OilVoice - Addax Petroleum Announces Second Quarter 2007 Results

Addax Petroleum Announces Second Quarter 2007 Results

Tuesday, August 07, 2007

• Funds Flow From Operations increased by 46 per cent and net income increased by 74 per cent
• Working interest gross oil production increased by 54 per cent, to an average of 123,000 barrels per day
• Continued exploration success offshore Nigeria and step-out appraisal success at Taq Taq

Addax Petroleum Corporation has announced its financial and operational results for the quarter ended June 30, 2007. The financial results are prepared in accordance with Canadian GAAP and the reporting currency is US dollars.

CEO’s Comment
Commenting today, Addax Petroleum’s President and Chief Executive Officer, Jean Claude Gandur, said: “Once again we have delivered strong and solid quarterly results. I am delighted to report further production growth which, together with good cost discipline, enables us to continue delivering strong financial and operational performance. We believe that we have excellent reinvestment opportunities, demonstrated in the quarter by our exploration successes offshore Nigeria and step-out appraisal success at Taq Taq. We continue to build a platform for growth for Addax Petroleum. During the quarter, we increased our capital base through a well-received convertible bond issue and completed our secondary listing on the London Stock Exchange which I expect to be an important contributor to our objective of maximising shareholder value.”

Selected Financial Highlights

• Petroleum sales before royalties in the second quarter of 2007 amounted to $753 million, an increase of 44 per cent over petroleum sales before royalties of $523 million in the second quarter of 2006. The growth in petroleum sales before royalties arose predominantly from increased petroleum sales volumes as the average crude oil sales price increased slightly by 1 per cent to $68.21 per barrel (/bbl) as compared to $67.85/bbl realized in the corresponding period in 2006.
• Net income in the second quarter of 2007 was $101 million, an increase of 74 per cent over net income of $58 million in the second quarter of 2006. Net income per share increased by 59 per cent to $0.65 per share (basic) in the second quarter of 2007 compared to $0.41 per share (basic) in the corresponding period in 2006.
• Funds Flow From Operations for the second quarter of 2007 increased 46 per cent to $287 million compared to $196 million for the corresponding period in 2006. Funds Flow From Operations per share increased by 32 per cent to $1.85 per share (basic) in the second quarter of 2007 compared to $1.40 per share (basic) in the corresponding quarter in 2006.
• In May, the Corporation successfully issued $300 million of senior unsecured convertible bonds due in 2012.
• Also in May, the Corporation was introduced to the Official List and to trading on the Main Market of the London Stock Exchange.

Selected Operational Highlights

• Average working interest gross oil production in the second quarter of 2007 was 123.0 thousand barrels per day (Mbbl/d), an increase of 54 per cent over second quarter 2006 average oil production of 79.9 Mbbl/d. Nigeria production increased by 30 percent to 104.1 Mbbl/d compared to 79.9 Mbbl/d in the corresponding period in 2006. Gabon contributed 18.9 Mbbl/d in the second quarter of 2007 (no contribution in the second quarter of 2006). Total oil production during the quarter was 11.2 MMbbl, as compared to oil sales volumes of 11.0 MMbbl during the quarter.
• Continued exploration success in OML137 offshore Nigeria, where oil and gas discoveries were made at Ofrima North and, at the start of the third quarter, Udele West, and step-out appraisal success at the Taq Taq field in the Kurdistan Region of Iraq.
• Capital expenditures, excluding new business acquisition considerations, farm-in fees and license signature fees, increased by 52 per cent to $261 million in the second quarter of 2007, up from $172 million in the second quarter of 2006. Development capital expenditures totaled $174 million in the second quarter of 2007, an increase of 28 per cent over second quarter 2006 development capital expenditure of $136 million. Exploration and appraisal capital expenditures increased to $87 million in the second quarter of 2007 from $36 million in the second quarter of 2006.
• Throughout the second quarter of 2007, the Corporation directly operated six drilling rigs: three offshore Nigeria, one onshore Nigeria and two onshore Gabon, and through its joint venture company, Taq Taq Operating Company, one further drilling rig in the Kurdistan Region of Iraq.

Development project highlights in the second quarter of 2007 include:

Nigeria
• four new development wells were drilled, all on OML123 and all four new wells were placed on production during the quarter;
• surface facilities development was ongoing at the Oron and Adanga fields on OML123.

Gabon
• two development wells were drilled on the Corporation’s onshore license areas;
• a total of three new wells were placed on production, all onshore, comprising the two development wells drilled in the quarter and one previously drilled well;
• surface facilities development was ongoing at the onshore Maghena and offshore Etame license areas.

Exploration and appraisal activity and highlights in the second quarter of 2007 include:
Gulf of Guinea Shallow Water (Nigeria and Cameroon)
• two exploration wells were drilled offshore Nigeria in the quarter, both on OML137 resulting in the two discoveries, Ofrima North and Udele West, the latter at the start of the third quarter;
• as reported on July 12, 2007, the Ofrima-2 exploration well, drilled on the Ofrima North structure, discovered a 140 feet gross oil bearing interval which, based on static pressure data measurements, is anticipated to be a light oil of approximately 39 degrees API, and three gas bearing intervals with individual gross gas columns of 29, 43 and 158 feet. A second exploration well, Udele-2, discovered seven gas bearing intervals with individual gross gas columns of between 41 and 113 feet, 542 feet in aggregate. Both discovery wells were suspended and the Corporation intends to re-enter each well to carry out flow tests over selected intervals later in the year.
• in Cameroon, the Corporation recently contracted for a drilling rig to start exploration drilling on the Ngosso license area later in 2007.

Gabon
• the Corporation has started a 3D development and appraisal seismic survey over the southern portion of the Maghena license area. The Corporation is working to extend seismic acquisition to cover the southern portion of the adjacent Awoun license area, operated by Shell Gabon and in which the Corporation has a 40 per cent working interest. The Corporation anticipates that the 3D survey, once acquired, processed and interpreted, will provide valuable information in the further development, appraisal and exploration of this area which contains the Obangue, Koula and Damier fields;
• as reported on April 10, 2007, the Corporation acquired a 50 per cent interest in and operatorship of the Epaemeno exploration license area, which lies immediately north of the Corporation’s Maghena and Awoun license areas onshore Gabon. The Epaemeno acquisition is subject to the consent of the government of Gabon.

Gulf of Guinea Deep Water (Nigeria and JDZ)
• technical studies are ongoing to evaluate exploration prospect drilling locations.

Kurdistan Region of Iraq
• as reported on June 4, 2007, a successful step-out appraisal well, TT-06, was drilled and tested at an aggregate rate of 18.9 Mbbl/d from three separate intervals. The TT-06 well was drilled approximately 3.6 kilometres north-northwest of the crestally-located TT-05 well;
• during the second quarter, the TT-07 well was spudded approximately 2.2 kilometres southeast of the TT-05 well location. Presently, the TT-07 well is being prepared for flow testing, the results of which will be announced following the completion of testing;
• recently, the TT-08 well was spudded approximately 1.1 kilometers north of the TT-05 well location with the objective of appraising the flank of the field;
• a 2D seismic survey commenced over the Kewa Chermila area and was recently concluded, following which a 3D seismic survey was started over the Taq Taq field.

Outlook

The Corporation’s outlook for 2007 is in line with guidance provided to date. Addax Petroleum expects average working interest gross oil production to approximate 127 to 133 Mbbl/d from its Nigeria and Gabon operations in 2007. Capital expenditure in 2007 is forecast to total $1,150 million, a decrease from $1,178 million, with $340 million allocated for exploration and $810 million for development expenditures. Forecast capital expenditures are allocated as follows: $750 million is forecast to be spent on Nigerian producing assets, $30 million to be spent on Nigerian non-producing assets, and $240 million to be spent on Gabon producing assets, $90 million on Taq Taq and $40 million on other assets, primarily on JDZ and Cameroon.