OilVoice - PA Resources AB Report Announces Third Quarter Results

PA Resources AB Report Announces Third Quarter Results

Wednesday, October 28, 2009

Summary third quarter 2009
• Total revenue for the Group amounted to SEK 696.5 million, compared with SEK 680.4 million in the same period a year ago.
• Production was started during the quarter at the Azurite field in the Republic of Congo, and the Group's total production amounted to 1,244,600 barrels, compared with 819,900 barrels during the second quarter of 2009.
• EBITDA amounted to SEK 499.0 million (556.3) and the EBITDA margin was 71.6% (81.8) during the quarter.
• Operating profit amounted to SEK 247.3 million (455.0), giving an operating margin of 35.5% (66.9).
• Profit before tax was SEK 114.9 million (224.5). Earnings per share before dilution amounted to SEK 0.16 (0.40), and earnings per share after dilution were SEK 0.16 (0.40).
• Total capital expenditures amounted to SEK 26.1 million, compared with SEK 1,048.1 million during the same period a year ago. The lower rate of investment is due to the fact that most of the investments ahead of the production start at the Azurite field have been completed.
• The debt/equity ratio has fallen to 69.9% (104.5) and was at the same time lower than at the start of the year after expenditures of SEK 1,736 million during the period January-September.
• Approximately 15% of the convertible bonds were converted to shares in September, which entailed that the original debt amount totalling SEK 1,164 million decreased by nominal SEK 179.8 million. The equity/assets ratio improved to 48.0% (39.7).
• Oil discovery has been confirmed at the Mer Profond Sud licence offshore the Republic of Congo and the development of the Aseng field in Equatorial Guinea has been initiated.

CEO's comments
Our goal for 2009 is increased production. The Azurite field in the Republic of Congo came on stream in mid-August and entails that PA Resources now has production in two regions. The production figures for the third quarter show that the Azurite field is already making a significant contribution, which is increasing in pace with the drilling and operation of additional wells. In early 2010 the field will reach its maximum production capacity of 40,000 barrels per day, of which PA Resources' share is 14,000 barrels gross.

PA Resources' goal is to achieve greater long-term production supply. Development of Block I in Equatorial Guinea has been initiated, where the Aseng oil field is the first development project. In the Republic of Congo, a new oil discovery was made at the Turquoise prospect at the Mer Profond Sud licence. During the quarter, oil was confirmed via an appraisal well, and evaluation of the prospect's promising potential continues.

The price of oil remained stable also during the third quarter, between USD 60 and 70 per barrel. Analysts believe that demand for oil will be rising both this year and next year, which is earlier than originally estimated and can be credited to a faster economic recovery.

Our rate of investment is considerably lower than in previous quarters as well as in the corresponding period in
2008. This, combined with a higher oil price and increasing production, makes PA Resources well positioned for the final quarter of 2009 and next year.

Ulrik Jansson, President and CEO, PA Resources AB

Operational review
PA Resources AB's business concept is to acquire, develop, exploit and divest oil and gas assets and to conduct exploration to find new reserves. The Group has operations in Tunisia, the Republic of Congo, Equatorial Guinea, the UK, Denmark, the Netherlands and Greenland.

Production and sales
Comparison figures for 2008 are exclusive of the divested Norwegian operations.

Third quarter 2009 (1 July–30 September)
Production was started at the Azurite field in the Republic of Congo in mid-August. In addition, production is taking place at six oil fields in Tunisia. Total oil production during the third quarter was 1,244,600 barrels (1,072,700). Average production was 13,500 barrels per day (11,700). At the end of the period, daily production was in excess of 15,000 barrels per day.

A total of 730,600 barrels (751,100) of oil were sold during the quarter at an average price of USD 65 per barrel. All sales consisted of oil produced in Tunisia. No sales were made in the Republic of Congo during the quarter.

Nine-month period 2009 (1 January–30 September)
Total oil production for the first nine months was 2,847,500 barrels (3,026,400) of oil. Average production was 10,400 barrels per day (11,000). A total of 2,186,000 barrels (2,730,300) of oil were sold at an average price of USD 55 (109) per barrel.

Production forecast
The company’s previously communicated forecast is that average production is expected to amount to between 11,000 and 14,000 barrels of oil per day in 2009. The final outcome is expected to be between 11,000 and 12,000 barrels per day.

North Africa Region Tunisia
PA Resources has conducted operations in Tunisia since 1998 and is one of the country's largest oil producers. The Group has interests in six production licences and four exploration licences.

Key events during the quarter

Production and maintenance at the Didon field
During the period, the producing wells at the Didon field maintained a satisfactory level of production. A new helicopter deck was installed on the platform as well as additional hydrocyclones, which improve the capacity to clean the volume of water that is pumped up along with the oil.

Preparations ahead of drilling at the Jelma licence
At the Jelma licence a 2D seismic study was acquired during the quarter. This new data will be processed and evaluated along with previously acquired data before any selection is made of prospects for the drilling that is planned for the third quarter of 2010.

Seismic studies at Douleb & Semmama
At the Douleb field, a 3D study has been carried out, and analyses and updates of maps are under way. At the Semmama field, a 2D seismic study has been concluded, and the evaluation has been started. A new development plan will be drafted based on the results of these seismic studies.

Planned activities

Continued capacity improvements at the Didon field
Additional installations of measurement equipment, hydrocyclones and other technical equipment will take place on the storage vessel during the fourth quarter. These installations, together with the remote-controlled platform, will reduce the field's operating costs.

Seismic study at the Makthar licence
During the second quarter of 2009 the Makthar licence was renewed for another three years, entailing an undertaking to collect 100 kilometres of 2D seismic data and to drill an exploration well. The seismic study has been brought forward to 2010.

