Canadian Overseas Petroleum Limited (LSE:COPL, CSE:XOP, OTC:VELXD) reported first-quarter net oil sales of 1,114 barrels of oil per day (bopd), consistent with the preceding three months, whilst sales values rose amidst rising prices.
The company generated US$7.1mln of petroleum sales in the quarter, up from US$5.8mln in the prior quarter, meanwhile, Cuda Petroleum (which is to be acquired by COPL) saw US$2.7mln of net royalties versus US$2.3mln – representing some US$9.8mln in aggregate for Q1, versus US$8.1mln.
"We are proceeding with our objectives for 2022 as set out in the company's year-end financial announcement,” said chief executive Arthur Millholland.
“The purchase of the Wyoming assets of Cuda has been approved by the Canadian courts, with approval by the US Federal Court expected later in the month.”
He added: “We are all looking forward to the commencement of the first phase of the delineation of our deep oil discovery as it is the start of an exceptional growth opportunity for the company."
COPL said it continues to advance planning for the intended delineation of the deep discovery at the Barron Flats property, in Wyoming, within the property’s Federal (Deep) Unit, with permitting underway for 16 well locations. An agreement is now in place with the US Bureau of Land Management which allows leasehold drilling obligations to be met.
The AIM-quoted company expects to drill at least two horizontal wells by the end of March 2023, to satisfy requirements.
A new competent persons report assessing the deep discovery is expected to be available later this month.
Elsewhere, within Baron Flats, the company noted the recent completion of what’s described as a rigorous reservoir simulation exercise for the Barron Flats Shannon asset which provided findings that are expected to lead to optimisations that will reduce a significant cost component of the miscible injection.
Production from Barron Flats Shannon (miscible) is presently restricted due to high surface working pressures, which is impacting the produced gas gathering system, and the company noted that mitigation efforts are in place until remedial work is completed later in 2022, and positive results should become apparent later in the second quarter of 2022.
At the same time, COPL said the response of the miscible flood at the Barrons Flats Shannon Unit continues to exceed the original expectations. Two pumping wells began flowing, in line with COPL’s reservoir simulation model, and the result of reconfiguration is expected to show in the numbers for Q2.
In terms of financials, COPL noted that its netback increased to US$48.53 per barrel, before hedging, compared to US$41.21 in the preceding three months.
It realised hedging loss of US$0.9mln as oil prices soared (it comprised a US$3.5mln hedging loss on crude contracts offset by a US$2.6mln gain on butane contracts).
Capital spending was trimmed to US$3mln, from US$10.7mln in the previous quarter.
Following an agreed waiver in March the company is no longer in a technical default under its credit facility, and as such in the accounts COPL’s indebtedness was reclassified under non-current liabilities.
Millholland, meanwhile, added: “Our finance team is working on the re-finance of COPL America Inc's senior credit facility with commercial banks.
“This will reduce our cost of capital in these times of increasing interest rates. The optimization and associated increase in oil production will occur later in 2022 with activities getting started in earnest after the completion of the Cuda acquisition.
COPL holds a 58% working interest in the Barron Flats Shannon unit, 55.56% in the Deep unit and has 66.7% of the Cole Creek Unit.
Cuda Petroleum is a Canadian company that was in receivership. It owns a 27% interest in the Barron Flats assets.