(Alliance News) - Wentworth Resources PLC on Monday said average 2019 production from the Mnazi Bay joint venture in Tanzania was in the middle of guidance "despite several challenges".
Shares in Wentworth closed down 7.6% at 21.25 pence in London.
The Mnazi Bay production sharing agreement is in onshore Tanzania and is operated by 48% owner Maurel et Prom. Tanzania Petroleum Development Corp has a 20% stake, while Wentworth's interest is 32%.
Daily production from Mnazi Bay in 2019 averaged gross of 70.29 million standard cubic feet per day, right in the middle of the 60 million to 72 million standard cubic feet per day guidance range.
"This was despite several challenges during the year, including abnormally high rainfall resulting in hydro-power displacing gas-generated power, increased competitive gas supply from the Songo Songo field into the National Natural Gas Infrastructure pipeline, and the temporary shut-in of the MB-2 well," Wentworth noted.
In the future, Wentworth is expecting a "modest growth in gas-fired power generation" to be offset by "continued strong hydro-power" due to high rainfall outside of the typical wet season plus competition from Songo Songo. In 2019, the long and short rainy seasons had more than twice the rainfall and a longer duration than at any corresponding period in the last ten years.
January rainfall was also higher than long-term averages, leading to a lower gas demand. Should rainfall totals return to 2008 to 2018 levels, higher gas deliveries may occur.
Pan Africa Energy Tanzania commenced gas sales into the National Natural Gas Infrastructure in December 2018 as part of a new gas sales agreement, which provides for gas sales of between 20 million and 30 million standard cubic feet per day. Allocation between Mnazi Bay and Songo Songo has so far suggested increased demand will be split in proportion to gas sales agreement totals until the upper end of the Pan Africa Energy Tanzania gas sales agreement is met, following which additional demand is likely to be supplied by Mnazi Bay.
In September 2019, the Mnazi Bay joint venture partners inked a full gas sales agreement with Tanzania Petroleum Development Co including a take-or-pay provision at 85% of the daily committed quotient - which for 2020 is 80 million standard cubic feet per day. As such, is annual volumes drop below 68 million standard cubic feet per day a take-or-pay clause will fgo into effect.
Given this, production guidance for Mnazi bay in 2020 is between 65 million and 75 million standard cubic feet per day gross, to be reviewed midway through the years around the end of the longer rainy season.
The Mazi bay joint venture partners have agreed to a "limited" work programme in 2020, of which USD4.6 million is net to Wentworth.
As ba result of "consistent monthly payments for gas sales", Wentworth has fully repaid its term loan - including a final USD1.7 million repayment plus interest on Friday last week.
As at December 31, Wentworth's net cash balance was USD13.5 million. On that date, the full field proved and probable gross reserves for Mnazi bay stood at 468.9 billion cubic feet, of which Wentworth's shares is 95.1 billion cubic feet. This compares to 481.9 billion cubic feet at the end of December 2018 despite 2019 production of 25.7 billion cubic feet.
"The fact that reserves decreased by less than production is attributable to the stronger than anticipated pressures measured across the field, which indicates larger in-place and recoverable volumes," said Wentworth.
The company intends to declare a final 2019 dividend along with its preliminary results in April.
Chief Executive Katherine Roe said: "We are pleased that the [joint venture] partners have successfully repaired the MB-2 flowline and recompleted MB-4, which will allow Mnazi Bay to sustainably increase production to satisfy demand from the Tanzanian market. Despite a challenging 2019, we met our revised production guidance and have exited the year in a strong operational position and continue to fully align ourselves with the objectives of the government and our joint venture partners. Our balance sheet has continued to strengthen as we have now fully repaid our long-term debt and continue to receive regular payments, enabling the company to return cash to shareholders via our dividend policy. We look forward to building on this foundation, leveraging our strengthened position in Tanzania and East Africa."
By Anna Farley; annafarley@alliancenews.com
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