LONDON (Alliance News) - Great Eastern Energy Corp Ltd on Monday said its financial performance has been, and is continuing to be, hurt by operating problems at one of its largest customer's plants, causing lower revenue, earnings and cash generation in its last financial year.
Great Eastern Energy produces coal-bed methane in India and warned back in October last year that its results would struggle to meet expectations.
The customer was taking gas from Great Eastern Energy to process in its plant but could not take any deliveries due to issues with its plant. The London-listed company agreed a minimum offtake agreement with the customer in question to help mitigate the problem whilst the plant issue is resolved.
Great Eastern Energy said that offtake agreement, in place since mid-November, is being adhered to and said the issues with the customer's plant are expected to be "fully resolved" by September this year.
However, Great Eastern Energy's financial results in the financial year to the end of March were heavily affected by the issues, knocking revenue by USD8.7 million and pretax cash generation by USD8.0 million, it said.
The company, as a result, has adopted a new accounting policy, charging the majority of its expenses and interest, which were earlier being capitalised, to operating results, stating this was "in line with best industry practice".
If the recently ended financial year and the previous year that ended in March 2015 were both accounted for using the new method, then Great Eastern Energy's profit before tax and certain items fell to USD5.9 million in the recently ended year from USD8.1 million the year before.
That fall in profit came as revenue dropped to USD29.4 million from USD37.5 million, pushing down earnings before interest, tax, depreciation and amortisation to USD17.5 million from USD21.8 million. Cash generation, however, rose slightly to USD11.6 million from USD11.4 million.
On an audited basis, without the new accounting method, Great Eastern Energy's results fared much worse year-on-year. The company moved into the red by reporting a pretax loss before certain items of USD1.9 million compared to a USD16.8 million profit last year, whilst Ebitda fell to USD14.7 million from USD24.8 million. Cash generation plummeted to USD3.8 million from USD20.1 million.
Net debt, which is unaffected by the accounting method used, stood at USD92.6 million at the end of March, compared to USD93.7 million at the end of March 2015.
Operationally, Great Eastern Energy said production rose 15% in the year to 14.8 million standard cubic feet of gas per day from 12.8 million. Since the end of the year, production has continued to rise to average 16.5 million standard cubic feet per day in July, it said.
Great Eastern Energy said the rate of monthly production growth between the end of November last year to July 2016 was 3.2 times higher than the rate of monthly growth between July 2015 to November 2015.
However, sales during the last financial year fell to 8.6 million standard cubic feet per day from 10.2 million standard cubic feet per day and prices were also lower, averaging INR21.32 compared to INR21.43 last year, equating to USD10.26 per million British thermal units compared to USD11.04 last year.
At the end of July 2016, Great Eastern Energy had 150 wells, of which 113 were producing and 37 were dewatering. In November last year, the company also had 150 wells, but only 111 of them were producing whilst 39 were dewatering.
Great Eastern Energy is attempting to double the amount of total wells through further drilling on the Raniganj (South) block.
"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 maintaining our strong balance sheet. Our underlying consistent performance during the period and favourable market conditions gives us confidence for the future," said Managing Director and Chief Executive Prashant Modi.
Great Eastern Energy shares were untraded at 27.36 pence per share on Monday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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