• 78 per cent increase in Funds Flow From Operations to $469 million
• 204 per cent increase in Net Income to $240 million
• 20 per cent increase in Production to 139.1 Mbbl/d
Addax Petroleum Corporation announces its results for the quarter ended March 31, 2008. 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: “I am pleased to report that Addax Petroleum’s performance in the first three months of 2008 continues to build upon our track record for delivering robust results, strong operational performance and excellent netbacks. Exploration and appraisal activity this year has been very encouraging and we are pleased to add further to our exploration portfolio through the acquisition of the Iroko exploration license in Cameroon. In the Kurdistan Region of Iraq, we are integrating the promising results of the two most recent step-out appraisal wells into a full field development plan and have commenced construction of an early production facility. Lastly, we have significantly expanded our ability to fund additional future growth through our first senior unsecured credit facility obtained successfully despite the difficult credit markets, which is a demonstration of the support for Addax Petroleum’s strategy and growth potential in the financial community.”
Selected Financial Highlights
• Petroleum sales before royalties in the first quarter of 2008 amounted to $1,154 million, an increase of 84 per cent over petroleum sales before royalties of $627 million in the first quarter of 2007. The increase in petroleum sales before royalties was primarily driven by a 66 per cent increase in the average crude oil sales price in the first quarter of 2008 to $96.03 per barrel (/bbl) as compared to $57.86/bbl realized in the first quarter of 2007 and a 12 per cent increase in sales volumes between the same periods. Noteworthy in the first quarter of 2008 is that oil production exceeded sales volumes by 0.64 MMbbl, or the equivalent of approximately 7 Mbbl/d, resulting in a large build of oil in inventory.
• Funds Flow From Operations for the first quarter of 2008 increased 78 per cent to $469 million ($3.02 per basic share) compared to $263 million ($1.70 per basic share) in the first quarter of 2007.
• Net income in the first quarter of 2008 increased 204% to $240 million ($1.54 per basic share) compared to $79 million ($0.51 per basic share) in the corresponding period in 2007.
• Capital expenditures increased by 57 per cent to $340 million in the first quarter of 2008 from $216 million in the first quarter of 2007. Development capital expenditures totaled $246 million in the first quarter, an increase of 68 per cent over development capital expenditure of $146 million in the first quarter of 2007. Exploration and appraisal capital expenditures increased to $94 million in the quarter, an increase of 34 per cent over exploration and appraisal capital expenditures of $70 million in the first quarter of 2007.
• At the end of the first quarter 2008, bank debt totaled $1,125 million, an increase of $150 million over the corresponding quarter in 2007. Bank debt is currently drawn under a 5-year, $1.6 billion senior secured term facility, with 4 years remaining.
• In late April 2008, the Corporation expanded its borrowing capacity and entered into a 2-year, $450 million senior unsecured bank loan facility. This loan facility is currently undrawn, but is intended to provide funding for future growth opportunities through potential acceleration of or increase in capital expenditure projects and/or other acquisition opportunities.
Selected New Business Highlights
During the first quarter of 2008, the Corporation renegotiated an amended production sharing contract for the Taq Taq license area in the Kurdistan Region of Iraq, keeping the Corporation’s economic and operational interest materially unchanged. Early in the second quarter of 2008, Addax Petroleum concluded one strategic acquisition which increased the Corporation’s exploration portfolio, offshore Cameroon.
New business highlights to date in 2008 include:
Kurdistan Region of Iraq
The Corporation signed an agreement with the Kurdistan Regional Government amending the production sharing contract it holds together with Genel Enerji in respect of the Taq Taq license area in the Kurdistan Region of Iraq. The purpose of the amendments was to bring the terms of the Taq Taq production sharing contract into conformity with recently enacted oil and gas legislation in the Kurdistan Region of Iraq.
Cameroon
Addax Petroleum acquired a 100% working interest in the Iroko exploration license area, offshore Cameroon. The Societe Nationale des Hydrocarbures, the national oil company of Cameroon, holds a back-in right of 30 per cent in case of a development. The Corporation is obligated to pay a signature bonus of $3 million and undertake a minimum work program valued at $18 million. There are no wells drilled on Iroko but there is oil production nearby from the Pecten (Shell)-operated Mokoko-Abana field complex. The Corporation is presently undertaking an exploration program on the Ngosso license area offshore Cameroon, after which it plans to start exploration drilling on the Iroko license area.
