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Forza Petroleum Q1 2023 Financial and Operational Results

09 May 2023

Calgary, Alberta, May 9, 2023


Operations remain mostly suspended pending restart of the Kurdistan Oil Export Pipeline


Forza Petroleum Limited (“Forza Petroleum” or the “Corporation”) today announces its financial and operational results for the three months ended March 31, 2023. All dollar amounts set forth in this news release are in United States dollars.


Financial Highlights:


  • Revenue of $47.8 million for Q1 2023, consisting of an average realized sales price of $54.19/barrel of oil (“bbl”) on working interest sales of 738,100 bbl and $7.8 million in recovery of carried costs
    • The Corporation has received full payment in accordance with production sharing contract entitlements for all oil sales to the Kurdistan Regional Government through September 2022
  • Field operating costs, representing the Corporation’s working interest share of operating expenses, of $5.5 million ($7.47/bbl) for Q1 2023 versus $5.6 million ($6.64/bbl) for Q1 2022
    • Field operating costs per bbl are up 13% versus the comparable period as a result of decrease in sales volumes, partially offset by lower facilities rental rates, as negotiated in 2022
  • Loss of $1.8 million in Q1 2023 versus profit of $22.2 million in Q1 2022 
  • Net cash generated from operating activities was $18.6 million in Q1 2023 versus $12.6 million in Q1 2022
  • Net cash used in investing activities during Q1 2023 was $10.1 million, including payments related to drilling and facilities work in the Hawler license area, versus $20.6 million in Q1 2022
  • $79.6 million of cash and cash equivalents as of March 31, 2023



Operations Update:


  • Average gross (100%) oil production of 12,800 bbl/d (working interest 8,300 bbl/d) in Q1 2023
  • The Zey Gawra-10H well, drilled late in 2022, was completed and turned over to production early in Q1 2023
  • As a result of the previously announced shutdown of the Kurdistan Oil Export Pipeline on March 25, 2023, production during April 2023 was limited to a minimal volume necessary to maintain operational readiness for a restart of production operations. Substantially all production remains shut in
  • The Demir Dagh-15 well targeting the Cretaceous reservoir of the Demir Dagh field was spudded on January 13, 2023 and total-depth of the horizontal drain was reached on March 29, 2023. The well has been suspended



2023 Forecasted Work Program:


  • Because of the shutdown of the Kurdistan Oil Export Pipeline and a lack of clarity regarding the restart of operations and collection of overdue and future payments for oil sales, Forza Petroleum has suspended its work program for the balance of 2023.
  • Forza Petroleum forecasts $24.1 million of capital expenditure for 2023, down from $68.3 million forecast in its news release dated March 16, 2023. Forecast investments for the balance of the year are limited to completion of the West Hawler Gathering System and stimulation of the Demir Dagh-9 well.



Liquidity Outlook:


  • The Corporation expects cash on hand as of March 31, 2023 and cash receipts from net revenues from sales, exclusively made to the Kurdistan Regional Government at the tie-in to the Kurdistan Oil Export Pipeline, will fund its forecasted capital expenditures and operating and administrative costs through the end of June 2024, including the $76.2 million in deferred purchase consideration owing in connection with the original acquisition of the Hawler license area.
  • Forza Petroleum’s principal shareholder has firmly indicated it will provide up to $10 million until September 30, 2023, if needed, to fund cash outflows.



Annual Meeting of Shareholders


Forza Petroleum will hold an annual and special meeting of shareholders at the offices of Forza Petroleum Services SA at Route de Pré-Bois 14, 1216 Cointrin, Switzerland on Tuesday, June 27, 2023, at 4:00 p.m. (Central European Summer Time). Holders of record of common shares at the close of business on May 1, 2023, the record date for the meeting, will be entitled to notice of and to attend and vote at the meeting.


Full details regarding the business of the meeting can be found in the related Management Proxy Circular which, in the coming days, will be mailed to shareholders and published online at www.forzapetroleum.com and on the Corporation’s profile on SEDAR (www.sedar.com).



CEO’s Comment


Commenting today, Forza Petroleum’s Chief Executive Officer, Shane Cloninger, stated:


“Forza Petroleum had a productive first quarter, generating more than $18 million from operating activities. A new well in the Zey Gawra field was completed and turned over to production, while another new well, targeting the Cretaceous reservoir in the Demir Dagh field, reached total depth before the end of the quarter. The team also successfully progressed construction of the West Hawler Gathering System, the commissioning of which is expected later this month. The use of these facilities reduce reliance on road tankers, improving the safety, environmental impact, and costs associated with operations in this part of the Hawler license area.


Unfortunately, the achievements during the quarter were overshadowed with news of the shut-in of the Kurdistan Oil Export Pipeline at the end of the period. Absent any immediately available alternative sales channels, and with our own storage quickly nearing capacity, we were forced to shut in substantially all production from the Hawler license area.


We are encouraged by news of progress being made by the Kurdistan Regional Government and the Iraqi Federal Government towards restarting the Kurdistan Oil Export Pipeline, and consider the pipeline shut-in and related pause in settlement of receivables for oil sales to be temporary. While steps have already been taken to reduce operating costs across the business, Forza Petroleum is maintaining operational readiness and the ability to restart production and deliveries to the Kurdistan Oil Export Pipeline within 48 hours following the restart of pipeline operations.


To preserve liquidity, the Corporation’s work program for the balance of 2023 has been largely suspended. Our investment plans will be reassessed once oil production and deliveries have restarted, any changes to oil sales terms are clarified, and receipt of payments for oil sales has regularized.


In the meantime, we remain closely engaged with all stakeholders regarding the pipeline restart and will continue to monitor the situation and take further actions as necessary.”


Complete press release: