In September, there was a further boost for the company, formerly known as LGO, as Trinidad granted the environmental go-ahead (CEC) for a waterflood programme at its Goudron field on the island.
Koot, the executive chairman, said he was thrilled with the award of the CEC and would begin the water injection pilot "A" programme immediately.
“We have effectively brought forward commencement of the waterflood pilot programme by nearly a year.
“This was an important work stream for the company as we continue to execute our new strategy for growth. As part of that growth strategy, we plan to submit further waterflood pilot proposals in the near future."
Waterflooding is a way of boosting the production from a field by injecting water. Columbus said the aim of the ‘A’ programme is to increase the rate and recovery at Goudron by increasing reservoir pressure to sweep oil towards the production wells.
Trinidad the cash cow for greater ambitions
Koot still sees Goudron, which in its prime produced over 2,000 bopd, as Columbus’ ‘money maker’, creating free cash flow to support new ventures into larger and ‘exciting’ exploration plays.
The field contains two separate reservoir packages; the shallow Mayaro (formally referred to as Goudron) Sandstones and the deeper Gros Morne and Cruse equivalent C-sands.
A deeper, pre-Cruse, interval of turbidite sands adds an additional, previously unexplored, deep resource for future exploitation.
Columbus has 11.8mln barrels (mmbbls) of proven and probable reserves (2P) in Goudron and is currently producing light sweet oil with an average API gravity of 37 degrees.
There are a further 22 mmbbls of most-likely (P50) Contingent Resources (2C) plus an estimated gross P50 unrisked oil in place of 1.3 bn barrels in the South West Peninsula leases.
900 barrels daily by mid-2018
Interim results, also in September, outlined Koot’s plans for Goudron.
Production should rise to 550 barrels per day by the end of 2017 and to 900bpd by mid-2018, from an average 357 barrels in the first half, where production tailed off markedly towards the end of the period.
Interim revenues rose to £2.46mln (£1.92mln) as higher oil prices and timing of sales offset this decline while after-tax losses were little changed at £1.96mln.
Cash holdings were £1.68mln at the period end since when financier Lind has agreed to top up a convertible loan to the group by a further US$750,000.
Koot said this additional cash plus the money to come from the Goudron work means it can fund the first wells on the 'potentially tranformational' South West Peninsula assets in Trinidad without a partner, though it may look for one over the medium-term.
The plan is to drill the most attractive exploration/approval wells itself, with mid-2018 penciled in as the starting date.
A placing at 5p to raise £4mln was subsequently announced in October to accelerate the programme. Of that, £3mln was secured through a share placing to Schroder Investment Management.
Getting LGO's act together is the first step
Koots arrived at the AIM-quoted company in May with a distinctly blue-chip background and a CV studded with multinational names such as Royal Dutch Shell, Halliburton and Abu Dhabi’s national oil company TAQA.
The new boss has a three year plan that sees it unlock free cash flow from Goudron in the first year to support subsequent phases of “transformational growth”.
“First year focused on getting our act together and then years two and three that’s when you’ll see the exponential growth.
“Getting our act together means a couple of things.
“Columbus/LGO has gone through quite a difficult period, like many oil companies since 2014, but it is one of few companies that came out of that recession reasonably intact, owning the assets.
“That’s a very good starting point, but as a result of the history the whole team and the whole operation were set in a legacy mindset.
“They were worried about what happened in the last years and found it difficult to look to the future. “So, with me we’re going to be looking at the future rather than see what happened in the past.”
Koot’s appointment was part of a major overhaul at the top of Columbus with Gordon Stein appointed as chief financial officer and Stewart Ahmed as managing director (Trinidad).
Costs have been chopped, with overheads 30% lower to date.
What the broker says
VSA said the interim results should mark a turning point with the restoration of profitability at the core operations, ie Goudron, to provide stable cash flow for unlocking the exploration potential.
Utilising water injection and other well stimulation techniques such as smart pumping systems are the basis of the 550bopd by year-end target. Early injectivity tests have resulted in tenfold increases in production rates so far.
SWP, meanwhile, represents Columbus’ transformational growth opportunity and the ability to develop the asset internally is a significant positive step in VSA’s view.
The broker’s target price remains 25p (against 5.6p currently), with ‘buy’ unsurprisingly the recommendation given that discrepancy.
-- updates for interim results, funding, broker comment --