Europa Oil & Gas Share News (EOG)

(Sharecast News) - UK, Ireland and Morocco-focussed exploration, development and production company Europa Oil & Gas reported revenue of £0.8m in its first half on Wednesday, slipping from £0.9m year-on-year.

The AIM-traded firm said its pre-tax loss, before exploration write-off, was £0.5m for the six months ended 31 January, widening from £0.4m year-on-year, while the pre-tax loss including write-offs taken following the relinquishment of Irish licences totalled £3.5m.

Net cash used in operating activities was £0.4m for the period, growing from £0.3m, while the company's cash balance at period end was £1.5m, down from £2.9m.

On the operational front, Europa noted that the Wressle Development was granted planning consent on appeal.

It said 90 barrels of oil per day was produced from its three producing UK onshore fields during the first half, matching the first half and full-year performances in 2019.

Net production was said to be on course to more than double to over 200 barrels of oil per day when the Wressle oil field comes on stream later in the year, at an expected initial rate of 500 barrels of oil per day.

Looking at offshore Ireland, Europs said it had refocussed its portfolio towards the proven gas play in the Slyne Basin during the first half, following the Irish government's recognition of the key role of gas in the country's transition to renewable energy, and its intention to phase out oil exploration.

Discussions were said to be ongoing with prospective partners to farm-out the 100%-owned FEL4/19 licence, where the 1.5 trillion cubic feet Inishkea prospect is located.

At its offshore Morocco assets, Europs noted that it was awarded the large Inezgane licence during the period, covering 11,192 square kilometres in the Agadir Basin, in September.

Shell, ENI, Repsol, Hunt and Genel are currently active in the area.

It added that data tapes were received from ONHYM, in preparation for seismic reprocessing.

Large prospects, with resource estimates of more than 250 million barrels, have already been identified in the Lower Cretaceous fan sand play, which the board described as "a prolific producer" in West Africa.

It said the licence was attracting interest from a number of operators seeking to farm-in.

On the subject of the ongoing Covid-19 coronavirus pandemic, Europa said that as at its reporting date of 31 January, there was no impact from the virus.

Since then, however, directors, London-based staff and consultants had been home-based from 16 March, and had agreed a temporary salary and rate cut of 20% from 1 April, while operations were continuing at the company's three production sites.

It said its updated economic model confirmed that production at Wressle would be economically robust in the current low oil price environment, with an estimated break-even oil price, excluding Europa's corporate overheads, of $17.62 per barrel.

Since the period ended, applications had been submitted for the relinquishment of three licences offshore Ireland, where primary prospectivity was oil, being LO16/19, LO16/22, FEL 2/13, for a total non-cash write-off of £1.7m.

An application had been submitted for a two-year extension and merger of FELs 3/13 and 1/17, with Europa explaining that should the merger not be granted, FEL 3/13 would be relinquished, with the company electing to write-off the £1.3m intangible asset in those accounts.

"The standout corporate events of the six month review period were the granting of planning consent for the development of Wressle and the award of the Inezgane permit offshore Morocco," said interim chief executive officer and executive chairman Simon Oddie.

"Expected to come on stream at a rate of 500bopd in the second half, Wressle will transform Europa's net production and revenue profile.

"Together with measures we have taken to reduce our already low cost base and, following the repositioning of our portfolio towards gas, we believe Europa will be well placed to withstand a sustained period of oil price volatility and weakness."

Oddie said that, while the ongoing Covid-19 pandemic could impact activity on the ground, there was much the company was still able to do, including working towards the farm-out of its strategic position in the Slyne Basin and continuing desktop work and launching the farm-out of its licence offshore Morocco.

"With gas set to play a key role in Ireland's energy mix and our licences located in a gas play proven by the producing Corrib field, Inishkea represents a compelling investment opportunity with an attractive risk/reward profile.

"While offshore Morocco is at an earlier stage, we are already talking to a number of parties who expressed an interest in our Inezgane licence, even before we had identified multiple targets with up to 250mmbls of prospective resources."

Oddie added that the global situation was "clearly challenging", with the firm's priority being the health and safety of its employees and stakeholders.

"With this in mind, we will continue to follow the latest government advice and as a result, timescales for certain activities and milestones, including our efforts to add a third leg to our business by securing a late stage appraisal project, may well need to be lengthened.

"Importantly, the roadmap we have to increase our onshore UK production and to expose our shareholders to potentially value creating events offshore Ireland and Morocco remains in place."

At 1010 BST, shares in Europa Oil & Gas Holdings were up 5.37% at 1.08p.