United Oil & Gas Plc CEO, Brian Larkin, said, 2019 has seen a continuation of both the pace and quality of activity being undertaken by United as we continue to build a full-cycle oil and gas company.
Interim Financial Statements for the Period Ended 30 June 2019
United Oil & Gas PLC (AIM: “UOG”), the AIM listed oil and gas exploration and development company announces its unaudited results for the six months ended 30 June 2019.
Year to date Highlights
· Delivering on strategy to acquire and develop a multistage portfolio of low risk development and appraisal assets in Europe/Greater Mediterranean region
· Strengthening of Executive team with appointment of David Quirke as Chief Financial Officer
· Announcement of conditional acquisition of Rockhopper Egypt Pty Ltd (“Rockhopper Egypt”)
· Signed a Heads of Terms on an agreement for the sale of the Crown Discovery, successfully monetizing the asset and delivering value to shareholders
· Admission to trading on AIM providing a sound basis for further acquisitions and development of the business
· Competent Persons Reports completed across the whole portfolio, demonstrating the quality of assets
· Preliminary award of Selva production concession and significant upgrade to Italian resources
· Colter South Discovery announced as part of successful Colter drilling campaign
· Provisionally awarded six Blocks in the UK 31st Round offshore licencing round of which four have now been confirmed
· Option secured to farm-in to Block B, onshore Benin
United Oil & Gas Plc CEO, Brian Larkin, said,
“2019 has seen a continuation of both the pace and quality of activity being undertaken by United as we continue to build a full cycle oil and gas company. We have been very active in terms of our existing assets and management of our portfolio and we have made a series of announcements covering ongoing operations, a transformational acquisition, a successful divestment and corporate development to strengthen our team.
Following completion of the acquisition of Rockhopper Egypt, which we anticipate will complete during Q4 2019, United will return to the market a significantly bigger company, with producing assets to complement our already impressive portfolio. I look forward to updating our shareholders further at that time.”
Chief Executive Officer’s Statement & Directors’ Report
The half year to date and slightly beyond, has seen United make considerable progress on our stated strategy of building a full cycle oil and gas company which delivers shareholder value by building a diversified portfolio of short-term development and production assets in Europe and the Greater Mediterranean area, and high impact assets further afield.
We began the year with the preliminary award of the Selva Production Concession, covering the Podere Maiar discovery. This is another important step on the road to first production, which is expected in late 2020. The development plan will see Selva come into production with facilities designed to produce at a gross rate of up to 150,000 cubic metres per day. At this rate, Selva will be generating significant cash flows for United which in turn will be reinvested into further high-impact activity across our portfolio.
In the UK drilling commenced on the Colter Appraisal Well in early February. The well delivered a new discovery, Colter South, which opens up new opportunity within the licence. While the side-track to Colter North encountered reservoir, it did so deeper than expected, suggesting a smaller accumulation than initially hoped. However, good oil and gas shows in the side-track at shallower intervals mirror the producing Kimmeridge oil field and provide encouragement for the prospectivity of the adjoining JV-held onshore licences.
United’s strategy is to create and manage a diverse portfolio of assets, with producing or near-to-producing assets in Europe and the Greater Mediterranean area complemented by high impact assets in Africa and the Caribbean. This reflects the expertise of the management team and the extent of the industry relationships that have been developed by the team.
In March, United announced an option to farm into Elephant Oil’s Block B, Bénin. Bénin Block B is located onshore in the Dahomey Embayment (Coastal Basin) and covers an area of 4,590 sq. km (approximately 1.1 million acres). The Block is located to the west of Bénin’s capital Cotonou continuing to the Togo border.
The Dahomey Embayment of onshore Benin is a frontier area, with no wells drilled in it to date. However, the licence is surrounded by prolific hydrocarbon producing regions, and there are excellent positive indications of a working petroleum system. At this point, the Block B licence data is limited to a single seismic line and a CGG-acquired airborne Falcon Gravity Gradiometer survey. This data suggests the presence of numerous large structures in the licence, with the potential to hold >200mmbbls. The Allada structure has already been identified by Elephant Oil as a prospect.
In the UK, United followed up their success in the 30th offshore licencing round with the award of a number of Blocks in the 31st offshore round. In June, United were provisionally awarded Blocks 14/15c, 15/11c, 15/12a, and 15/13c on a 100% basis. These licences which were formally awarded in September, cover close to 500 km² in a highly prospective area close to Marigold and Yeoman discoveries and the substantial Piper, MacCulloch and Claymore oil fields.
Additionally, United was provisionally awarded 10% interest in Blocks 98/11b and 98/12 in the English Channel, which lie contiguous with United’s 10% interest in the Colter P1918 Licence and contain the Ballard Point discovery and the eastern portion of the Colter South discovery. This aligned with the success of the Colter campaign strengthens United’s position in this area.
