LONDON (Alliance News) - Roxi Petroleum PLC Friday revealed its operations struggled to squeeze out a profit during 2015 and ultimately turned to a pretax loss for the year but the company is hoping its efforts during the year will lead to a material lift in production in 2016.
The producing oil and gas company said it made a USD1.9 million pretax loss in 2015, swinging from the USD20.1 million profit reported in 2014.
Roxi reversed impairments in 2014 that allowed it to book a USD25.0 million gain during the year that was not repeated in 2015. However, Roxi also managed to avoid booking any impairments at all in 2015.
The company struggled to maintain profitable operations in the year after reporting revenue of USD1.1 million and a tiny gross profit of only USD2,000 compared to 2014 when it delivered revenue of USD1.6 million and a gross profit of USD580,000.
Notably, Roxi's loss after tax amounted to USD7.1 million from a USD11.3 million profit last year but the company said it also booked a USD17.7 million profit from discontinued operations during 2015, specifically from the sale of the Galaz Contract Area - giving the company an ultimate profit for 2015 of USD10.6 million compared to a GBP5.7 million profit in 2014.
Roxi sold its entire interest in Galaz in order to focus and fund its current flagship asset, the BNG Contract Area, where Roxi drilled the A5, 801 and A6 deep wells throughout the year. Those deep wells are not yet contributing to production but tests are set to be carried out shortly.
"Progress in getting our deep wells to flow has been slower than we would have wished. We continue to wait for confirmation of management's belief that the deep prospects at BNG, which to date have been targeted with the three deep wells drilled, will prove BNG to be an extremely valuable field," said the company.
The five existing shallow wells at BNG produced an average of 825 barrels of oil per day in 2015, of which 487 barrels were net to Roxi as it holds a 58.4% working interest. The other producing asset, Munaily, produced an average of 75 barrels of oil per day, of which 44 barrels were net to Roxi through its 58.41% working interest in the area.
Importantly, oil from the main producing BNG area has to be sold at domestic prices under the terms of the current licence but oil produced from Munaily may be sold at international oil prices. The Kazakh domestic prices are "significantly lower" than international prices.
Brent, a benchmark for international oil prices, was trading below USD51 per barrel on Friday morning after breaking the USD50 threshold on May 26.
Roxi invested USD23.0 million into BNG during 2015 and the company is hoping production can materially increase through the new deep wells that have been drilled, yet those all-important tests will have to confirm whether or not the wells are successful ones that can contribute toward commercial production rates.
Ultimately, Roxi hopes to have transformed BNG by the summer of 2018, when it hopes to have secured a full production licence and significantly more reserves and higher production that what it currently has locked in at the asset.
Roxi conceded that exploration does "not generally fit equity financing cycles" as lenders tighten their purse-strings in light of lower oil prices and increasingly challenging conditions. However, Roxi said there has "never been a better time to explore and develop oil fields" for companies that have "alternative access to funding".
The company is keen to progress and develop BNG as it is in the process of increasing its working interest to 99%, meaning the asset will be the biggest producer in the portfolio and the asset in which Roxi holds its largest stake.
Although the wider market looks to hunker down and focus on assets that are already producing, Roxi sees potential to take advantage of lower rig and service costs by pushing forward with the development of BNG. Roxi said it is currently developing the asset in line with the funds generated from production, but conceded further funds may be required in the future.
"In the event the Roxi board decides to develop BNG at a rate faster than could be funded by current production additional equity or debt would be required," said Roxi.
Each shallow well costs Roxi around USD1.5 to USD2.0 million to drill whilst deep wells cost between USD4.0 to USD6.0 million.
"The group continually monitors the financing arrangements to ensure the continuation of the operational activities and expects to fund the costs of its planned development programme over the next 12 months from the proceeds of the receipt of oil plus, if appropriate, from the introduction of new equity of loan capital," the company added.
Roxi shares were trading down 0.5% to 9.20 pence per share on Friday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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