Indago Petroleum Limited, the independent oil and gas production and exploration company with operations in the Sultanate of Oman and the UAE has announced its unaudited interim results for the six months ended 30 June 2006.
Financial Highlights for first half of 2006
• Turnover of $6.8 million (2005: $2.0 million)
• Profit before tax of $1.75 million (2005: Loss of $1.92 million)
• Cash as at 30 June 2006 of $72.6 million
Operational Highlights
• Average production of gas condensate and LPG of 1,835 bbl/d and 27 MMscf/d of gas from Bukha fileld (Indago 40%) ahead of budget for first six months of 2006
• Award of concession encompassing RAK-B offshore oil and gas field, Ras Al Khaimah, UAE
Outlook
• West Bukha – 2
- currently drilling through the target reservoirs
- test results expected in October 2006
• Fully funded three-well exploration drilling programme now underway onshore Oman
- Rig on site: final acceptance checks being made
- Hawamel-1, on the Izz prospect programmed to spud first with results expected in November.
- After Izz, rig will drill Al Jariya-1 on the Jebel Hafit prospect, targeting 1 billion boe
• Zad – 1 on the Adam prospect will be drilled towards end of first half 2007
• Acquisition of two new blocks:
- Block 43A. Seismic acquisition in our blocks onshore Sultanate Oman starting November
- New joint operating agreement with the Ras Al Khaimah Gas Commission over the Saleh field : seismic reprocessing already begun
Tim Eggar, Chairman of Indago, Commented:
“We are delighted with the progress that Indago has made over the last six months, further consolidating our position as a leading independent operator in our area of focus. With the commencement of operations for the Hawamel well on the Izz prospect, the Group has entered an extremely exciting phase, with its three-well programme, including Jebel Hafit, which will be drilled subsequently, targeting 1 billion boe.
Indago’s portfolio is now stronger, with the acquisition of our new blocks, and the seismic work we are carrying out currently will form the basis of our next drilling programme.”
Financials
The oil price has remained buoyant and the Group made a profit before interest, and a pre - tax result of $1.75 million for the first six months of 2006 on markedly increased turnover compared to the corresponding period in 2005. Turnover in the year ended 31 December 2005 reflected just one sale of condensate and a low revenue allocation due to the absence of recoverable costs. Indago are now seeing the benefit of the reversal of that situation in a high oil price environment.
The Company’s financial performance during the first six months has been influenced primarily by two factors:
1. High oil prices, resulting in the first half lifting of condensate yielding over $63 per barrel; and
2. The Group having significant costs to recover from the West Bukha development well.
The first condensate sale of the year was priced at $63.678 per barrel. The second sale, which occurred in July yielded a price of $70.512 per barrel. On 23 May 2006, the Company announced the spudding of the West Bukha 2 appraisal / development well, offshore Oman. As the well is in the same block (Block 8) as the Bukha producing field, the costs from West Bukha can be recovered from the revenues generated by the producing field.
The Group’s results were further underpinned by high interest rates on its cash deposits, and at the end of the period, the Group had over $70 million of both cash and net current assets.
Operational Update
Output from Bukha, our current operating field, averaged 1,835 bbl/d of condensate and LPG, and 27 MMscf/d of gas (Indago 40%) and has been consistently marginally in excess of budgeted volumes. Our exploration programme has experienced some delays - symptomatic of the frenetic levels of activity, not just in the Middle East, but worldwide – and with respect to the current onshore programme, the decision has now been made to drill the Jebel Hafit prospect immediately after Izz, which will spud on the conclusion of the acceptance tests for the rig. Jebel Hafit, which is targeting 1 billion boe, is currently scheduled to spud in December 2006 and the well is expected to take approximately five months to drill. The rig will then move to the third well in our programme, Zad-1 on the Adam prospect in Block 47.
The West Bukha-2 appraisal/development well has penetrated the target reservoirs and we plan to acquire wireline logs to measure the various reservoir parameters. Once the results have been assessed, the joint venture (Indago 40%) will decide the testing programme to follow. We expect the testing results to be available before the end of October.
We have also acquired two more blocks in addition to the RAK-B concession we announced at the beginning of June. The first is Block 43A, onshore Oman, which completes Indago’s contiguous string of blocks in the fairway running along the frontal section of the north-south mountain range. Our company now holds more blocks than any other company operating in Oman and, consistent with the rest of the onshore blocks in the Sultanate, we have a 100% equity interest in Block 43A. The initial programme on this Block is to reprocess and interpret existing seismic, acquire new seismic over the most promising structures and seek to spud an exploration well in 2008.
The second is offshore where we have recently entered a partnership with the Ras Al Khaimah Gas Commission, Rakgas, to seek to revive the Saleh field. Indago has operatorship and a 40% equity stake in the project which is to look for untapped reserves in a field which had significant production in the past, peaking at 70 MMscf/d and 13,000 bbls/d condensate rate. Drilling ceased almost 20 years ago and our intention is to reprocess 3D seismic to ascertain, utilising modern technology, whether a new drilling programme could revitalise the field.
At the same time, we agreed to give up our interest in the onshore Ras Al Khaimah block, having concluded from the Hagil drilling that the probability of success within that acreage did not warrant further investment on our part. Our management believes that the new block additions more than compensate and the portfolio of assets is as strong, if not stronger, than at flotation. We are already preparing the ground for our next onshore drilling campaign in 2008 by commissioning new seismic over the most promising leads in Blocks 31 and 47; thereby meeting another of our commitments outlined at the IPO.
Board Changes
We have also had two changes to the Board. Bob Williams stood down at the AGM at the end of July, and I should like to re-iterate my gratitude to him for his extensive contribution in making the IPO successful. At the same time, we welcomed Nick Zana as a non-executive director. Nick comes to us via Nelson Resources and Chevron, amongst others, and brings over 30 years of experience in the industry.
Outlook
We are in a very active period for the Company. The results of the West Bukha testing are expected shortly, Izz is about to drill, the major opportunity of Jebel Hafit will be drilled immediately thereafter, followed by Adam; plus a range of new projects is being progressed. This is an incredibly exciting phase and one which we are confident will leave us well placed to deliver value to our shareholders.