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Columbus Energy Resources PLC

Columbus Energy Res - Operational, Financial and Management Update

RNS Number : 0009A
Columbus Energy Resources PLC
21 December 2017
 

21 December 2017

COLUMBUS ENERGY RESOURCES PLC

("Columbus" or the "Company")

Operational, Financial and Management Update

Columbus, the oil and gas producer and explorer focused on onshore Trinidad with the ambition to grow in South America, is pleased to provide an update on its operational and financial activities as well as announce the appointment of Tony Hawkins as Legal and Mergers & Acquisition ("M&A") Director and Troy Wilson as Goudron Field Manager.

Leo Koot, Executive Chairman of Columbus, commented:

"Since the Annual General Meeting in September, Columbus has continued to deliver at pace upon our wholescale change in strategy and has focussed on our target of increasing the Company's production in Trinidad to over 550 bopd and becoming cash flow positive by year-end 2017.  It is my pleasure to announce that we have achieved and exceeded these targets, with the Company achieving production of 561 bopd within the past week and will be generating more cash than we are spending on our day to day activities across the Group as we enter 2018. The Company now finds itself in a position where we are fully funded for our planned 2018 work programme and can use our positive cash flow and currently available funds to re-invest in further real growth of Goudron production in 2018 and also on other growth opportunities.  

Delivering this target has not been easy and has involved a huge amount of work and dedication from the staff of Columbus which a new Company Video, which can be viewed here (https://youtu.be/FoJNT8iiZYE) and on the Company's website, illustrates. 

Although we achieved the 561 bopd production level recently, a 71% increase from where we started at the end of June, numerous legacy challenges, old infrastructure and inferior oil-field practices and equipment meant that we were unable to grow our production to reach the internal stretch targets I hoped might be achievable in 2017.  We have subsequently implemented a programme of infrastructure and process improvements and introduced new leadership in the Goudron field, as outlined below, all designed to address the legacy issues which were hampering our production growth.   We have also implemented the first of our waterflood pilot programmes with water being injected into well GY-669 and we are targeting increasing production in well GY-670 which has historically produced at over 1,100 bopd.  The increases in production achieved in 2H 2017 and the commencement of the waterflood campaign have been achieved at a capex cost of US$350,000 and incremental opex costs of US$260,000 which are significant reductions on previously planned costs to grow production in Trinidad.  We will look to expand the waterflood pilot campaign through other pilots in 2018.   

Our forecast production profiles for the Goudron field in 2018, including low and high case production scenarios, are included in a presentation entitled "End of year update (December 2017)" on the Company's website. The low case profile forecasts production growth similar to that achieved in 2H 2017 (around 60%-70%%) and the high case targets are significantly greater but, I believe, are potentially achievable.

In addition to this, and in line with our planned strategy for growth, I am delighted to welcome Tony Hawkins and Troy Wilson to Columbus. Tony, with his 20 years of legal and commercial experience at both large and small oil & gas companies, including executing commercial deals in Trinidad for Centrica, will provide Columbus with a unique ability to deliver upon our strategy for accelerated growth and consider further M&A opportunities in his position as Legal and M&A Director (a non-Board position at present). I also look forward to working with Trinidad national, Troy as Goudron Field Manager.  Troy joins the company from Schlumberger having worked in a number of countries, including Trinidad, Venezuela, Suriname, Barbados and the USA.  Troy's most recent position at Schlumberger was as a senior artificial lift specialist and will bring invaluable experience to help us achieve our 2018 production targets.  

Whilst progress on the completion of the acquisition of the South West Peninsula ("SWP") assets, through the previously announced BOLT transaction, has been slower than we would have wished, we hope to be able to announce improved and re-structured commercial arrangements for these very exciting assets in the very near future.

In summary, the second half of 2017 has been a significant period for Columbus, during which we have completely revitalised our producing Goudron field, implemented changes across many other areas of the business and strengthened our balance sheet to allow further growth to be fully funded in 2018.  The Board and I look forward to updating shareholders on further operational and business activities shortly."

 

Key Highlights:

·      Key production target has been met with production in Trinidad currently delivering between 520 and 561 barrels of oil per day ("bopd"), the latter amount achieved within the past few days:

This follows wholescale field re-organisation and significant workstream efficiency gains since the appointment of the new management. 

·      The production increase in 2H 2017 and the commencement of the waterflood campaign have been achieved at a capex cost of US$350,000 and incremental opex costs of US$260,000 - a significant reduction on previously planned costs. 

·      A number of challenges have been faced to increase production in 2H 2017 due to numerous legacy issues, old infrastructure and inferior oil-field practices and equipment.  New leadership and a programme of infrastructure and process improvements have been implemented in the Goudron field to address the legacy issues which were hampering production growth. 

·      In January 2018, the Company will be generating more cash than it is spending on day to day activities and is now cash flow positive.  The Company plans to invest this cash into the Company's growth opportunities to deliver further returns.

