Download - Pa resources q3 2013 results 23 october 2013
Third Quarter 2013
Mark McAllister, CEO
Tomas Hedström, CFO
Stockholm, 23 October 2013
Today’s topics
2
Q3
>> NEW CEO
Short introduction to Mark McAllister
>> OPERATIONAL UPDATE
Recent developments
>> FINANCIAL HIGHLIGHTS
Earnings, key ratios and one-offs
>> PA RESOURCES’ WAY FORWARD
Follow up on strategic review and outlook
3
Mark McAllister New CEO since 1 October
• Petroleum Engineer with Engineering MA from
Cambridge University
• Joined the oil industry in 1979 with Conoco
• Worked for Operators in the North Sea, FSU and
North Africa
• Held senior management positions at Monument
Exploration and LASMO plc, two of the most
successful UK Independents
• Founded and ran two new UK Independents,
Acorn Oil & Gas and Fairfield Energy
• These companies have played a significant role in
the rationalisation of the mature North Sea
• Was Chairman of OSPRAG, the joint industry-
government body formed as a North Sea response
to the Macondo blow-out
• Awarded Honorary Doctorate from Robert Gordons
University in Aberdeen for services to the North
Sea oil industry
4
Q3 summary Strengthened balance sheet
Q3 HIGHLIGHTS
• Strengthened balance sheet through
completed rights issue and bond issue
• Main owner Gunvor Group now holds ~50%
• Advanced 12/06 farm-out negotiations and
MPS farm-out discussions in progress
• Maintenance and upgrade shut-in of Didon
field extended until early November
• Alen production start, gas volumes slowly
increased
• Diega appraisal programme underway
Operational update
Q1
6
West Africa: MPS farm-out and Azurite abandonment
• Early abandonment to commence in Q4 2013
• Final lifting expected in Q4 2013 to mainly cover
PA Resources’ share of regular abandonment cash
costs
• One-off decommissioning costs of SEK 469 million
reported in Q3, costs relating to the FDPSO vessel
and Murphy’s Congo office
Azurite field (35% interest)
Mer Profonde Sud (85% interest)
• Farm-out data room process attracted considerable
interest
• PA Resources in the process of finalising agreement
to divest majority stake and operatorship
• Farm-out subject to government approval, prior to
enter third and final renewal period in November
2013 incurring one firm well commitment
• If third period not entered, licence to be relinquished
giving rise to impairment of current book value
(approx. SEK 800 million)
EG Block I – Diega appraisal programme underway PA Resources 5.7%
1. Carla North and South exploration/appraisal
• 2011 discovery in adjacent Block O (’Carla
North’) appraised in 2013 with additional oil
reservoir found
• Carla South exploration well in Block I and
its sidetrack encountered oil in two different
good quality sandstone reservoirs
• Implication of results being evaluated
2. Diega appraisal
• Pilot how drilled and logged in Q3 followed
by a horizontal sidetrack
• Diega oil production test being performed
• Possible further drilling in 2014 and near-
term submission of plan of development
• Advanced discussion on initial allocation of
Diega field (between Block O and Block I)
7
Licence Group: Operator Noble Energy (38%), Atlas Petroleum
(27.55%), Glencore Xstrata (23.75%), PA Resources (5.7%),
GEPetrol (5%)
Block I Drilling program - targeting next developments
Carla South
1 2
Diega
8
North Africa – Didon shut-in and farm-out process
• Production shut in since 1 July
• FSO-vessel undergoing a comprehensive recertifica-
tion and upgrade work programme conducted in
Palumbo Dry Dock in Malta
• Extensive shut down maintenance programme on
production platform and production riser change out
• Production restart is now re-scheduled to early
November
• Production shortfall expected to be partly compen-
sated by higher production when field is back on
stream
• Vessel prepared for field life extension programme
Didon field (30% interest)
Farm-out process
• Agreement to farm-out 70% and operatorship of
Tunisian offshore assets to EnQuest signed in May
2013
• Notification and approval process has commenced,
delayed due to political situation in Tunisia
• Transaction completion not expected before Q1 2014
9
North Sea – Advanced 12/06 negotiations
• Rig discussions continue for 2014/2015 drilling, with
Lille John appraisal as priority
• Studies continue of development options for Broder
Tuck field, towards decision in H1 2014
• PA Resources currently finalising negotiations
regarding a farm-out of 40% interest in the licence,
reducing the interest from 64% to 24%
12/06 (64% interest)
Gita evaluation (26.8% interest)
• Operator received regulatory approval for continued