Portfolio management is a key aspect of the development of any successful oil and gas company, particularly one focussed on delivering value for shareholders. The divestment of the Crown Discovery announced in July will deliver an excellent return of up to US $5 million from an asset acquired less than a year ago. This result, which is in large part due to the technical work of our geological and geophysical team, will generate proceeds to further strengthen United’s balance sheet and support the growth of the Company.
The conditional acquisition of Rockhopper Egypt was also announced in July. This is a transformational deal, which will rapidly accelerate the development of the Company. Not only will the acquisition deliver United’s first production, but there is significant upside both from infill drilling and exploration. The current infill drilling campaign has resulted in production increasing from 3,800 boepd at the start of 2019 to current levels of over 5,100 boepd. The agreement with BP on both the offtake of United’s future oil and gas production, and the provision of the prepayment financing structure of up to US $8m, is another very positive development and United looks forward to developing this relationship.
Understanding our Assets
United, in co-operation with our licence partners, commissioned and published Competent Persons Reports (CPRs) on our licences in Italy, Jamaica and our UK licences covering Crown and Waddock Cross. These CPRs have confirmed the confidence that we have in our portfolio and will assist us in the development of these licences.
The Crown CPR, which is the first CPR commissioned by United on the Crown Discovery, estimates gross unrisked 2C oil contingent resources of 6.35 MMstb for this asset. The updated CPR on the Waddock Cross Field is based on recently reprocessed seismic and has increased the gross unrisked 2C oil contingent resources from 1.23 MMstb to 1.55 MMstb.
The February CPR on the Selva Gas Field was a milestone for United, confirming the company’s first reserves. The CPR reclassified previously reported gross 2C contingent resources to the higher confidence and more valuable category of 2P (proven plus probable) reserves of 13.3BCF. A subsequent update to the Italian CPR in April provided additional gross 2C contingent resources of 14.1 Bcf within the Podere Gallina licence and increased the unrisked gross best-case prospective resources to 91.5 Bcf.
A CPR on our Jamaican assets upgraded the potential of the high impact Walton-Morant licence. As well as an increase in the likelihood of success, an additional gross resource of 10MMstb was assigned to the Colibri prospect, increasing the gross unrisked prospective resources associated with the structure to 229MMstb. United have long held this prospect in high regard, and this CPR provides further support to that view. A number of other structures on the licence, including the Oriole prospect, have also been identified. The additional prospects plus the increase in gross unrisked mean prospective resources provide encouragement as progress is made towards a joint farm-down process.
Since launching the business, the management has looked to bring on board the necessary expertise to drive the business forward. The appointment of David Quirke as United’s Chief Financial Officer is another important milestone in United’s development. David’s understanding of Capital Markets and Corporate Finance particularly in the E&P sector will strengthen our ability to develop new funding avenues to fuel United’s growth.
In March, United moved to the AIM market of the London Stock Exchange. We indicated at the time that the move would help to reduce costs and to facilitate the Company in deal-making and we believe this will prove to be the case.
At time of publication of these interim results, United shares remain suspended on the AIM market as we work to complete the Rockhopper Egypt acquisition. We are confident that we will shortly return to market a larger business with an even more attractive investment case.
The Company has a strong cash position and is fully funded for its share of the current work programme across the existing assets. Proceeds from the divestment of Crown, the equity raise and drawdown of the BP prepayment financing structure, for completion of the Rockhopper Egypt acquisition will transform the capital structure of the business. As at 30th June the Company had cash balances of US$ 1.8 million.
The Company has decided to change its presentation currency from UK Sterling (GBP) to United States dollars (US$) to better reflect the Group’s expanding and international business activities and to improve investors’ ability to compare the Group’s financial results with other publicly traded businesses in the international oil and gas industry.
United has continued to make excellent progress towards our stated goal of building a full cycle oil and gas company. We anticipate that the Rockhopper Egypt acquisition will be concluded in Q4 2019. In advance of this, and post completion of the equity raise, we will recommence trading on the AIM Market of the London Stock Exchange. With this transaction, United will become a producing oil and gas company with significant cash flow. In 2020, we expect to augment that production with the arrival on stream of the Selva Field in Italy. Production from these assets s will provide funding to drive future growth in the business.
The second half of 2019 is likely to see further operational activity across our portfolio. With the operator, Egdon Resources, we are currently completing technical studies on the Waddock Cross field and are targeting drilling following the completion of technical studies. In conjunction with the operator Tullow Oil, a joint venture farm down process, which has seen considerable interest, will continue on the Walton Morant licence in Jamaica. Our geotechnical team are working to interpret the information gathered from the Colter drilling campaign and interpreting it in the context of the additional acreage awarded in the 31st UK Licensing Round.
Finally, drilling activity continues on the Abu Sennan Licence, 22% of which is currently held by Rockhopper Egypt and which is the subject of the conditional acquisition. Recent drilling has continued a strong track record of success since the start of the year, production on the Abu Sennan permit has risen from approximately 3,800 boepd to over 5,100 boepd.
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