Mosman Oil And Gas Ltd (LON:MSMN) has told investors that production continues at the Stanley field in Texas, albeit with output currently around 20% lower than the rate seen in the second half of 2019.
The company, in an update, noted the challenges presented by the coronavirus (COVID-19) pandemic and market conditions.
It said though that it believes its current cost structure will allow the company to remain profitable, even if oil prices are down to ‘the mid-teens’.
Mosman relayed comments from the Stanley project’s operator which stated: “We believe the greatest impact will be in the monthly oil price we receive in May. In response we have created on-lease temporary oil storage using rented frac tanks, allowing us to continue to produce the wells while mitigating adverse near-term pricing."
Tanks are expected to add around 5,000 barrels of crude storage which will allow some flexibility around timing oil sales, to potentially achieve better prices, though that will also defer cashflow.
Drill plans for Stanley were recently redrawn, resulting in costs paid for the Stanley-4 well being repaid to the company. Stanley-4 is still in the plans for the project, just not until oil prices have recovered.
In the meantime, the plan is to increase production at the Stanley project via workovers of existing wells. Mosman noted that recent production volumes at Stanley, about 160 barrels of oil per month, will be sufficient to hold the lease.
Earlier this week, on Monday, Mosman shares surged with news of a farm-out deal for exploration permit (EP) 155 in the Amadeus basin, in Australia’s Northern Territory.
Mosman will retain a 30% holding and the transaction allows for the AIM-quoted firm to be ‘carried’ in an exploration well in return for a further 15% interest in the project.
Elsewhere in the Mosman portfolio the Arkoma project, in Oklahoma, continues to produce albeit at reduced levels while the Welch project is seeing “steady” production.
In today's statement, Mosman chairman John Barr said: “The Mosman board acted quickly and decisively in March and matters remain in accordance with that plan.
"Completing the potential sale of Welch together with continuing to control costs are clearly the key objectives in the coming months. Despite difficult circumstances, the board remains determined to deliver value to shareholders from its stated strategy."