·      The Company is fully funded for its 2018 work programme as a result of its positive cashflow position and the funds, totalling US$6.0million, which were received in October and November 2017.

·      The first waterflood pilot campaign has commenced on GY-669, targeting increased production in GY-670 which has historically produced at over 1,100 bopd. Further waterflood pilots are planned to commence in 1H 2018.

·      The South West Peninsula ("SWP") negotiations with BOLT and other relevant stakeholders are progressing and the Company hopes to announce improved and re-structured commercial arrangements for the assets in the near future.

·      Following the completion of negotiations on the South West Peninsula, the Company intends to re-activate the Bonasse field and increase production in 2018.

·      The Spanish Government has confirmed they will close the current concession in early 2018 after the completion of the relevant documentation and activities on the licence, including certain dismantling works by Columbus' Spanish subsidiary.  Tender process for the new concession is now expected to commence in Q2/Q3 2018 with the  concession being awarded to the new licensee in 2019.    

·      Tony Hawkins and Troy Wilson appointed as Legal and M&A Director and Goudron Field Manager respectively, bringing a wealth of worldwide experience to the Company and further strengthening the team to progress with its growth strategy focus.

 

DETAILED INFORMATION

Operations

Goudron

Goudron Field wellwork has comprised of over 70 separate workovers since August 2017 performed under a new Wellwork Planning Procedure followed by a new Active Well Optimisation procedure aimed at maximising the potential of the existing producing well-stock. Simple well integrity checks have preceded water injectivity testing and combined well clean-outs and stimulations termed "Perforation Washes" on 20 wells, which have resulted in some significant improvements in oil rates. Perforation Washes on wells GY-190, GY-211, GY-257, GY-290, GY-673 and GY-683 have resulted in instantaneous oil rate gains of 20-60 BOPD per well. Not all jobs have resulted in oil gains and problems handling reservoir sand laden fluids produced from wells GY-664 and GY-670 during October and November resulted in production losses from these significant oil production rate wells during those months. The challenges of developing downhole pumping systems able to handle sand content in the produced oil and water has been partially met through the introduction of new sand handling systems such as downhole filters and sand resistant rod pump designs.

The Goudron Field waterflood pilot facilities have been commissioned with the first water injection pump being delivered to the field and commissioned in November 2017 on the GY-669 well with the objective of testing communication with GY-670. Intermittent water injection has been carried out into GY-669 during December 2017 with more continuous injection planned in 1Q18. Waterflood Pilot "A" implementation is approved and is focussed on supporting the GY-664 and GY-665 wells. Additional produced water storage tanks were installed in December 2017 to allow capture and treatment of all produced water. A second water injection pump is being delivered in December. The conversion to injection of the first target Waterflood Pilot "A" well, GY-668 is planned to allow Pilot "A" to commence in 1Q 2018.

The field safety record has been commendable with no Lost Time Incidents in 2017 to date.

The area has experienced a particularly heavy rainy season with frequent flooding and road blockages affecting field access. The operations crew have coped with the adverse weather conditions and maintained field production, workover and water injection facility commissioning operations throughout.  Additions to the crew and changes to the crew schedules have been implemented in November 2017 in anticipation of the increased workload from water injection and well stimulation activities planned in 2018.    

South West Peninsula

Negotiations with BOLT and other stakeholders have been slower than the Company would have wished but it hopes to be able to announce improved and re-structured commercial arrangements for these very exciting assets in the near future. Tony Hawkins has been assisting the Company on the commercial negotiations in recent months as a consultant, including attending a number of meetings with the relevant parties in Trinidad.  

Bonasse Field

After the Company complete the South West Peninsula transaction, the Company intends to re-activate the Bonasse field and use its knowledge of recent operations on the Goudron field to increase production in 2018.

Spain

The Company has continued to work towards closing the La Lora Concession and now anticipates the closure of the concession in February 2018.  At present the Company is removing/dismantling old infrastructure in the field, which it anticipates will be completed early January 2018, and will allow the Spanish authorities to formally close the current concession.  Following such closure, Columbus will have an opportunity to take part in the tendering process for a new concession (expected Q2-Q3 2018).

The closure of the current concession has been a protracted and hugely frustrating process, due in large part to the fact this process has never been undertaken by Spanish authorities before for an operating oil-field. The Spanish authorities have therefore been very pedantic in what should have been a relatively short and straight-forward process to enable the tender for the new concession to take place.  Despite these delays, the Company has continued to meet its ongoing obligations on the current concession, including meeting the staffing, legal and operational costs associated with keeping the field in good order and seeking to close-out the current concession. This has involved costs of approximately US$60,000 per month which are included in the Company's positive cashflow assessment.

 

Financial

The Company is fully funded for its planned 2018 work programme:

Cash flow positive

The Company has taken action throughout 2H 2017 to reduce its G&A costs, particularly in London with an office move to a new location and with the senior leadership (Executive Chairman, CFO and Managing Director Trinidad) all taking 50% of their fees in shares instead of cash.  The shares will be issued after one year of employment for all three employees.  It should be noted that Tony Hawkins, who will commence his employment with the Company on 1 January 2018, will also take 50% of his fees in shares after one year.

The reductions in costs, as highlighted above, together with:

·      the introduction of further cost efficiencies in Trinidad,

·      the increased production in the Goudron field by year-end 2017 to over 550 bopd, and

·      an improved oil price environment where the Company is receiving an increased oil price on sales, with US$56.241 per barrel being received in December 2017 for November sales to the Pointe-a-Pierre refinery,  

means that the Company will be generating sufficient net cash from operations in Trinidad to meet all of the Group's day to day running costs as it enters 2018.  This introduces additional cash to drive further production growth and allow the Company to consider implementing other opportunities to add value. 

Lind Partners

Following the announcement on 11 September 2017, the restructuring of the Lind Partners, LLC ("Lind") loan has resulted in the Company being able to accelerate its work programme in Trinidad to increase production and revenues from existing fields, including field optimisation, well stimulation and the water-injection pilot.  Lind also exercised their exclusive right to provide the Company with a second loan facility of US$750,000, which was received by the Company, net of expenses, in October 2017.   With the exception of the monthly loan repayment due in September 2017, which was paid in shares as part of the re-structuring announced on 11 September 2017, the Company has repaid Lind in cash every month since the initial loan was taken out in December 2016. In October and November 2017, Lind also exercised its right to convert a total of US$450,000 of the monies outstanding from the loans into shares at the re-structured conversion share price of 4.5p per share. 

The total debt outstanding on the two Lind loans at the end of December 2017, after repayments due later this month and the two loan conversions referred to above, will be approximately US$1.35 million. The Company has budgeted to meet all repayments due to Lind in 2018 in cash, although Lind retains the exclusive right to convert outstanding debt at 4.5 pence per share at any time of their choosing whilst the debt remains outstanding. 

Equity Investment by Schroders and others

The Lind loan re-structure was followed by an investment of £3 million by Schroder Investment Management Ltd   ("Schroders") at 5 pence per share in October 2017 and a further £1 million of investment from existing shareholders through an Open Offer at the same share price (an offer which was over-subscribed 3.2 times). Senior management also participated in capital raising, further aligning them with shareholders. As a result of this investment and the Company's cashflow positive position, the Company is now in a fully funded position to deliver on its planned 2018 work programme. The Company was particularly delighted to add an institutional investor with the excellent reputation of Schroders to its shareholder register and demonstrates the increasing confidence of institutional investors in Columbus' new business strategy, leadership and growth potential.   

 

Personnel

Tony Hawkins has been working for the Company as a consultant over the past few months and, in particular, has taken a leading role on the SWP negotiations in Trinidad. Tony, who will be taking up the role of Legal and M&A Director in January 2018 (a non-Board position at present), is an English and Australian qualified lawyer of 20 years' experience, who has worked in both private practice and in-house roles. Most recently, he was General Counsel & Head of Commercial for Sterling Energy plc, a London listed oil & gas company.  He was also the company secretary. He is a senior energy lawyer, asset manager and commercial negotiator, predominately in oil and gas but also in power, LNG and renewables. Prior to Sterling Energy, Tony spent 6 years at Centrica plc (a FTSE 100 listed utility), where he had a number of roles, including interim General Counsel for Centrica Energy.  Whilst at Centrica Energy, he assisted Centrica with its new country entry in Trinidad (Block 2ab, NCMA-1, Block 22, Block 1(a) and Block 1(b)), Norway and Egypt.

Troy Wilson joins the Company as Goudron Field Manager with 10 years field operations experience gained both from a major service company and local Trinidad operating E&P companies. Troy is a Trinidad and Tobago national and as Schlumberger's Senior Artificial Lift Specialist has implemented downhole pump solutions in many of the Trinidad field developments as well as having experience in Suriname, Guyana, Barbados and the USA. Experienced in completions design, production troubleshooting, well stimulation and field optimisation, Troy brings Petroleum Engineering skills to the field based Goudron Field Manager position.  

 

This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Qualified Person's statement:

The information contained in this document has been reviewed and approved by Stewart Ahmed, Managing Director (Trinidad) for Columbus Energy Resources plcMr Ahmed has a BSc in Mining and Petroleum Engineering and is a member of the Society of Petroleum EngineersMr Ahmed has over 32 years of relevant experience in the oil industry.

 

Contact Information

Columbus Energy Resources plc

Leo Koot / Gordon Stein

+44 (0)20 3794 9230

VSA Capital Limited

Financial Adviser and Broker

Andrew Monk / Andrew Raca / Justin McKeegan

+44 (0)20 3005 5000

Beaumont Cornish Limited

Nominated Adviser

Roland Cornish / Rosalind Hill Abrahams

+44 (0)20 7628 3396

Camarco

Public and Investor Relations

Georgia Edwards / James Crothers

+44 (0)20 3757 4983

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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