United Oil & Gas PLC (AIM:UOG) shares plunged more than 25% lower as the company’s trading update, ahead of its interim results, highlighted numerous challenges including a squeeze on working capital.
Whilst the company maintains a productive and cash-generative operation in Egypt, it today noted increasing difficulty and cost in the repatriation of funds from its Egyptian operations.
First-half revenues are expected to equate to US$6.4mln, versus US$9.8mln a year ago, whil cash collection was reported at US$7mln.
At group level the company had a cash balance of US$550,000 at the end of June.
“Although we have received USD payments in the first half and successfully repatriated funds directly, we have also incurred significant additional foreign exchange costs when translating EGP to USD for working capital needs,” United said in a stock market statement.
“Notwithstanding these short-term challenges due to reduced USD liquidity in Egypt, we continue to manage our working capital position across the group.”
Operationally, United also reported that a production well completed earlier this year was now in decline – having peaked at 2,800 barrels a day, 616 bopd net to United – and that the group’s first half-net production exit rate was measured at 1,122 boepd.
To support production volumes the company said it intended to install artificial lift intervention into the well and would continue production-enhancing workover activity across its licence.
Alongside joint venture partners, it also plans to drill new wells in the second half, starting in September.
Elsewhere, a farm-out of a North Sea project that would deliver an injection of funds has been delayed with the deadline for completion extended from 30 June to 31 July to allow the incoming partner, Quattro Energy, more time to raise the funds needed to complete the deal.
According to United, Quattro has hired a broker in Canada for an equity sale that’s expected this month.
United has also extended the deadline for its Jamaican farm-out process, at the request of the ‘interested parties’ participating in the process. The company had previously set a 30 June deadline for indicative offers.
The AIM-quoted oiler today said it remained “encouraged by the number and quality of companies that are in the process of completing their evaluations”.
To retain the Jamaican asset, United is obligated to make a drilling commitment by the end of January 2024.
Onshore UK, the non-core Waddock Cross Field continues in the process to secure planning and permitting consents, ahead of a proposed well in 2024.
In London, United shares fell 0.47p or 26.25%, changing hands at 1.33p valuing the company at £8.74mln.
“We have had a strong start to the first half of the year from our Egyptian drilling programme,” chief executive Brian Larkin said, adding: “We are cognisant of the short-term challenges in Egypt and with this in mind are delighted to continue drilling in the second half, initially targeting one exploration and one appraisal well in this highly prospective licence.
“In parallel, we remain focused on securing a partner in Jamaica for this potentially transformational licence and we are delighted to have multiple quality potential partners advancing their evaluation of the project.
“We look forward to the remainder of the year and updating our shareholders on our progress."