LONDON (Alliance News) - Great Eastern Energy Corp Ltd on Monday said revenue and profit in the first half of the financial year fell after the company sold less gas at lower prices, but said its underlying performance gives it "confidence for the future".
The fall in earnings will not be a surprise to investors after the company warned back in October that its first half results would be below market expectations because of issues at one of its largest customer's plants.
The coal bed methane company operating in India said profit before tax, the restatement of the foreign currency loans and derivatives and deferred tax expense in the six months ended September 30 totalled USD5.5 million. The company did not provide a comparative figure for a year earlier.
However, the profit after tax but before the restatement of the foreign currency loans and derivatives and deferred tax expense fell to USD5.4 million from USD8.9 million a year ago.
Earnings before interest, tax, depreciation and amortisation also fell to USD10.7 million from USD13.0 million.
Those results came after revenue in the six month period dropped to USD16.5 million from USD19.5 million, with total cash generation falling to USD7.2 million from USD10.8 million.
Revenue fell as a result of lower sales and lower gas prices, partially caused by problems announced in October at one of the company's largest customer's plants. On Monday, the company said its team has now resolved the issue for the customer. The pair also have agreed a minimum guaranteed offtake deal, whereby the customer will take a minimum amount of gas from Great Eastern.
Great Eastern said the minimum guaranteed offtake quantity had been put in place to "safe guard the company's interest going forward", but did not reveal any further details.
The company sold an average of 9.48 million standard cubic feet of gas per day in the first half of the year, compared to 10.38 million standard cubic feet per day a year ago.
Prices averaged INR21.31 per standard cubic metre of gas in the period compared to INR21.56 per cubic metre a year ago, with dollar prices dropping to USD10.45 per cubic metre from USD11.28 a year ago.
Great Eastern Energy said production in July averaged 15.1 million standard cubic feet of gas per day before rising to 15.3 million standard cubic feet per day in November. The company did not provide a comparative figure, but average production in the financial year ended March 31, 2015, came in at 12.8 million standard cubic feet per day.
At the end of November, the company had 150 Indian wells, of which 111 were producing with the other 39 dewatering. At the end of July, it had 108 wells producing and at the end of November 2014, the company had 101 wells producing.
Great Eastern Energy plans to drill another 144 wells on its acreage covered by the Raniganj (South) block whilst continuing with its strategy to optimise production from the existing wells and securing sales opportunities in a new region, Asansol-Raniganj-Durgapur, using its own dedicated pipeline network.
On a more positive note, the company's net debt at the end of September stood at USD90.3 million, yielding a debt to equity ratio of 1.04, compared to net debt of USD101.8 million and a ratio of 1.22 at the end of September 2014.
"We are continuing to make strong progress with our strategic goals of further optimising well production, planning second phases of drilling on the Raniganj (South) block and identifying new reserves, whilst improving the debt [to] equity ratio. Our underlying performance during the period gives us confidence for the future," said Prashant Modi, Great Eastern's managing director and chief executive.
Coal-bed methane is an unconventional source of natural gas that requires methods similar to fracking to extract. Countries all over the world, including the US, the UK, Australia and China, are currently exploring the technique of using old coal seams to produce natural gas to boost domestic energy production.
Great Eastern Energy shares were untraded at 31.02 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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