OilVoice - PA Resources Reports 2008 Results

PA Resources Reports 2008 Results

Wednesday, April 01, 2009

PA Resources AB operates in Tunisia, United Kingdom, Denmark, Greenland, Netherlands, Equatorial Guinea and the Republic of Congo (Brazzaville). Up to December 31, 2008, the Group also had operations in Norway.

Summary fourth quarter 2008

• The Norwegian subsidiary was divested in December 2008 for a sales price of USD 220 million, which generates a capital gain for the Group of SEK 686 million. The Norwegian operation was deconsolidated December 31 and is classified as discontinued operations, reported on a separate line. The subsidiary’s revenues and costs are not included below in the reported revenues and operating profit for the fourth quarter and full year 2008.
• Group revenue referring to sales of crude oil assignable to the continuing operations decreased during the fourth quarter and amounted to SEK 370.9 (755.4) million. The decrease is due to lower production and considerably lower oil prices.
• Profit for the period amounted to SEK 387.3 (261.5) million.
• Earnings per share before dilution amounted to SEK 2.66 (1.80) and earnings per share after dilution became SEK 2.66 (1.79).
• Total equity amounted to SEK 4.7 (3.3) billion, an increase by SEK 1.4 billion.
• The issue of convertibles was completed and fully subscribed and has in January contributed with a nominal amount of SEK 1,164 million to the Group.

Summary full year 2008

• Group revenue referring to sales of crude assignable to continuing operations amounted to SEK 2,419.9 (2,793.8) million.
• Profit for the period amounted to SEK 925.5 (947.1) million.
• Earnings per share before dilution amounted to SEK 6.38 (6.53) and earnings per share after dilution became SEK 6.34 (6.47).
• Operating cash flow including the divested Norwegian operation amounted to SEK 2,284.2 (1,226.9) million.

Comments from Ulrik Jansson, President and CEO at PA Resources:
“PA Resources has had a very eventful fourth quarter. We have strengthened the Group’s financial position during the present financial crunch and in a period with a low oil price. During December and January, we have redeemed loans to a total amount of approximately SEK 2.5 billion.

“We have also divested our Norwegian operations in December to a sales price of USD 220 million, which indicates the value of our oil related assets. The divestment has lead to that our total production has decreased but it will increase again in the second half of the year with the production from the Azurite field.”

Production and sales - Q4, 2008
Total production during the fourth quarter was 1,491,200 (1,386,000) barrels of oil including the production in Norway. Average production amounted to 16,200 (15,066) barrels per day. Approximately 480,300 barrels of this was assignable to the Norwegian operations, which in average is 5,200 (0) barrels per day.

2008 Full year
Total production during the full year 2008 was 5,153,700 (5,509,000) barrels of oil. Average production amounted to 14,100 (15,093) barrels of oil equivalents per day. Approximately 1,113,800 barrels of oil was assignable to the Norwegian operations during the full year 2008. The production of oil came from seven oil fields; six in Tunisia and one in Norway. No gas was produced or sold during 2008.

Production forecast
PA Resources expects average production in 2009 to be between 11,000 and 14,000 barrels of oil equivalents per day. During 2011, the company estimates that production levels will reach about 50,000 barrels of oil per day. This forecast includes the currently producing fields in Tunisia and Norway as well as the Azurite field in the Republic of Congo. The forecast does not include the discoveries in Equatorial Guinea or possible new discoveries in other fields.

Reserves
PA Resources’ total proven and probable oil and gas reserves (2P) are estimated to approximately 107.5 (120.7) million barrels of oil equivalents as per December 31, 2008. Out of the total 2P reserves, 8.9 (20.8) million barrels of oil equivalents is estimated as proven reserves (1P). The Group’s reserves have decreased with 13.2 million barrels of oil equivalents during 2008. The comparative figure for 2007 includes reserves assignable to the Norwegian licenses.

