Valeura Energy Inc (LON:VLU), an upstream oil and gas company with assets in the Thrace Basin of Turkey, has reported its unaudited financial and operating results for the three month period ended September 30, 2021.
Highlights
• Financial position – Cash position of US$41.7 million at September 30, 2021;
• Royalties – Valeura is now due royalty payments in connection with the sale of its conventional gas producing business. Given current gas prices, these are now expected to reach the capped total of US$2.5 million within the coming year; and
• Strategy – Continuing to pursue near-term inorganic growth opportunities and seeking a suitable partner to farm in to the Company’s 20 Tcfe unrisked mean prospective resource deep, tight gas play.
Sean Guest, President and CEO commented:
“Our third quarter results demonstrate the stability of our financial position as we continue to pursue our strategy from a position of strength. With no debt, a cash position of US$41.7 million, and a lean organisation, we are aggressively evaluating new business opportunities without putting strain on our balance sheet.
“During the third quarter we have experienced a strengthening in the business environment for global upstream oil and gas investments, with stronger benchmark oil and gas prices. This reinforces our view on the ability for mergers and acquisitions-led growth to contribute meaningful near-term cash flow, and we remain especially focused on those opportunities which also provide the potential for follow-on investment in the medium term.
“We are encouraged by the substantial improvement in European gas market fundamentals, as well. This underscores the inherent long-term value of our 20 Tcfe unrisked mean prospective resource gas play. We also stand to benefit directly from increased gas prices in the near term by the start of royalty payments from the shallow gas producing business we sold earlier this year. We anticipate receiving the full capped maximum royalty payment of $2.5 million within the coming year.”
Financial position and Royalty
As of the end of Q3, Valuera had cash and cash equivalent resources totalling US$41.7 million, and no debt.
Associated with the sale of its conventional gas producing business which closed in Q2 2021, Valeura is due a royalty over the next five years of between US$1.0 and $2.5 million, related to gas prices. The Company has received confirmation that a royalty payment is due for September and, given the continued positive environment for gas prices, the royalty payment is expected to increase for Q4 2021. Under the current gas price outlook, Valeura expects to receive the full US$2.5 million in royalty payments within the coming year and this has been recorded as an increase in the accounts receivable.
The Company’s near and mid-term financial obligations are minimal, comprised only of G&A associated with its small and lean organisation, and modest licence commitments required to keep its Turkish land holdings in good standing.
Strategy
With its strong financial position and internationally experienced team, Valeura is well positioned to grow by way of mergers and acquisitions in a number of international jurisdictions including the Mediterranean basin and other areas where the management and board have experience. The Company is evaluating several targets that could provide near-term cashflow plus the opportunity for medium-term re-investment to generate further value through growth. Valeura is squarely focussed on only executing transactions that will generate material value for shareholders.
In the longer term, Valeura intends to deliver value from its deep, unconventional tight gas play in the Thrace Basin. Its three exploration licences in the core of the Deep Gas Play are valid up to June 27, 2022 and, under Turkey’s licence terms, the Company has the ability to maintain these assets for up to approximately five more years through work programme commitments, which do not require material near term cost outlays. Given recent gas price increases and the focus on gas supply to Europe, the Company is continuing with its plan to farm out a portion of its interest in the Deep Gas Play in order to jointly pursue the next phase of appraisal work.
Additional information and commentary on the three months ended September 30, 2021 is included in Valeura Energy’s management’s discussion and analysis, which is available on the Company’s website and on www.sedar.com.
