Stratic Energy Corporation announces results for the quarter and nine months ended September 30, 2009. All amounts are US dollars, unless otherwise stated.
Highlights:
Disposal Program
• Sale of Breagh asset completed - gross proceeds of $65 million received and mainly used to pay down bank and other debt
• Sale of Italian business to Enel Trade SpA announced - cash consideration of €34.3 million ($50.9 million) due on completion which is expected late in the first quarter of 2010; further contingent consideration of up to €6.6 million ($9.8 million) depending on timing of Longanesi field production commencement
West Don Development
• West Don gross oil production averaged 6,743 bopd (Stratic net 1,163 bopd) for the third quarter from two wells (second well since August)
• Water injection well brought on stream in early September - injection averaging approximately 5,000 bwpd - higher injection rates expected
• Field expected to produce approximately 1.75 mmbbls gross by end 2009
• Pipeline tie-back to nearby Thistle platform on schedule for completion in the first quarter 2010
• Third production well to access further reserves in the southern part of the field under evaluation with a view to drilling in summer 2010
Updated reserves report by independent engineers Ryder Scott:
• reduces gross ultimate proved and probable reserves by 9% to 18.4 mmbbls (Stratic net 3.17 mmbbls)
• increases gross remaining proved and probable reserves at end 2009 by 16% to 16.5 mmbbls (Stratic net 2.84 mmbbls) mainly due to lower than expected production in 2009
• revised peak gross production of approximately 11,000 bopd now in 2011, declining thereafter at a lower rate than originally forecast
Exploration/Appraisal and Pre-Development Assets
• Crawford field development plan - alternative development concept utilizing jack-up drilling unit with production facilities on deck being considered; sanction of project deferred until 2010, pending completion of ongoing pre-development study work
• Bowmore - well suspended in August as a 'tight hole' for commercial reasons; further well on the licence planned in 2010
• Al Tayr 101 exploration well (Stratic operator) spudded in Syria in October and currently operating satisfactorily at 1900 metres, with TD at 3000 metres expected early in the New Year
• West Ayazli exploration well in Turkey spudded in October and currently operating at TD. Novel low cost completion planned to facilitate early production of Kusuri gas bearing sands
Financial
• Oil and gas sales revenues in the UK and Turkey of $9.1 million in Q3 (2008: $2.2 million) with increase due to West Don
• Net income for quarter of $13.1 million (2008: loss $13.0 million), including recognized gain on Breagh sale of $22.5 million
• Capital expenditure for the quarter of $12.9 million (2008: $19.9 million), mainly on West Don and the Bowmore well
• Cash and cash equivalents (including restricted cash) of $11.3 million at period end (December 31, 2008: $28.2 million); bank debt (excluding letters of credit) and convertible notes totaling $110.4 million at period end (December 31, 2008: $118.9 million)
• Discussions ongoing with Stratic's bank syndicate for the deferral of scheduled debt repayments due at year end and the provision of additional temporary liquidity, to be repaid from the proceeds of sale of the Italian business; similar structure envisaged to that agreed with the banks earlier in 2009 regarding the Breagh sale
Kevin Watts, Stratic's President and Chief Executive Officer, commented:
"With the sale of our Italian business we will have met or exceeded all of the restructuring targets we set for the company exactly twelve months ago. Once the sale completes we will have raised more than $115 million from asset disposals, and we will have significantly improved our balance sheet and financial flexibility. We can then look forward to implementing a growth strategy for the business which is less capital intensive and more appropriate for the current credit market conditions. Furthermore, the recent performance improvements on West Don, which are underpinned in remaining reserves and value terms by the recent independent Ryder Scott report, are expected to continue once offshore loading is discontinued, and allow us to look forward to the future with increased confidence."