Canadian Overseas Petroleum Limited (LSE:COPL, CSE:XOP) chief executive Arthur Millholland described “significant progress” as the company continues work to resolve its recent challenges.
Today, in the company’s quarterly results statement, COPL showed working interest average crude oil sales of 1,177 barrels per day.
It noted that a reduction in production is due to operational interruptions at high-impact wells caused by the miscible flood programme, which involved the injection of high-pressure solvent to raise reservoir pressure and mobilize oil in place.
A bottleneck caused by the field's originally undersized low-pressure gas gathering system restricted the wells.
To resolve this, COPL plans to upgrade the system in phases.
Net petroleum sales for Q4 2022 were US$6.7mln, from US$7.1mln in the preceding quarter, reflecting the drop in commodity prices over the quarter.
The company incurred a net realised hedging loss of US$2.2mln, due to crude oil hedge contracts' losses, though it noted a gain of US$0.5mln was realised on butane hedge contracts.
COPL noted that, in December, oil price weakness provided an opportunity to execute hedge restructuring without cash costs, increasing COPL's exposure to oil price upside whilst stabilising operating cash flow for the first half of 2023. The restructuring now provides revenue protection with puts at US$60 per barrel on 750 barrels per day and maintains cost protection for butane injections.
"Despite the operational interruptions encountered in Q4 2022, COPL made significant progress toward resolving these issues and positioning itself for future growth,” Millholland said.
“Our restructuring of hedging positions has provided greater WTI exposure while ensuring a level of revenue and cost protection in the short term.
“We remain optimistic about the company's outlook and look forward to delivering on our commitment to create long-term shareholder value."
COPL noted that it settled US$2.4mln of accounts payable to arm's length creditors by issuing 2.29mln common shares on 31 March 2023, further improving its working capital position.
Operationally, it highlighted that the COPL America subsidiary has now commenced pipe procurement for GGS Phase 1 upgrades, which are intended for installation in the second quarter of 2023. Meanwhile, well conversions from flowing to pumping-flowing at high productivity wells in the Shannon miscible flood are set to improve production levels.