Microsoft Word - FY16 - Q1 - AWE Quarterly Report - FINAL
Issued by AWE Limited on 29 October 2015
Quarterly Report
For the 3 months to 30 September 2015
HIGHLIGHTS
PRODUCTION AND DEVELOPMENT
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Total quarterly production of 1.38 mmboe, down 3% on the previous quarter
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BassGas production up 23% over previous quarter, after Yolla-5 and Yolla-6 development wells brought onto production
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Sugarloaf 2P Reserves upgraded to 47.8 mmboe at 30 June 2015 following independent review and further drilling of the Austin Chalk (Sugarloaf 2P plus 2C now 65 mmboe net to AWE)
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Net 2P Reserves of 114.4 mmboe, more than 22 years of production at current rates, and 2C Resources of 121.9 mmboe, with the ability to convert the majority of these assets to 2P within the short to medium term
EXPLORATION AND APPRAISAL
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Combined gross 2P Reserves and 2C Resources for Waitsia, Senecio, Synaphea and Irwin increased to 721 Bcf of gas (67 mmboe net to AWE)
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Excellent conventional flow test results from Waitsia-1 recorded in October 2015 with a combined flow rate exceeding 50 mmscf/d, comprising 24.7 mmscf/d from the High Cliff Sandstone formation and
25.7 mmscf/d from the Kingia formation
FINANCIAL AND CORPORATE
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Sales revenue of $59.4 million, down 27% on the previous quarter
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Average realised oil and condensate price for the quarter was A$60.13/bbl
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Oil price hedging program implemented to underpin cash flow in FY16
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Net debt of $156 million, comprising cash of $54 million and drawn debt of $210 million, at 30 September 2015 with $190 million of corporate debt facility undrawn
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No Lost Time Injuries or reportable environmental incidents during the quarter
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Agreement to sell 57.5% working interest in the Cliff Head oil field announced in October 2015
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MD and CEO, Bruce Clement, to step down in CY 2016 in line with succession planning strategy
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QUARTERLY PRODUCTION BY PRODUCT '000 BOE
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QUARTERLY SALES REVENUE BY PRODUCT $'000
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OIL
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320
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18,647
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CONDENSATE
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234
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17,349
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LPG
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133
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3,479
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GAS
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698
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19,959
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TOTAL
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1,384
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59,434
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Numbers may not add due to rounding
AWE LIMITED LEVEL 16, 40 MOUNT STREET NORTH SYDNEY NSW 2060 AUSTRALIA
P +61 2 8912 8000 F +61 2 9460 0176 E [email protected] ABN 70 077 897 440 www.awexplore.com
MANAGING DIRECTOR'S COMMENTS
The first quarter of the 2015-16 financial year was positive for AWE, with good progress made on major development projects, cost reduction initiatives, safety and environment.
The major highlight so far in this financial year has been the outstanding success of the appraisal program in the north Perth Basin, Western Australia. After evaluating the results from the Waitsia-2 appraisal well in July and August, gross combined 2P Reserves and 2C Resources for the Waitsia, Senecio, Synaphea and Irwin gas fields was increased to 721 Bcf.
More recently, flow testing at Waitsia-1 in October has achieved a combined gas flow rate greater than
50 mmscf/d from the conventional Kingia and High Cliff Sandstone formations. These results are exceptional and will enable us to reduce the number of wells, and the development costs, for the full field development.
AWE has started this financial year with a very strong book of Reserves and Resources. We have net 2P Reserves of 114.4 mmboe, more than 22 years of production at current rates, and 2C Resources of
-
mmboe, with the ability to convert the majority of these assets to 2P within the short to medium term.
One of the biggest increases in Reserves and Resources came from the Sugarloaf AMI, where combined 2P Reserves and 2C Resources now total 65 mmboe net to AWE (at 30 June 2015). The Operator is currently targeting further cost reductions to bring total costs per well under US$5 million.
Production of 1.38 mmboe was down slightly on the previous quarter, which was boosted by the initial flush production from the Pateke-4H well at Tui. Notably, BassGas production was up 23% following the tie-in of the Yolla-5 and 6 development wells, and Sugarloaf production was up 7% after 20 wells (gross) were brought onto production.
In Asia, AWE's two development projects in Indonesia continued to move forward, with FEED work completed for both the AAL oil project and the Lengo gas project. In October, we drilled our second exploration well in China, although no hydrocarbon shows were recorded.
Pleasingly, safety performance throughout the quarter improved and no Lost Time Injuries (LTIs) were recorded and there were no reportable environmental incidents.
The company remains very focused on implementing cost reduction initiatives within a disciplined financial framework. Field opex reduced by 21% during the quarter and our total investment expenditure (exploration and development) reduced by 29%. We are reducing staffing levels across our Sydney and New Plymouth offices by approximately 30% and we will close our Jakarta project office by the end of the year, replacing it with a representative office.
The divestment of non-core assets is proceeding and we have agreed to sell our 57.5% interest in the Cliff Head oil project to Elixir Petroleum, conditional on the purchaser securing acquisition funding and JV approval. We also took steps to underpin future cash flows and put in place an oil hedging program from October 2015 through to June 2016. This will provide certainty of cash flow as we move forward with the development of our growth projects.
Low oil prices continue to present challenges to our industry. AWE's clear strategy and disciplined financial management has us well positioned to manage volatile market conditions and remain focused on delivering our core growth projects.