West Africa Region Republic of Congo (Brazzaville) and Equatorial Guinea

PA Resources owns interests in three licences offshore the Republic of Congo (Brazzaville), of which one of the licences, the Azurite field, in now in production. PA Resources also owns interests in two licences in the Gulf of Guinea offshore Equatorial Guinea, where the development of the Aseng field in Block I has been started.

Key events during the period

Production at the Azurite field in the Republic of Congo
The Azurite field offshore the Republic of Congo has been in production since mid-August. The production level of the first producing well has been higher than anticipated.

Production will increase gradually as additional wells are drilled and come on stream toward the end of the year and during the coming year. The field's maximum production capacity is estimated at 40,000 barrels per day, of which PA Resources' share is 14,000 barrels per day gross. This volume is expected to be reached early in 2010.

Evaluation of oil discovery at MPS, Republic of Congo
In mid-July oil was discovered at the Turquoise Marine prospect at the Mer Profond Sud licence offshore the Republic of Congo. The well was drilled at 1,610 metres underwater at a total depth of 3,675 metres and encountered in excess of 41 metres of net oil pay. The Turquoise Marine discovery is located approximately 28 kilometres from the Azurite field.

During the third quarter the Turquoise Marine-2 appraisal well was drilled with the Pride South Pacific rig, and oil was confirmed, but not of a sufficient commercial volume. The operator Murphy and PA Resources will continue to evaluate the results and integrate these with the overall analysis of the Turquoise area. The current plan is to drill an additional two appraisal wells at the Turquoise area as well as an exploration well at the Cobalt structure (west of Turquoise) in 2010. The development scenarios are being evaluated based on the existing infrastructure at the Azurite field.

Development of the Aseng field at Block I, Eq. Guinea
The Plan of Development for the Aseng field (formerly Benita) was sanctioned at the end of July by the authorities in Equatorial Guinea. Production will take place utilising an FPSO vessel, which in addition to its use at the Aseng field, will also be used for production of hydrocarbons at the entire Block I.

The vessel has a process capacity of 120,000 barrels of liquid per day, including 80,000 barrels of oil and an injection capacity of up to 150,000 barrels of water per day.

The vessel can handle 170 million standard cubic feet of gas per day. The first oil from the Aseng field is expected in mid-2012.

The next development project according to plan is the Belinda field, which will be tied to the Aseng FPSO.

Planned activities

Additional production wells at the Azurite field, Rep. Congo
Drilling and the start of operations of the second well at the Azurite field, which is a water injector, are in progress. The plan is that the third well will also be a water injector and that the fourth well will be the second production well at the field. A total of nine wells are planned at the field.

Exploration drilling at Marine XIV, Republic of Congo
The partner group is waiting for results from the second pre-salt drilling at the near-lying Marine XI licence. At present an exploration well is planned for drilling at the Marine XIV licence (at no cost to PA Resources), and depending on the results, an additional well may come into consideration.

Exploration drilling in Block I, Equatorial Guinea
The plan is to drill an additional two exploration wells in Block I in 2010. The objective is to reach the deeper and proven oil-bearing Miocene structure that was encountered in the previously drilled Diega well.

North Sea Region UK, Denmark, Netherlands and Greenland

PA Resources owns interests in 13 exploration licences, of which five are located on the British continental shelf, four are offshore the Danish coast, three are in the Netherlands, and one is offshore western Greenland. The Group is the operator of all the licences except for the licences in the Netherlands and for Block 9/06 and Block 9/95 in Denmark.

Important events during the quarter

Farmout of shares in Licence P1529, UK
PA Resources UK has signed an agreement on the farmout of a 48% interest in Licence P1529 to Venture North Sea Gas Limited. The licence covers Block 43/9, 43/10 and 44/6 in the brittish part of the southern North Sea. Venture has also acquired a 12% working interest from the licence partner, Spyker Energy SAS, entailing that PA Resources will retain 32% in the licence and Spyker 8%.

Under the terms of the farmout agreement, Venture will pay 100% of the costs of a 3D seismic survey covering 250 square kilometres. After the survey is fully completed, PA Resources will transfer the operatorship to Venture. The transaction is subject to approval of the Secretary of State for Energy and Climate Change in the UK.

PA Resources UK achieves environmental certification
PA Resources UK Limited has achieved certification according to ISO 14001:2004 (E), the international standard for environmental management. The certification is a demonstration that PA Resources UK Limited has an environmental management system that meets the requirements of the standard. During the certification process, the independent accreditation bureau URS Ltd performed a thorough audit of the company's environmental management system as applied to both office-based activities and exploration operations at the company's oil and gas licences.

3D survey at Licence P1529, UK
In late September a 3D seismic study was started of parts of Licence P1519 (Blocks 43/9, 43/10, 44/6). PA Resources is the operator for the shooting of the seismic that was completed in mid-October 2009.

New licence awarded in the Netherlands
In early July PA Resources was awarded an onshore exploration licence in the Netherlands, called Schagen. PA Resources holds a 50% interest in the licence. The partner and operator for the licence is Smart Energy Solutions B.V. (SES). Schagen is an onshore exploration licence that extends into Dutch territorial water and covers a total area of 355.5 square kilometres. The licence has a four-year duration and took effect in June 2009. The licence is covered by an existing 3D seismic survey and involves an undertaking to drill one exploration well.

Planned activities

Evaluation of seismic data in the UK
In the UK, processing of 3D data that was acquired last year for Licences P1318, P1319 and P1336 is nearing completion. A decision on a continued work programme will be made during the fourth quarter of 2009.