evaluation of remaining prospectivity until Q2 2014,
Northern portion of licence to be relinquished
UKCS Block 22/19a (100% interest)
• PA Resources operator of the Bergman (formerly
Fiddich) gas/condensate discovery from 1984
• Initial discussion with potential candidate host
facilities to assess scope for tie-back to nearby
infrastructure
• Gunvor Group is a leading global energy
commodities trader with a turnover of more than
USD 93 billion, book equity in excess of USD
2.2 billion and USD 5.6 billion in available
liquidity at year end 2012
• Mainly owned by Mr Guennadi Timtchenko and
Mr Torbjörn Törnqvist
• Year end 2012, Gunvor Group had USD 461
million in investments in associates and joint
ventures
• Gunvor Group also has USD 84 million
outstanding to PA Resources through an RBL
(reserve based loan)
Gunvor Group and Lorito – New main owners
10
• Following the equity issue, Gunvor
owns 49.96% of PA Resources after
invested c. SEK 550 million in new
equity
• Lorito Holdings Ltd (Lundin family-
owned trust) owns 9.69% after
investing c. SEK 120 million in the
rights issue
• Both Gunvor Group and Lorito
Holdings are financially strong owners
with significant experience from the oil
and gas industry and related
businesses
Largest shareholders and Nomination Committee
11
Largest shareholders per 30 Sep. 2013 Capital/
votes
GUNVOR GROUP LTD 49.96%
LORITO HOLDINGS LTD 9.69%
CREDIT AGRICOLE (SUISSE) SA 3.84%
AVANZA PENSION 2.59%
ÅGERUP FASTIGHETER AB 2.06%
ORIGINAT AB 1.70%
NORDNET PENSIONSFÖRSÄKRING AB 1.02%
HAJSKÄRET INVEST AB 0.91%
STIFTELSEN OLLE ENGKVIST 0.80%
AB TRACTION 0.76%
Total, 10 largest shareholders 73.33%
Other shareholders 26.67%
Total 100.00%
NOMINATION COMMITTEE 2014
• Dirk Jonker (Gunvor Group)
• Garrett Soden (Lorito Holdings)
• Göran Ågerup (Ågerup Fastigheter)
• Sven A Olsson, Chairman of the Board
The Nomination Committee’s proposal
regarding the Board of Directors, election of
auditors, remuneration and more will be
published ahead of the AGM on 16 April 2014
Financial highlights
Q1
8 7
00
8 0
00
7 7
00
7 1
00
6 8
00
5 7
00
4 2
00
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013
PAR production Before Tunisian farm-out
13
Production and sales in Q3
bopd Ytd
2013
Q3
2013
Sept.
2013
West Africa 4,200 3,800 3,800
North Africa 700 400 300
Group Total 4,900 4,200 4,100
• ASENG: Oil production declined slightly, consistent
with expectations and facility’s gas handling capacity
• AZURITE: Early field abandonment to commence
in Q4 2013, final lifting in Q4 2013
• TUNISIA: Shut-in of Didon since 1 July due to
maintenance work programme which has been
extended with expected completion early November
• PRICE: PA Resources realised price of USD 108 per
barrel compared to Brent average of USD 110
Average production (bopd)
Average sales price (USD/bbl)
120
109 109 106 113
103 108
119 108 109 110 113
102
110
20
40
60
80
100
120
140
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013
PA Resources Brent
Earnings and key ratios
14
Q3 2013 Q2 2013
Production (bopd)* 4,200 4,800
Oil price (USD/barrel) 108 103
Revenue (SEK million) 293 332
EBITDA (SEK million)** 64 140
Profit before tax
(SEK million)*** 10 -2
Profit for the period
(SEK million) -501 -350
Earnings per share (SEK)**** -8.53 -12.89
* Subject to the necessary approvals, PA Resources´ working interest in the Didon field in Tunisia
has been reduced from 100% to 30% through the farm-out transaction with EnQuest.
** Figures for Q3 and Q2 exclude non-cash, one-off costs of SEK 469 million and SEK 462 million
respectively.
*** Figures for Q3 and Q2 exclude non-cash, one-off costs of SEK 469 million and SEK 647 million
respectively.
**** The rights issue in September 2013 gave rise to retrospective adjustments
KEY COMMENTS Q3 vs Q2
• Revenue negatively impacted by lower
production counteracted by higher oil
price
• Cost for Didon recertification and
upgrade programme of SEK 48 million
• Decommissioning costs from early
Azurite abandonment of SEK 469
million, presented as one-off costs
Q3 & Q2 comparison after one-offs
15
SEK million Q3 2013 Q2 2013
Profit for the period -501 -350
One-off costs
Decommissioning costs 469 0
9/06 (Gita) 0 88
2008/17 (Block 8) 0 97
Tunisian farm-out 0 117
Net exchange gains/losses -46 3
Didon 70% net result impact 0 8
Profit for the period
(Adjusted) -78 -38
KEY COMMENTS
• Adjusted profit for Q3 and Q2 amounted
to SEK -78 million and SEK -38 million
respectively
• Difference of SEK -40 million is mainly
explained by cost for Didon recertification
and upgrade programme.