Bruce Clement
Managing Director and CEO
FINANCIAL & CORPORATE
FINANCIAL
September quarter production was 1.38 mmboe, 3% lower than the June quarter. Production increases at BassGas, up 23%, and Sugarloaf, up 7%, largely offset the expected decline in production from Tui's Pateke- 4H well. Liquids comprised 50% of quarterly production with gas providing 50%.
Total sales revenue for the September quarter was $59 million, down 27% from the $81 million recorded in the June quarter due to only one lifting occurring at Tui and significantly lower oil prices. The average realised price for oil and condensate was A$60.13/bbl.
Field opex was reduced by 21% to $33 million and Field EBITDAX for the period was $27 million, down 34% from the previous quarter.
Development expenditure for the quarter was $52 million, down 26% from the previous quarter, and exploration expenditure was $8 million, down 40%. Taken together, total development and exploration expenditure was reduced by 29% and reflects AWE's commitment to adapt to the low oil price conditions.
During the quarter, AWE implemented an oil price hedging program to underpin cash flow:
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537,000 barrels of oil hedged for the 9 months from October 2015 to June 2016 at a weighted average WTI price of US$46.65/barrel in relation to the Sugarloaf asset; and
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718,000 barrels of oil hedged for the 9 months from October 2015 to June 2016 at a weighted average Brent price of US$50.85/barrel in relation to Australian and New Zealand production assets.
At the end of the September quarter, AWE's financial position remained sound with cash of $54 million, $210 million of drawn debt and undrawn facilities of $190 million. Net debt was $156 million.
FINANCIAL HIGHLIGHTS 3 months to
Sept 2015
3 months to
June 2015
3 months to
Sept 2014
Exploration expenditure $'000 $'000 $'000
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South East Australia
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291
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(610)
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1,712
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Western Australia
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1,311
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12,144
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8,082
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New Zealand
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(503)
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(185)
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4,629
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Indonesia
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827
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9151
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2,403
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Yemen
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(387)
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34
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324
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China
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6,292
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976
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13,070
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Other
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391
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421
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1,387
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Total
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8,222
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13,6951
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31,609
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Development expenditure
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3 months to
Sept 2015
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3 months to
June 2015
$'000
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3 months to
Sept 2014
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$'000
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$'000
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South East Australia
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23,483
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29,4051
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5,091
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Western Australia
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5,857
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855
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166
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New Zealand
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(2,425)
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519
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2,323
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USA
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20,011
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34,432
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28,881
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Indonesia
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5,128
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5,5321
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5,348
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Total
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52,054
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70,7431
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41,810
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1. Includes adjustment from previous quarter.
Note: Financial highlights are preliminary and unaudited. Numbers may not add due to rounding.
FINANCIAL HIGHLIGHTS (continued)
$ million $ million $ million
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Sales Revenue Field Opex
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59
33
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81
41
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85
32
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Field EBITDAX
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27
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41
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52
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Note: Financial highlights are preliminary and unaudited. Numbers may not add due to rounding.
CORPORATE
Dr Vijoleta Braach-Maksvytis announced her resignation from the board of directors effective at the close of the 2015 Annual General Meeting after serving since October 2010. Dr Braach-Maksvytis chaired the company's People Committee and will leave her position to pursue other business interests.
The AWE Limited Annual General Meeting for shareholders is being held at the Museum of Sydney on Friday, 20 November, 2015. The Notice of Meeting has been distributed and further details are available on the company's website at www.awexplore.com.
In line with AWE's succession planning strategy, Mr. Bruce Clement will step down as Managing Director and Chief Executive Officer in 2016 after more than five years in the role. The company has commenced a search for a new MD and CEO.
In the September quarter, AWE completed the sale of its 19.25% interest of Block 7 in the Shabwa Basin, Yemen to Petsec Energy for nominal consideration.
AWE Limited has also agreed to sell its 57.5% working interest in the Cliff Head oil field to Elixir Petroleum Limited for $1 million upfront and up to $9 million in contingent payments over the next five years. The effective date is 1 October 2015 and Elixir has an exclusivity period to 30 November 2015 to conclude its due diligence on the project, with an option to extend that period to 24 December 2015 on payment of a 10% non- refundable deposit. The sale is conditional on the purchaser securing funding for the acquisition and JV approval.
PRODUCTION & DEVELOPMENT
SOUTH EAST AUSTRALIA
BassGas Project (35%)
Gross production for the September quarter was up 23% from the previous quarter and comprised 4.05 PJ of gas, 138,500 barrels of condensate and 11,800 tonnes of LPG. The average gross daily rate for the quarter was approximately 44 TJ/day. AWE's share of production was approximately 1.41 PJ of gas, 48,000 barrels of condensate and 4,100 tonnes of LPG.
The Yolla-5 and Yolla -6 development wells were brought online during the quarter and, when co-mingled with Yolla-4, production regularly exceeded 60 TJ/d. Demobilisation of the West Telesto jack-up drilling rig, used to drill Yolla-5 and 6, was completed in October 2015.
The final stage of the Mid Life Enhancement Project (MLE), the hook-up and commissioning of the gas compression and condensate pumping modules, is planned to occur over the next two financial years.
Following the Operator's preliminary reassessment of new data obtained during the drilling program, AWE reduced its 2P Reserves for the Yolla field by 5.5 mmboe to 13.4 mmboe at 30 June 2015.
Casino Gas Project (25%)
Gross quarterly production for the Casino Gas Project remained steady, quarter on quarter, with approximately 5.8 PJ of sales gas and 3,600 barrels of condensate. The average gross daily rate for the quarter was approximately 63 TJ/day. AWE's share of production was approximately 1.4 PJ of sales gas and