Valeura Energy Inc. (TSX:VLE, LON:VLU), an upstream oil and gas company with assets in the Thrace Basin of Turkey and an announced acquisition in the offshore Gulf of Thailand, has reported its unaudited financial and operating results for the three month period ended March 31, 2022.
Highlights
· Strong financial position, including cash of US$39.8 million at March 31, 2022;
· Royalty payments of US$2.1 million collected in Q1 2022, with a further US$0.4 million due and invoiced;
· Acquisition announced subsequent to end of the quarter to acquire certain Gulf of Thailand assets with a focus on near-term production and cash flow and further growth in 2023; and
· Continuing strategic focus on inorganic growth in Southeast Asia in addition to seeking a suitable partner to farm in to the Company’s Turkish 20 Tcfe unrisked mean prospective resource tight gas appraisal play.
Sean Guest, President and CEO of Valeura commented:
“We have carefully preserved our strong financial position, resulting in nearly $40 million in cash resources at the end of Q1 2022, which was bolstered by incoming royalty payments. This has facilitated our announced Gulf of Thailand acquisition without any share dilution to our shareholders.
We expect to close the deal in Q2 2022 and our management and our new team in Thailand are looking forward to returning to active operations. We are already progressing the key commercial arrangements and procurement work streams required to bring the Wassana oil field back to production later this year, at an expected rate of 3,300 bbls/d gross.
This acquisition is bringing balance into our portfolio by providing strong near-term cash flow and further organic growth opportunities for 2023. At the same time our strategy remains unchanged and we are evaluating further M&A opportunities while continuing to seek out a suitable partner for our deep gas play in Turkey which provides very significant upside potential.”
Financial Position
As of the end of Q1 2022, Valeura had cash and cash equivalent resources totaling US$39.8 million, and no debt. The cash position reflects having spent approximately US$1 million of initial cash consideration paid for the Acquisition (defined below), and US$1.2 million incurred in transaction costs during Q1 2022.
Associated with the sale of its conventional gas producing business in 2021, Valeura is due a royalty of up to $2.5 million. Given the recent high price of gas in Turkey, the Company received US$2.1 million in royalty payments by end Q1 2022, and has invoiced the remaining US$0.4 million, which is now due and expected to be collected in Q2 2022.
Acquisition and near-term priority
Subsequent to the end of Q1 2022, on April 28, 2022, Valeura announced that it had entered into an agreement to acquire all of the shares of KrisEnergy International (Thailand) Holdings Ltd. (the “SPA“) which holds an interest in two operated licences offshore Thailand – licence G10/48 (89% working interest) and licence G6/48 (43% working interest) in the Rossukon oil field – for total initial cash consideration of US$3.1 million, plus contingent payments of up to a further US$7.0 million relating to future development milestones. Separately, Valeura agreed to purchase the mobile offshore production unit located on the Wassana oil field in the G10/48 licence for consideration of US$9.2 million (the “MOPU Purchase“) which will be phased over approximately 14 months. Valeura expects to fund both the SPA and the MOPU Purchase (together the “Acquisition“) from cash on hand and from initial cash flows generated by the assets. The Acquisition is expected to close in Q2 2022.
Based on the Company’s internal assessment (non-independent) effective December 31, 2021, the Acquisition includes total proved and probable (2P) reserves of 4.0 mmbbls of oil and an aggregate 13.3 mmboe of 2C contingent unrisked resources, net to the working interests being acquired.
In parallel with preparations to close the Acquisition, Valeura is already working with the local operating team in Thailand to prepare for the restart of production operations from the Wassana field in the G10/48 licence. The Company is currently pursuing all key commercial arrangements and procurement work streams required for production operations to resume as soon as practicable after the Acquisition closes. Oil production is expected in Q4 2022 and the Company anticipates initial production rates of approximately 3,300 bbls/d gross.
Valeura anticipates making additional announcements during Q2 2022 on closing the Acquisition and thereafter on the award of contracts for the restart of production operations at Wassana.
Ongoing Strategy
With the Company’s continued strong financial position, even considering the funds required for the Acquisition, Valeura has created a foundation in the Southeast Asia region and is well positioned to grow further by way of mergers and acquisitions. This capability is further bolstered by the addition of an experienced operating team in Thailand and a leadership team experienced across the Southeast Asia region. As such, the Company is continuing to evaluate additional targets that will further bolster near-term cashflow while providing opportunities for additional medium-term re-investment to generate value through further growth.
Valeura’s 20 Tcfe prospective resources tight gas appraisal play in Turkey represents a significant source of potential long-term value. Valeura is continuing its search for a suitable farm-in partner for the tight gas appraisal play. The Company believes securing a partner is the most prudent first step before committing significant capital to the next phase of the appraisal drilling. Valeura is poised to resume deep drilling operations rapidly upon securing a partner, with several locations already in the advanced permitting stage.
Annual Meeting
Valeura has scheduled its annual meeting of shareholders for June 23, 2022. Meeting materials will be mailed in the middle of May.