OVERVIEW OF OPERATIONS DURING FOURTH QUARTER 2008

Tunisia

PA Resources has been operating in Tunisia since 1998 and holds interest in six production and four exploration licences.
LicenceLicence statusInterest

Discovery at Didon North in Zarat permit
In late November an oil discovery was made at the Didon North prospect in the Zarat permit offshore Tunisia. The exploration well encountered 14 meters of oil pay in the El Gueria formation, a widely established reservoir formation in Tunisia including the producing Didon field. The top of the formation was encountered at 2,797 meters and the formation has excellent reservoir interval. The exploration well has now been plugged and abandoned. The recovered well data will be analyzed and reviewed in order to assess a possible exploitation of the discovery.

Production on Didon field
The four wells Didon-4, Didon-5, Didon-6 and Didon-7 at the Didon field have delivered at good regularity during the quarter.

Production on Ezzaouia field
Ezzaouia-17 well started production on natural flow in the end of August. However, the production has declined during the fourth quarter. The drilling of another production well, Ezzaouia-18, started in August and was finished by mid November. Production commenced by end of December.

Equatorial Guinea

PA Resources AB owns shares in two exploration licences in the Gulf of Guinea offshore Equatorial Guinea.

Development of the Benita field in Block I
At the end of 2008, the partners submitted a Plan of Development and Operations for the Benita oil field. The Government commenced the formal review of the plan in January 2009. Approval is expected during the first quarter of 2009, together with the assignment to develop the exploration area. The partners are ready to initiate the development as soon as the approval is received. First oil is estimated during 2012. The results from the 2008 drilling campaign have been further evaluated during the fourth quarter.

The Republic of Congo (Brazzaville)

PA Resources owns shares in three licences offshore the Republic of Congo (Brazzaville) of which one of the licences, the Azurite field, is under development.

Development of the Azurite field
The Azurite field development shows progress according to plan. The production will be acheived with the world’s first FDPSO vessel (Floating Drilling Production Storage Offloading). The FDPSO Azurite left Singapore at the end of January and will arrive in the Republic of Congo by the end of the first quarter. All sub-sea work and installations are completed at the field location offshore Congo and are ready to be hooked up with the FDPSO when it arrives. The Azurite field is very important for PA Resources as, in the long run, it will compensate for the decline in production following the sale of the company's Norwegian operations.

Farm out of interest in Marine XIV
In September, PA Resources signed an agreement to reduce its licence share in the exploration license Marine XIV from 85 to 12.5 percents interest. The agreement has been initially approved by the Congolese Authorities. The purpose of the sale is to facilitate and accelerate the exploration activities at deeper laying prospects, but without investments costs for PA Resources and to a lower risk. The national Congolese oil company SNPC, which has a 15 per cent interest, has decided not to employ its pre-emption right, which means that the authorities now will approve the assignment of their interest to the rest of the partners in the licence.

Reduction of areas in block Mer Profond Sud
The initial license period expired at the end of 2008 and the license partners have requested an extension of the exploration license. According to the licence terms, the licence area will be reduced by 25 percent and relinquished to the authorities, while these areas are no longer appraised as interesting for exploration.

United Kingdom/Netherlands/Denmark/ Greenland

PA Resources owns shares in 15 exploration licences - eight are located on the British continental shelf, four are located offshore Denmark, two offshore the Netherlands and one offshore Greenland. The Group is operator for all licences except for P1550 in the East Irish Sea, Block Q7 and Q10a in the Netherlands, and Block 9/06 and Block 9/95 in Denmark.

Acquisition of two Danish exploration licences
In August, PA Resources entered into an agreement with Shell Olie- og Gasudvinding Danmark to acquire a 26.8 percent participating interest in Licence 9/06 (Gita) and License 9/95 (Maja) on the Danish Continental Shelf.

Exploration drilling at the Gita licence offshore Denmark
In mid December, the operator Mærsk Olie og Gas AS spudded an exploration well Gita-1X on Licence 9/06. The well is a vertical high pressure and high temperature well and is being drilled with the drilling unit ENSCO 101. Results from the drilling are expected in March.

3D Seismic acquisition for three UK licences
An acquisition of 3D seismic for the licences P1318, P1319 and P1336 was completed in November 2008. A total of 500 km2 of data are now being processed and analysed.

