Forza Petroleum Q3 2023 Financial and Operational Results and 2024 Capital Budget
07 November 2023
Calgary, Alberta, November 7, 2023
Through local oil sales and targeted cost cutting, Forza Petroleum is preserving liquidity while it awaits a re-opening of the Kurdistan Oil Export Pipeline
Forza Petroleum Limited (“Forza Petroleum” or the “Corporation”) today announces its financial and operational results for the three and nine months ended September 30, 2023. All dollar amounts set forth in this news release are in United States dollars.
Financial Highlights:
- Revenue of $14.4 million for Q3 2023, consisting of an average realized sales price of $30.83/barrel of oil (“bbl”) on working interest oil sales of 391,700 bbl and $2.3 million in recovery of carried costs.
- The Corporation has received full payment in accordance with production sharing contract entitlements for all oil sales into the Kurdistan Oil Export Pipeline through September 2022, with a $63 million balance outstanding for oil sales from October 2022 through March 2023.
- Payment for local oil sales completed during the quarter were settled by buyers in advance.
- Field operating costs, representing the Corporation’s working interest share of operating expenses, of $3.2 million ($8.07/bbl) for Q3 2023 versus $5.9 million ($6.54/bbl) for Q3 2022.
- Field operating costs per bbl increased versus the comparable period because of a 57% decrease in sales volumes related to the shutdown of the Kurdistan Oil Export Pipeline, partially offset by decreases in facilities, diesel, security, and equipment costs.
- Loss of $1.6 million ($0.00 per common share) in Q3 2023 versus profit of $23.7 million ($0.04 per common share) in Q3 2022 primarily attributable to a decrease in net revenue resulting from decreased realized sales prices and lower sales volumes.
- Net cash generated from operating activities was $1.1 million in Q3 2023 versus $25.4 million in Q3 2022.
- Net cash used in investing activities during Q3 2023 was $3.3 million, primarily related to drilling activities completed during the first half of 2023, versus $15.3 million in Q3 2022.
- $69.0 million of cash and cash equivalents as of September 30, 2023.
Operations Update:
- Average gross (100%) oil production of 6,500 bbl/d (working interest 4,200 bbl/d) in Q3 2023.
- Given the previously announced suspension of the Corporation’s work program, activity continued to be limited during the third quarter of 2023.
- Notwithstanding activity being restricted, the Corporation continues to advance installation of a pipeline connecting the Banan field to the Hawler production facilities at the Demir Dagh field. Subject to final government permitting, commissioning of the pipeline is expected during the fourth quarter of 2023.
2023 Forecasted Capital Expenditures:
- Forza Petroleum forecasts $23.9 million of capital expenditure for 2023, consistent with the prior forecast announced on May 9, 2023.
- The Corporation’s work program for the balance of 2023 remains largely suspended pending reopening of the Kurdistan Oil Export Pipeline and clarity regarding collection of overdue payments for oil sales and the terms applicable for future oil sales.
2024 Budgeted Capital Expenditures:
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Forza Petroleum budgeted capital expenditures for 2024 are $5.7 million and dedicated exclusively to the Hawler license area. Planned investments include an acid stimulation of the Demir Dagh-9 well and well pad renovations. Expenditures also include allocated general and administration and compliance costs.
- The Corporation’s work program for 2024 remains largely suspended pending reopening of the Kurdistan Oil Export Pipeline and clarity regarding collection of overdue payments for oil sales and the terms applicable for future oil sales.
Liquidity Outlook:
- The Corporation expects cash on hand as of September 30, 2023, cash receipts from oil sales, and, if required, up to $20 million in funding from the Corporation’s principal shareholder, will fund its forecasted capital expenditures and operating and administrative costs through the end of December 2024, as well as the $76.2 million in deferred purchase consideration due and payable in connection with the original acquisition of the Hawler license area.
CEO’s Comment
Commenting today, Forza Petroleum’s Chief Executive Officer, Shane Cloninger, stated:
“A partial restart of operations in July 2023 allowed the Corporation to pursue local oil sales and generate revenue for the period. Although the price for oil sold to the local market is at a significant discount to international prices, full payment from local buyers is received in advance and the revenue from such sales helped the Corporation cover operating costs incurred during the quarter.
While it is understood that it is technically feasible for the Kurdistan Oil Export Pipeline to reopen, and that Turkey has agreed for exports to restart, no timeline for resumption has been announced. The Corporation continues to have dialogue with the Ministry of Natural Resources regarding collection of overdue payments for oil sales and the terms applicable for future oil sales; nevertheless, there continues to be a lack of clarity on these points.
Due to these unfortunate circumstances, the Corporation has implemented further cost-cutting measures, including staff layoffs. In addition, the Corporation’s work program remains largely suspended. These measures, together with oil sales to the local market, will support the preservation of liquidity while the export pipeline remains closed.
In addition to our commitment to resolving overdue payments from the Ministry of Natural Resources, management remains engaged with industry and government to stay informed and adapt to the evolving situation in the region.”
Complete press release:
PR_Q3_2023.pdf