LONDON (Alliance News) - Ophir Energy PLC on Thursday increased its full-year production guidance and reported a large reduction in spending, as the company tries to restructure itself for a USD50 per barrel of oil environment, after swinging to a substantial pretax loss in the first half of 2015.
Ophir was the worst performer in the FTSE 250 on Thursday morning as its shares were down 5.1% to 107.50 pence per share.
The FTSE 250-listed oil and gas company said it was positioning Ophir to not only create value during the downcycle, but also to be optimally positioned to benefit from any recovery in the sector.
That response came after the company swung to a large USD123.3 million pretax loss in the first half of 2015 from a USD589.4 million profit a year before, when it had booked a one-off gain. Revenue came in at USD86.5 million compared to nil a year earlier.
The loss was caused by exploration expenses, including write-offs, rising to USD94.9 million in the first half from USD67.7 million as depreciation, impairments and provisions increased to USD23.0 million from USD774,000, partially offset by administrative expenses falling by a fifth to USD19.4 million from USD27.2 million.
Ophir had booked a USD673.0 million gain in the first half of 2014 related to the sale of its interest in three Tanzania blocks to Pavilion Energy PTE LTD, which was not repeated in the most recent half. Without that gain, the interim loss last year would have been USD83.6 million.
Ophir reported a cash balance of USD708.2 million at the end of the first half, significantly down from USD1.17 billion at the end of 2014. Gross debt stood at USD316.2 million, resulting in a net cash position of USD392.0 million.
Ophir said capital expenditure fell by over 50% in the first half, and the company said full year expenditure will still be between USD250 million to USD300 million, before it makes further cuts to its 2016 expenditure, it said.
Previously, Ophir said its only committed exploration and appraisal capital expenditure totalled USD100 million over the next three years.
On top of that, Ophir said it has delivered USD60.0 million in annual cost savings through efficiencies, job cuts and office closures mainly related to the synergies achieved from the acquisition of Salamander Energy PLC in 2014.
The full-year capital expenditure guidance and USD60 million in cost savings were originally announced at the end of 2014.
That is all response to the fall in oil prices, and Ophir said it is prepared for USD50 per barrel environment and said it is only progressing investments that offer "strong returns" whilst restricting expenditure.
Operationally, Ophir said it "significantly advanced" the Fortuna floating liquefied natural gas project in Equatorial Guinea and remains on schedule for a final investment decision in mid-2016 and first gas in mid-2019.
"In a tough operating environment for E&P companies Ophir continues to differentiate itself through the robustness of its financial position, the progression of its field development plans and a commitment to acquire quality exploration acreage with minimal financial commitments that offer attractive returns at current commodity prices," said Chief Executive Nick Cooper.
Average daily production came in at 14,600 barrels of oil equivalent per day in the first half, and the company pushed up its full-year guidance to 11,000 to 12,500 barrels of oil equivalent per day. Ophir said the recent decline in oil prices, forecast underlying operating cash flow from the producing assets is revised to between USD110 million and USD130 million for the full year.
"The second half of the year will see the drilling of two low cost wells in the Gulf of Thailand in an unexplored basin adjacent to the Bualuang oil field," Cooper indicated.
The majority of Ophir's current production comes from the Bualuang field, making that development key to further increasing production.
Ophir said it is an exploration company at heart and said there is currently "limited competition for exploration acreage" which gives the company the opportunity for the company to undertake some M&A activity.
"It is well documented that rates for both seismic vessels and drilling rigs have fallen, but perhaps the most important change is that licences for prime acreage can now be acquired without having to undertake firm drilling commitments. We believe this is a fundamental change that will lead to improved returns from exploration drilling as our geoscientists will be able to high-grade across our portfolio, without the encumbrance of drilling commitments on specific licences," it said.
"As a well-capitalised company, the discipline to allocate capital to drilling only those exploration prospects that offer the best potential returns, even in difficult times for the sector, will be the hallmark of Ophir in the future," it added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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