Exploration activities on Greenland
A work program and budget for 2009 have been prepared, including the acquisition of approximately 4,000 kilometers of 2D seismic data.

Change of Licence interests in the Netherlands
The group has been assigned a 30 percent interest in licence Block Q10a, offshore Netherlands, at the same time as 20 percent of the Group’s interest in the adjoining Block Q7 has been transferred to a state-owned company in the Netherlands.

Divestment of Norwegian subsidiary
On December 1, PA Resources signed an agreement concerning the sale of its wholly owned subsidiary PA Resources Norway AS, including all assets on the Norwegian continental shelf, to Bayerngas Norge AS, a subsidiary of the German gas company Bayerngas GmbH. Bayerngas Norge paid for an Enterprise value amounting to USD 220 million.

Production and drilling on Volve field
Two oil producers at the Volve field have continued to deliver well during the fourth quarter. The drilling of an exploration well on the Volve South prospect was finalised by the operator in December. The well was drilled into a reservoir section in the Hugin formation to the total depth of 4,090 meters. No hydrocarbons were encountered. The well has now been plugged and abandoned.

PLANNED ACTIVITIES

Tunisia

Maintenance on Didon field
A planned production shutdown took place in January 2009. Hydro cyclones are installed in order to improve the produced water handling system. The installation of the platform remote control system was also completed.

An additional production well is also planned to be drilled at the field in 2009.

Drillings at the Jelma licence
PA Resources plan to drill two exploration wells on the licence during 2009, as well as acquiring seismic data.

Drillings at the Zarat exploration license
For 2010 the drilling of two commitment wells is planned for in the Zarat permit. One exploration well will be drilled to test the Massinissa prospect, and one appraisal well is planned to be drilled on the Elyssa discovery.

Exploration well at the Jenein Centre
During the third quarter, PA Resources acquired a 35 percent share in the onshore licence Jenein Centre in southern Tunisia. The company plan to drill an exploration well during the first half of 2009.

Equatorial Guinea

Exploration drillings in Block I
Two exploration wells are planned to be drilled during 2010. The objective of these wells will be to reach the deeper Miocene sequence proven oil bearing that was encountered in a previously drilled well.

Exploration activities in Block H
The Ministry has approved an extension of the current exploration period in order to drill the Aleta-1 well during the second half of 2009. A deepwater rig is available for this activity.

Development of the Benita field in Block I
At the end of 2008, the partners submitted a Plan of Development and Operations for the Benita oil field. The Government commenced the formal review of the plan in January 2009. Approval is expected during the first quarter of 2009, together with the assignment to develop the exploration area. The partners are ready to initiate the development as soon as the approval is received. First oil is estimated during 2012. The results from the 2008 drilling campaign have been further evaluated during the fourth quarter.

The Republic of Congo (Brazzaville)

On site activities at the Azurite field
When the FDPSO Azurite arrives at the field location, it will be connected to the sub-sea production equipment. The first production well be drilled during the second quarter 2009, and first oil is expected during the summer. The field will be taken into operation gradually during the year and three production wells and two water injection wells will be drilled in total during 2009. The plan is to drill nine wells in total. PA Resources' share of the maximum production capacity is estimated to be 14 000 barrels with this level estimated to be reached by the end of 2009 at the earliest.

Exploration drilling on the Mer Profond Sud licence
One exploration wells is planned to be drilled during the second half of 2009 and a deep-sea rig for the drilling is secured. A second exploration well may be drilled during the year.

Seismic survey in block Marine XIV
A 3D seismic survey will commence during the first quarter 2009.

Office locations and Employees

PA Resources has offices in Stockholm (Sweden), Tunis (Tunisia), London (the United Kingdom) and Pointe Noire (the Republic of Congo). In addition, the Group has personnel on the production facilities in Tunisia. Until December 31, 2008, the Group also had an office in Oslo (Norway).

Average number of employees in the Group, excluding the divested Norwegian operation, was 128 (126) persons during 2008. Total number of employees as per December 31, 2008, was 132.