian G & A cash expenditure run rate by approximately 10% compared with the commencement of the financial year.
December quarter
Sales revenue for the 3 months to 31 December 2015 (the December quarter) was $7.0 million compared with $7.6 million in the previous quarter and $8.8 million in the December quarter 2014.
The lower quarterly revenue is mainly due to lower prices, with the September quarter average oil price of A$58.60/bbl being 6% lower than the September quarter average of A$62.54/bbl and 25% lower than the average of A$78.36/bbl in the previous corresponding period (pcp). The December quarter revenue and average oil price are inclusive of hedging gains of $0.5 million.
Direct production costs, including transport and royalties, of A$29.68/bbl were 10% lower than the previous quarter's comparative of A$33.06/bbl and the pcp (A$33.07/bbl).
Sales volume and production for the December quarter was 2% lower than the previous quarter but higher than the pcp. Production for the quarter was 123.1 kbbl compared with 125.0 kbbls in the September quarter and 118.5 kbbl during the 2014 December quarter.
Year to date
Year to date results feature increased production and reduced operating costs (including royalties), offset by lower sales revenue due to lower oil prices.
Total sales revenue for the first two quarters of FY16 was $14.6 million compared with $23.0 million in the previous corresponding period (inclusive of hedging gains of $0.8 million). The average oil price received for the year to date of A$60.59/bbl was 38% lower than the previous year's comparative of A$97.58/bbl.
In comparison, year to date direct operating costs of A$31.37/bbl were 19% lower than the comparative of A$38.63/bbl. The reduction in operating costs is mainly due to lower royalties on Cooper Basin output and increased production in Indonesia.
Capital expenditure
Capital expenditure for the December quarter was $5.2 million, down from $10.1 million in the September quarter. The movement between periods is due to development expenditure in Indonesia during the September quarter.
Year to date capital expenditure of $15.3 million is 42% higher than the 2014 first half comparative of
$10.8 million. The increase is attributable to expenditure developing the Sole Gas Project and drilling in the Sukananti KSO. An update on the lower capital expenditure outlook is provided under the heading 'Expenditure Resetting' following.
Cash
Cash at 31 December of $28.9 million compares to the quarter's opening balance of $36.1 million. Total cash and investments available for sale at 31 December was $30.3 million compared with $37.6 million at the beginning of the quarter.
Expenditure resetting
Rigorous review and management is yielding significant reductions to expenditure levels, while maintaining the resourcing necessary for delivery of the company's growth projects.
Actions taken during the December quarter reduced Australian general and administration cash costs by approximately 10% on an annualised basis. Further reductions will be targeted over the balance of the year without compromising the delivery of the transformational gas projects.
Capital expenditure for FY16 is now expected to range between $32 million to $34 million, which is between 13% and 18% lower than original guidance of $39 million. The large majority of FY16 capital expenditure relates to the Sole Gas Project in the Gippsland Basin. As reported under the heading 'Production, Exploration & Development', this project is progressing ahead of schedule and within budget.
Hedging
Cooper Energy uses hedging to protect against downside oil price scenarios while retaining partial exposure to higher oil prices. The company realised hedging gains of $0.5 million from its zero cost collar options during the quarter. Total year to date hedging gains are $0.8 million.
The company has extended the tenure and volume of its hedge book during the quarter. Hedging in place at 31 December is summarised in the following table.
The effect of the positions taken is that approximately 50% of the company's second half production is hedged at an average floor price of A$68.50/bbl.
The table below summarises the hedging in place as at 30 September 2015:
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Hedge arrangements (bbl remaining):
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H2 FY16
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H1 FY17
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H2 FY17
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Total
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A$80.00 - 90.57 zero cost collar options
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60,000
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60,000
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A$57.00 - A$69.70 zero cost collar options
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60,000
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60,000
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30,000
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150,000
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Total
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120,000
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60,000
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30,000
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210,000
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Quarter Ending
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Year to Date
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Description
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Units
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31 Dec
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30-Sep
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31 Dec
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31 Dec
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2015 1
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2015 2
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Change
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2015 1
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2014
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Change
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Production and Sales
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Oil produced
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kbbl
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123.1
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125.0
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-2%
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248.0
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246.0
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1%
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Oil sold / delivered for sale
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kbbl
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119.5
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121.5
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-2%
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241.0
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235.7
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2%
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Sales revenue3
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$ million
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7.0
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7.6
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-8%
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14.6
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23.0
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-37%
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Average oil price3
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A$/bbl
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58.60
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62.54
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-6%
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60.59
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97.58
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-38%
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Direct operating cost4
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A$/bbl
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29.68
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33.06
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-10%
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31.37
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38.63
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- 19%
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Capital Expenditure
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Exploration and Appraisal
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$ million
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5.2
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6.4
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-19%
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11.6
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6.5
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78%
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Development and Fixed Assets
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$ million
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-
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3.7
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-100%
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3.7
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4.3
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-14%
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Total Capital Expenditure
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5.2
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10.1
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-49%
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15.3
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10.8
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42%
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Financial Assets
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Cash and term deposits
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$ million
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28.9
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36.1
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-20%
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28.9
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37.5
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-23%
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Investments5
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$ million
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1.4
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1.5
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-7%
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1.4
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15.8
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-91%
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Total Financial Assets
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30.3
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37.6
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-19%
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30.3
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53.3
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-43%
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Capital
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Issued shares
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million
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333.7
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332.1
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1%
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332.1
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329.2
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1%
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Performance Rights
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million
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20.5
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17.0
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21%
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17.0
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19.5
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5%
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Share appreciation rights
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million
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22.3
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100%
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22.3
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-
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100%
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Notes:
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Current quarter includes preliminary production figures for PEL 92 and PEL 93 in the Cooper Basin
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Prior periods have been updated for final reconciled production figures
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Includes realised hedge gains of $0.5 million for the December quarter and $0.8 million year to date and end of period oil price adjustments on oil delivered for sale but not invoiced
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Direct operating cost includes production, transport and royalties
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Investments shown at fair value at the reporting date shown