Forza Petroleum Q3 2021 Financial and Operational Results and 2022 Capital Budget
10 November 2021
Calgary, Alberta, November 10, 2021
Forza Petroleum achieves fifth consecutive quarterly profit; expects to complete three additional wells before year-end
Forza Petroleum Limited (“Forza Petroleum” or the “Corporation”) today announces its financial and operational results for the three and nine months ended September 30, 2021. All dollar amounts set forth in this news release are in United States dollars.
Financial Highlights:
- Revenue of $48.7 million for Q3 2021, consisting of an average realized sales price of $56.81/barrel of oil (“bbl”) on working interest oil sales of 718,500 bbl and $7.9 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 August 2021, including full recovery of previously deferred receivables relating to November 2019 through February 2020 oil sales
- Field production costs, representing the Corporation’s working interest share of operating expenses, of $4.7 million ($6.57/bbl) for Q3 2021 versus $4.6 million ($6.57/bbl) for Q3 2020
- Field production costs per bbl are flat versus the comparable period as a 3% increase in production volumes was offset by a 3% increase in absolute costs
- Profit of $7.6 million ($0.01 per common share) in Q3 2021 versus profit of $30.1 million in Q3 2020 ($0.05 per common share) which result was boosted by a one-time gain of $26.9 million recorded on the settlement of a loan facility
- Net cash generated from operating activities was $13.9 million in Q3 2021 versus $3.6 million in Q3 2020
- Net cash used in investing activities during Q3 2021 was $7.7 million, including payments related to drilling and facilities work in the Hawler license area, versus $3.3 million in Q3 2020
- $19.5 million of cash and cash equivalents as of September 30, 2021
Operations Update:
- Average gross (100%) oil production of 12,000 bbl/d (working interest 7,800 bbl/d) in Q3 2021, down marginally versus Q2 2021 as a result of shut-ins at the Zey Gawra field during July 2021 to replace leased processing facilities with lower cost facilities and anticipated declines in oil production rates at the Zey Gawra field
- Although the Banan-8 and Zey Gawra-6 wells, completed in May 2021 and August 2021, respectively, contributed incremental production during the third quarter, efforts continue to optimize production from the two wells
- A horizontal sidetrack of the previously drilled Demir Dagh-2 well targeting the Cretaceous reservoir was completed in September 2021 and is now the second most prolific producer in the Hawler license area, contributing approximately 2,000 bbl/d to gross (100%) export volume
- The Corporation mobilized a second drilling rig and, during September 2021, both a Demir Dagh well targeting the Cretaceous reservoir and a Zey Gawra well targeting the Tertiary reservoir were spudded, representing the fifth and sixth wells of an active year for the Corporation
- Equipment was mobilized in October 2021 to begin construction of the gathering system to serve the western flank of the Hawler license area
- The worldwide outbreak of the COVID-19 virus, including within Iraq, has not significantly impacted operations. The Corporation has taken precautions to protect its employees and contractors but does not at this time expect that the virus outbreak will restrict operations
Q4 2021 Forecasted Capital Expenditures:
- Forza Petroleum forecasts $48 million of capital expenditure for 2021, down from $62 million forecast on August 10, 2021, resulting from lower than estimated drilling costs, delays in construction of the West Hawler gathering system, and unscheduled well interventions delaying certain planned activity
- For the balance of 2021, the Corporation plans to complete the Demir Dagh-12 and Zey Gawra-7 wells that are currently being drilled, to spud and complete the first well in the Demir Dagh Tertiary reservoir, to complete a workover on the Zey Gawra-6 well completed earlier in the year, and to spud a well targeting the Tertiary reservoir of the Zey Gawra field
- The Corporation also plans to complete the installation of the river crossing portion of the West Hawler gathering system flowlines and to undertake other minor facilities and maintenance projects
2022 Budgeted Capital Expenditures:
Forza Petroleum budgeted capital expenditures for 2022 are $81 million and dedicated exclusively to the Hawler license area. Planned investments include:
- 11 wells including, in no particular order, completion of the Zey Gawra Tertiary well to be spudded in December 2021 and a second well targeting the Zey Gawra Tertiary reservoir, a Zey Gawra Cretaceous well, a well targeting the Cretaceous reservoir in a previously undrilled structure west of the currently developed Zey Gawra field, two side tracks of existing wells targeting the Demir Dagh Cretaceous reservoir, three additional wells targeting the Demir Dagh Cretaceous reservoir, the completion of the Ain Al Safra-2 well that was suspended prior to testing the Triassic reservoir due to the invasion of ISIS in 2014, and a well targeting the Cretaceous reservoir of the Banan field east of the Great Zab river;
- processing facilities and pipelines connecting each of the Banan field and the Zey Gawra field to the Hawler production facilities at the Demir Dagh field; and
- pads, flowlines and infrastructure modifications needed to accommodate incremental drilling and production and to reduce operating costs.
Liquidity Outlook:
- The Corporation expects cash on hand as of September 30, 2021 and cash receipts from net revenues from export sales exclusively through the Kurdistan Oil Export Pipeline to fund its forecasted capital expenditures and operating and administrative costs through the end of December 2022.
CEO’s Comment
Commenting today, Forza Petroleum’s Chief Executive Officer, Vance Querio, stated:
“Another quarter of record revenue bolsters our earlier decision to contract a second drilling rig and to accelerate investment in the Hawler license area. We anticipate completing another three wells and increasing production over current rates before the end of the year.
Production rate gains are also anticipated from wells completed earlier this year as well interventions are completed and facilities are optimized to support these wells. The success of the Demir Dagh-2 side track, completed in September, gives us renewed confidence in the potential of the Demir Dagh Cretaceous reservoir, where we have our largest volume of proved plus probable (2P) oil reserves, which will continue to be a focus of our investment plans for 2022.
We have budgeted $81 million of capital expenditure for 2022 exclusively for the Hawler license area. The drilling or completion of eleven wells are planned, including completion of the Ain Al Safra-2 well in the Triassic reservoir and a well targeting an undrilled segment of the Zey Gawra field. We forecast that cash generated from operating activities will be sufficient to fund our most aggressive work program since 2015.
I would like to acknowledge the unsurpassed commitment and efforts of our staff and the support of our board of directors and the Ministry of Natural Resources of the Kurdistan Region of Iraq, without which our ambitious plans could not be achieved. With our success in 2021 as a foundation we expect to produce more oil and generate more revenue in 2022 than ever before.”
Complete press release:
PR-Q3-2021.pdf