2007 HIGHLIGHTS
OPERATIONS
• Production increased by 77% to 7,820 boepd (2006: 4,400 boepd)
• Announced GFI acquisition, increasing near term production outlook
• Extensive exploration and appraisal programme underway
• Appraisal success in South Sembakung and Tutung, East Kalimantan
• Continued portfolio expansion adding 6 new licences in 2007
FINANCIAL
• Maiden post tax profit of $4.6 million (2006: loss $19.6 million)
• Revenue increased by 120% to $69.6 million (2006: $31.6 million)
• EBITDAX of $41.4 million (2006: $2.9 million)
• Strong balance sheet with net cash at year end of $91.6 million (2006: $127.3 million)
• Average realisations of $71.75 per bbl and $4.34 per Mscf (2006: $61.33 per bbl and $3.05 per Mscf)
OUTLOOK
• Production targets of 9,000 boepd in 2008 and 15,000 boepd in 2009
• Bualuang and Kambuna field developments progressing on schedule
• Phu Horm South appraisal well currently drilling below 2,200 metres towards planned TD at c. 2,900 metres
• Gurame appraisal, Indonesia, spudded on 25 March
• 14 exploration and appraisal wells planned in next 18 months
Commenting on the results, Salamander Energy’s Chairman Charles Jamieson said:
“During 2007, Salamander delivered on its strategic objectives. 2007 saw an increase in production and reserves, as well as success with the drill bit, while the GFI acquisition demonstrated the Company’s ability to execute value enhancing, complementary acquisitions. The Company is pleased to announce a maiden full year profit.
”The next 18 months will see Salamander step up its operational programme, with fourteen exploration and appraisal wells and two new developments set to come on stream which will see production average 15,000 boepd in 2009.”
Financial Results
The Group announced maiden profits, generating a profit after tax of $4.6 million, compared to a post-tax loss of $19.6 million last year. Revenues grew to $69.6 million compared to $31.6 million for the full year 2006, while earnings per share were $0.05 compared to a loss of $0.48 in 2006. This was achieved through increased production and higher average realised oil and gas prices. The average net production rate for 2007 was 7,800 boepd, 46% of which was oil and condensates. Average realisations of $71.75 per bbl and $4.34 per Mscf were achieved over the year.
The Group generated $15.8 million in post-tax operating cashflow (2006: $5.6 million) that contributed to the strength of the balance sheet with $91.6 million of net cash at the year end ($127.3 million).
Operational Progress
Production Sharing Contracts (“PSC”) signed in Lao PDR and Vietnam offer the opportunity for transformational reserves additions and were balanced with lower risk resource addition opportunities accessed through entry into the Simenggaris PSC and, in early 2008, the Bengara-I PSC, both in East Kalimantan.
The Company’s asset portfolio has, after three years, reached the point where Salamander has one of the most active drilling programmes in the upstream sector. During 2007 the Company demonstrated its ability to create value through the drill bit with the successful appraisal of the South Sembakung discovery in the Simenggaris PSC, Indonesia. A plan of development has been submitted to the Indonesian authorities and Salamander continues to explore the acreage for further resource additions. This early success was followed up in 2008 with the successful appraisal of the Tutung discovery in the Bontang PSC and encouraging results from the Dong Mun appraisal in Thailand. These provide early indications of the value creation potential of Salamander’s active, high impact drilling programme that, independent of development drilling activity, will see twelve exploration and appraisal wells drilled during 2008.
GFI Oil and Gas
Salamander illustrated its ability to identify and execute value-adding acquisitions through reaching agreement in December 2007 with the Board of GFI for the proposed acquisition of the entire issued share capital of GFI. The transaction was subsequently completed in March 2008 and adds 17.8 MMboe to Salamander’s proved and probable reserves. Based on the Company share price on the day of announcement, this represented a cost per boe of $11.65. The acquisition provides Salamander with interests in Thailand and Indonesia that complement and enhance the Group’s existing portfolio by adding late stage development assets together with further exploration and appraisal upside.
The assets acquired through GFI are the Bualuang oil field in Block B8/38 in the Gulf of Thailand, the Kambuna gas field in the Glagah-Kambuna TAC and the Seruway PSC, both in the North Sumatra Basin. Of these, the Bualuang oil field is expected to commence production in the second half of 2008 and the Kambuna field will commence production in the first quarter of 2009. The Seruway PSC contains a gas discovery called Gurame that is currently being appraised by the Gurame 1X well. There are numerous other exploration and appraisal opportunities throughout the portfolio that will be examined in due course.
Operating Review
Appraisal and development drilling activity was ongoing for most of 2007 on the Company’s Thai assets and preparatory work and seismic acquisition were undertaken across the region in support of the intensive drilling programme planned for 2008 and 2009.
In 2007, in addition to continuous drilling operations in South East Sumatra, the Company’s activity included the drilling of three development wells on the Sinphuhorm field resulting in the Phu Horm-10 well being tied in to the field’s production system. On the Simenggaris PSC, the successful appraisal of the South Sembakung field led to the submission of a plan of development in early 2008. In the first quarter of 2008 the Dong Mun-3 appraisal well was drilled in Northeast Thailand and the South Phu Horm-1 well was spudded. Salamander’s operated Tutung Alpha-1 well was also drilled in early 2008 and has given sufficient encouragement for the early return of the rig for further delineation of the discovery.
As the Company added new assets both through acquisition, farm in and licensing rounds, it has increased its footprint in the region and now has offices in Singapore, Jakarta, Ho Chi Minh City and Vientiane. Salamander will be opening an office in Bangkok in 2008.
The seismic acquisition and technical studies conducted in 2007 underpin the start of the 2008/9 drilling operations in which Salamander will participate in the drilling of up to 13 exploration and appraisal wells in the next eighteen months.
Production
The Group’s production for 2007 averaged 7,800 boepd and comprised 46% liquids and 54% gas. The increase compared to 2006 (4,400 boepd) is attributable to the first full year of contribution of gas from the Sinphuhorm field in Thailand which ran reliably and above expectation through the year at an average of 88 MMscfd (1,418 boepd net to Salamander). Salamander’s participation in the ONWJ and SES PSCs in Indonesia provided the rest of the Company’s output in 2007.
Production for the full year 2008 is forecast to be in the region of 9,000 boepd with the increase coming from the Bualuang oil field in Thailand that is expected to commence commercial production by mid-year 2008.