Q3 2013 Q2 2013
Production (bopd) 4,200 4,800
Oil price USD(barrel) 108 103
Currency (USDSEK) 6.52 6.50
Cash flow
16
SEK million Q3 2013 Q2 2013 Jan.-Sept.
2013
Cash flow from operations -13 -27 -110
Capex -74 -38 -171
Rights issues 810 0 1,413
Loans raised 0 38 38
Amortisation of debt -27 -121 -392
Cash flow from financing 783 -83 1,059
Net cash flow 696 -149 778
KEY COMMENTS
• Q3 capex of SEK 74 million, mainly
related to drilling activities in Block I in
Equatorial Guinea
• Full year capex forecast of SEK 250-
380 million, expected outcome in the
lower part of the range
• Rights issue of SEK 810 million, net
after transaction costs
• Cash and cash equivalents at the end
of the period, SEK 835 million
Current equity and debt situation
17
KEY COMMENTS
• Equity amounted to SEK 2,144 million
• New bond loan of SEK 750 million issued
and previous SEK 850 million repaid in
October
Q3 2013 Q2 2013 Q1 2013 Covenants
Book Equity (SEK
million) 2,144 1,973 2,201 >1,000
Book Equity to
Capital Employed 49% 46% 48% >40%
Net debt (SEK million) 1,422 2,197 2,111 N/A
Covenants and Net Debt development
Debt maturity per 23 Oct. 2013 (SEK million)
0
100
200
300
400
500
600
700
800
January 2014 April 2014 April 2015 March 2016 April 2016
Bond Loan 900m NOK
Bond Loan 750m SEK
Convertible Bond
Way forward and outlook
Q1
19
New strategic plan – basis for ongoing review
• Current producing assets in natural decline, but provide
important cash flow for several years to come
• Several appraisal and development assets expected to
come on stream within the next few years
• The scenario entails an average production of 15,000 –
20,000 boepd in 2018 net to PA Resources
• The new strategic plan focuses on the following assets
to be developed into production:
» Zarat (13.7 mmboe 2P and 6 mmboe in 2C),first oil 2017
» Elyssa (16 mmboe 2C), first gas 2016
» Block I (1.7 mmboe – Diega or Carla South), first oil 2017
» Denmark 12/06 (8 mmboe – Broder Tuck or Lille John),
first production 2018
• Relatively conservative scenario with only three
discovered fields brought to development
• Tangible upside in discovered hydrocarbons as well as
exploration potential
0
5 000
10 000
15 000
20 000
25 000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Currently producing Fields to be developed
Forecasted production profile (boepd)
Asset portfolio – Strategic plan assumptions
20
Take out Greenland
Production
Exploration and development
Producing assets
today
Development
assets included in
new strategic plan
Key Assets NOT
included in new
strategic plan
• Tunisia Offshore: Didon
• Tunisia Onshore: DST fields
• Equatorial Guinea: Aseng and Alen
• Tunisia: Didon and DST investment cases, onshore exploration
• North Sea: Bergman, German exploration
• Equatorial Guinea: Block I gas development
• Congo: MPS exploration
• Tunisia: Zarat and Elyssa
• Equatorial Guinea: Carla South or Diega
• Denmark: Broder Tuck or Lille John
21
• Capex required to reach production of 15,000 -20,000
boepd by 2018 estimated at $600 million
• Majority of capex is related to development costs
• Assets are located close to existing infrastructure
which reduces capex and enables cost efficient
development
• Impact of farm-out carries is to back-end loaded PA
capex requirement towards 2016-2017
• Majority of medium term capex is for Tunisian
offshore assets, Denmark and Equatorial Guinea
• Key requirement of farm-in Operators was a track
record of cost control and project delivery in similar
developments
0
50
100
150
200
250
300
2014 2015 2016 2017 2018
CAPEX plan 2014-2017 (USD million)
Medium term CAPEX plan 2014-2017
Strategic review Path to completion
22
• Strategic review initiated after AGM in May
• Financial situation stabilised in Q3 through
completed rights issue and bond issue
• Mid to long term asset development plan
presented with Q2 Report and Rights issue
• First step was to realise asset values and reduce
exposure through farm-out campaign to
experienced and efficient Operators
• Next phase is to provide a more rigorous
definition of the portfolio upside
• Then a refinancing plan will be put in place to
allow these field developments to be completed
• Final outcome of this strategic review process is
expected in Q1 2014
Thank you! Q1
Q4 Report on 6 February 2014