Operational update
Panoro Energy ASA (“Panoro” or the “Company”) is pleased to provide an update on its ongoing divestment processes as well as an operational update on its Brazil and West African assets.
1) Manati, Brazil
Natural gas production from the Manati field averaged 5.00 MMm3/day (3,140 boe/day net to Panoro) in the second quarter 2013. The average production was lower than the first quarter due to the scheduled 21 day shutdown in April for maintenance of the gas treatment plant (EVF) and the platform (PMNT-1). The shutdown went according to plan and the field is producing again from all six wells.
On May 15, 2013 Panoro announced the divestment of its Brazilian subsidiary Rio das Contas to GeoPark which includes Panoro’s 10 % interest in Manati. The purchase consideration for the shares in Rio das Contas comprises an initial payment of USD 140 million, adjusted by working capital, with an effective date of the transaction April 30, 2013 to be paid in cash upon closing. In addition, a contingent earn-out of up to USD 20 million is to be paid in cash over the 5-year period from January 1, 2013 to December 31, 2017. The closing of the transaction will, amongst other conditions, depend on approval by the Brazilian regulatory authority ANP which can be anticipated within a 4-9 month timeframe from the May 15, 2013 signing date. The relevant documentation relating to the assignment process has been filed with ANP and is progressing according to plan.
2) OML 113, Nigeria
On June 18, 2013 Panoro announced that its wholly owned subsidiary Pan-Petroleum Aje Limited entered into a Sale and Purchase Agreement with Lekoil for the sale of Panoro's 6.5% participating interest in the OML 113 licence offshore Nigeria for a consideration of USD 30 million. In accordance with the SPA Lekoil has provided Panoro with a bid bond of USD 3 million. Within ninety (90) days of entering into the SPA, Lekoil is required to deposit into an escrow account the cash consideration of USD 30 million plus certain costs incurred from January 1, 2013. The transaction is expected to complete before year end.
3) Mengo-Kundji-Bindi (MKB), Republic of Congo
On July 2, 2013 Panoro announced that the sale of the MKB asset to SNPC has been completed and proceeds have been received by Panoro. The transaction is not expected to generate any payable taxes.
4) BS-3, Brazil
Petrobras has requested ANP to provide a one-year suspension of the concession period for the BS-3 fields. In a recent response ANP has given Petrobras three months to re-submit development plans for the BS-3 assets and has communicated that the BS-3 concessions can be revoked unless the concession holders meet ANP’s requirements. The development plans need to include the drilling of appraisal wells to test the low permeability B1 zone. Petrobras responded to ANP with a request to reconsider the three-month ruling and further extend the time allowed to re-submit the development plans. The main obstacles to moving the BS-3 project forward are the appraisal wells required by ANP and a gas export solution. Panoro is working on farming out the Company’s interest in these assets or alternatively selling its subsidiary company Panoro Energy do Brasil.
5) Dussafu, Gabon
The Joint Venture is finalizing the subsurface studies of the Ruche and Tortue discoveries. Panoro is very encouraged by the results, however additional work needs to be completed before concluding the studies. The operator, Harvest Natural Resources, is working on a fast track development scheme to include the Tortue, Ruche and Walt Whitman discoveries. Once this study is completed the partners will take a decision regarding the declaration of commerciality. This decision is expected to take place later this year. The central 3D seismic processing has now been completed and technical interpretation of the seismic has commenced and is generating additional prospects in the licence area. In addition, a new outboard 3D seismic is being considered to target the Dentale potential. This potential has been observed in the existing 2D data and is now also strongly supported by the high quality Dentale reservoir found in the Tortue discovery.
6) General & Administration costs
The Company has been focusing on reducing its general and administration costs. The cost cutting process is progressing and as a consequence of the ongoing divestment of assets, the Company expects to have 10-12 employees at year end 2013 compared with 30 at year end 2012. Panoro is targeting to have closed down its Rio de Janeiro office by year end. The full benefit of the cost cutting will be seen in 2014.
7) Accounting effects and funding update
The divestments of Rio das Contas (Manati) and the OML113 (Aje) asset will be classified in the second quarter 2013 accounts as discontinued operations. They will be posted as assets held for sale in the balance sheet.
The West Africa sales processes will result in a significant reduction in payables offset by certain receivables towards joint ventures. The reduction in net payables is estimated to be around USD 15 million in the second quarter 2013 compared to first quarter 2013.
The Company’s cash position as of June 30 (net of restricted cash) will be approximately USD 75 million which includes proceeds from the MKB sale. Assuming the OML 113 and Rio das Contas transactions are closed by year end, and the current bond is repaid, we estimate the group cash position at year end 2013 will be in excess of USD 100 million and that the Company will be debt free.
8) Strategy/way forward
The Company is currently well placed with a solid cash position and divestments of non-core assets progressing well. The promising Dussafu license in Gabon forms a strong basis for growing the Company. The Company has retained Evercore to evaluate strategic options following completion of the divestments. The main options being reviewed include:
1) Organic growth building on the Dussafu asset
2) M&A opportunities
3) Return of cash to shareholders
The Company will present an update on strategy as part of the second quarter reporting on August 8, 2013.
For further information, please contact:
Anders Kapstad, Group Chief Financial Officer and Country Manager Brazil
Cell: +47 918 17 442
Email: anders.kapstad@panoroenergy.com
Carl Peter Berg, VP Commercial and Investor Relations
Cell: +47 928 05 029
Email: carl.peter.berg@panoroenergy.com
Please visit www.panoroenergy.com for more information. Panoro Energy ASA is listed on the Oslo Stock Exchange (Ticker code: “PEN”).