Selected Exploration and Appraisal Highlights
• During the first quarter of 2008, Addax Petroleum had significant exploration and appraisal success in its program offshore Nigeria and in the Kurdistan Region of Iraq and also commenced its exploration program offshore Cameroon. The Corporation also progressed its exploration and appraisal portfolio in Gabon and the Joint Development Zone and is planning for exploration and appraisal activities later in the year.
Exploration and appraisal highlights to date in 2008 include:
Gulf of Guinea Shallow Water (Nigeria and Cameroon)
- In OML137, two successful appraisal wells were drilled on the Ofrima North discovery. The Ofrima-3A well confirmed the western extension of the H42 oil reservoir discovered by the Ofrima-2 well drilled in 2007 and the Ofrima-3 well discovered 62 feet of oil and 92 feet of liquids-rich gas in deeper horizons. Development planning studies for Ofrima North are currently underway;
- In OML123, two wells were successfully appraised at the Kita Marine and Oron West fields, the results of which are presently being incorporated into field development options. The ORW-C1AST well successfully appraised an extension to the producing Oron West field and the KTM-6 well discovery in March 2008 encountered an aggregate gross oil column of 173 feet over four zones. The Kita Marine discoveries lie in the northern part of the prolific OML123 block offshore Nigeria in an area which has not previously had production; and
- In Cameroon, the Corporation started its first exploration drilling campaign. The campaign comprises drilling up to three exploration wells in the Ngosso license area followed by an exploration well in the recently-awarded Iroko license area. The 2008 Cameroon exploration drilling campaign is planned to be completed during the second quarter.
Gulf of Guinea Deep Water (Nigeria and JDZ)
- The Corporation continued its evaluation of drilling locations in the JDZ license areas and its efforts to secure a rig of opportunity to commence drilling operations in the second half of 2008. In OPL291, the Corporation is planning to acquire 3D seismic survey also in the second half of 2008.
Gabon
- The Corporation participated in the unsuccessful THAM-1 exploration well drilled by Sterling Energy to test the Admiral prospect on the Themis Marin offshore license area. The Themis Marin license was subsequently relinquished with all work commitments completed. Onshore Gabon, the Corporation acquired development and exploration seismic data in its operated Remboue license area.
Kurdistan Region of Iraq
- In January 2008, the Corporation tested the TT-09 step-out appraisal and development well on the Taq Taq field in the Kurdistan Region of Iraq. The TT-09 well tested at an aggregate oil rate of 16,170 bbl/d from two separate zones.
- In March 2008, the Corporation tested the TT-08 step-out appraisal and development well on the Taq Taq field in the Kurdistan Region of Iraq. The TT-08 well tested at an aggregate oil rate of 35,750 bbl/d from two separate zones.
Selected Operational Highlights
Average gross working interest oil production in the first quarter of 2008 was 139,100 barrels per day (bbl/d) representing an increase of approximately 20 per cent over the 2007 average production of 116,090 bbl/d. Average oil production in the first quarter of 2008 included 109,700 bbl/d from Nigeria and 29,400 bbl/d from Gabon compared to a
Development project highlights in the first quarter of 2008 include:
Nigeria
- Drilled three new development wells which included one oil production well and one water injection well in OML123 and one oil production well in OML124;
- Placed a total of two new oil production wells on production in the quarter which were the two wells drilled in the quarter;
- In OML123, the Oron West South platform was installed while the first of two platform substructures were installed on the Adanga North Horst field and water injection pipelines were laid and facilities commissioned;
Gabon
- Drilled seven new development wells onshore of which five, comprising four oil production wells and one gas injection well, were in the Addax Petroleum operated Tsiengui field in the Maghena license area and a further two oil development were wells in the Shell-operated Koula field in the Awoun license area;
- Placed a total of five new oil production wells on production in the Tsiengui field in the quarter of which two were drilled in the quarter and three were drilled in the previous quarter;
- Continued ongoing surface facilities development at the onshore Addax Petroleum operated Tsiengui and Obangue fields and the Shell-operated Koula field, including the extension of the Corporation’s onshore oil export pipeline system, and at the offshore non-operated Ebouri field;
Kurdistan
- Commenced construction of an early production facility; and
- Started trial production from the Taq Taq field at reduced rates with intermittent local sales. The Corporation is targeting to commence commercial oil production attributable to its working interest in the second half of 2008.
Operating netbacks in the first quarter of 2008 increased 72 per cent to $72.49/bbl compared to $42.05/bbl in the first quarter of 2007. Unit operating expenses in the first quarter of 2008 increased to $8.09/bbl, an increase of 3 per cent over the 2007 level of $7.84/bbl as the Corporation continues to face cost inflation pressures for the provision of services.