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LONDON (Alliance News) - Baron Oil PLC Monday said its pretax loss narrowed in the first half of 2015 despite revenue falling on the back of lower oil prices, as the company prepares to exit Colombia, where its sole producing asset lies, over the next six months.
The South American oil and gas producer reported a GBP963,000 pretax loss in the first six months of 2015, narrowing from the GBP2.0 million loss a year earlier despite revenue falling to GBP1.0 million from GBP1.2 million.
Despite revenue falling, its gross loss also narrowed to GBP148,000 from GBP548,000. The other causes on the narrower loss was administrative expenses falling to GBP686,000 from GBP794,000 and its impairments dropping to GBP84,000 from GBP416,000.
"In volume terms, oil sales held up well but the major decline in the oil price leads to lower revenue compared to same period in the preceding year. Although well operating costs are greatly reduced, nevertheless, at current oil price levels, we continue to show a gross loss on oil sales," it said.
At its wholly-owned Block XXI in Peru, Baron Oil secured the final environmental impact assessment approval from authorities in July following delays, where seismic planning activities are currently being undertaken. Topography work is expected to be completed in October, followed by the seismic acquisition, which will take about 60 days to complete.
At Block Z-34, where Baron Oil has a 20% stake, "very little" progress was made in the period as the licence remains suspended through the force majeure clause. That is because Union Oil has still not been officially approved as an oil company by the government agencies in Peru.
Despite the suspension, technical work continues with a Satellite Oil Seep Study to increase its understanding of the block and to demonstrate its commitment, it said.
At the producing Nancy Burdine Maxine field in Colombia, where it has a 29.5% stake, was producing around 400 barrels of oil per day in the period, but this was "abruptly stopped towards the end of the reporting period," it said.
"Production of approximately 400 barrels per day from the Nancy #1 well abruptly stopped towards the end of the reporting period, we believe, due to a downhole breach. This well has been producing oil continuously for many years and it also produced a significant amount of brine along with the oil," said Baron Oil.
Downhole corrosion is the most likely cause of the sudden termination of the oil production from the well, which would require Baron Oil to re-enter the well to fix and evaluate. However, the company said it has not done this because it would involve "significant operational risk and cost" which could not be recovered from any further production sourced from the well.
Also, Baron Oil is due to hand the producing field licence to EcoPetrol on October 16 after its contract expired and its request to continue operating the field was rejected by EcoPetrol.
"Our proposals to continue operating the field were declined by Ecopetrol and the field will be officially handed over to them on October 16, 2015. We anticipate a further six months of work, mainly administrative, to complete the formal documentation to complete the handover of NBM to Ecopetrol and closing the office in Bogota," it said in a statement.
"We will now begin to exit from Colombia and reduce our administrative costs to a minimum and settle our outstanding liabilities which come mainly through our ownership of Invepetrol and their interest in the Union Temporal joint venture in the NBM field. We will update shareholders as to our progress and cost of exiting Colombia with our final 2015 results during the first half of 2016," it added.
Following the planned exit from Colombia, the company is focused on finding new opportunities in Peru "and elsewhere" but said it is unclear on its future costs associated with its Colombian operations.
Baron Oil shares were down 4.0% to 0.600 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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