Oryx Petroleum Q1 2020 Financial and Operational Results
22 June 2020
Calgary, Alberta, June 22, 2020
33% increase in Production; 21% decrease in Operating Expenses per barrel
Oryx Petroleum Corporation Limited (“Oryx Petroleum” or the “Corporation”) today announces its financial and operational results for the three months ended March 31, 2020. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.
Financial Highlights:
- Total revenues of $31.9 million on working interest sales of 842,800 barrels of oil (“bbl”) and an average realised sales price of $34.03/bbl for Q1 2020
- 33% increase in sales volumes versus Q1 2019
- 8% increase in sales volumes versus Q4 2019
- The Corporation has received payment in accordance with Production Sharing Contract entitlements for all oil sale deliveries into the Kurdistan Oil Export Pipeline through October 2019 and for the months of March, April and May of 2020. Payments for the months of November 2019, December 2019, January 2020, and February 2020 remain outstanding with the Contractor share totalling $39 million. Payment is not expected in 2020 and longer term timing of settlement is as yet undefined. The Corporation expects future monthly sales invoices to be settled in the following month
- Operating expenses of $7.7 million ($9.11/bbl) and an Oryx Petroleum Netback[1] of $11.28/bbl for Q1 2020
- 21% decrease in operating expenses per barrel versus Q1 2019
- Loss of $249.6 million ($0.45 per common share) in Q1 2020 versus Profit of $1.5 million in Q1 2019 ($0.00 per common share)
- Loss in Q1 2020 primarily attributable to a $238 million impairment expense related to the Hawler license area, increases in material inventory and oil sales receivables provisions versus changes in Q1 2019, and a lower netback versus Q1 2019
- Net cash generated by operating activities was $6.8 million in Q1 2020 versus net cash generated by operating activities of $8.6 million in Q1 2019 comprised of Operating Funds Flow[2] of $6.6 million and a $0.3 million decrease in non-cash working capital
- Net cash used in investing activities during Q1 2020 was $8.5 million including payments related to drilling and facilities work in the Hawler license area, preparation for drilling in the AGC Central license area, and an increase in non-cash working capital
- $3.2 million of cash and cash equivalents as of March 31, 2020
[1] Oryx Petroleum Netback is a non-IFRS measure. See the table below for a definition of and other information related to the term.
[2] Operating Funds Flow is a non-IFRS measure. See the table below for a definition of and other information related to the term.
Operations Update:
- Average gross (100%) oil production of 14,200 bbl/d (working interest 9,300 bbl/d) in Q1 2020
- Average gross (100%) oil production of 4,300 bbl/d (working interest 2,800 bbl/d) for April 2020 and 3,800 bbl/d (working interest 2,500 bbl/d) for May 2020
- Production from the Banan field was shut-in on April 2, 2020 due to poor economics
- Lower realised prices for production from the Banan field is due to higher oil quality discounts and higher per barrel facilities operating costs than other fields
- Plan to install a pump in the Banan-4 well in the coming weeks which will significantly reduce operating expenses and justify a resumption of production in Q3 2020 - The worldwide outbreak of the COVID-19 virus, including within Iraq, has not caused any significant disruption of production operations. The Corporation is taking precautions to protect its employees and contractors but does not at this time expect that the virus outbreak will restrict operations
2020 Forecasted Work Program and Capital Expenditures:
2020 capital expenditures are forecasted to be $11 million (versus $53 million previous forecast). All previous planned drilling activity has been deferred except the installation of a pump at the Banan field and minor infrastructure works in the Hawler license area, certain studies in the AGC Central license area and license maintenance costs.
Liquidity Outlook:
- The Corporation expects cash on hand as of June 22, 2020 and cash receipts from net revenues from export sales will allow it to fund its 2020 forecasted capital expenditures and operating and administrative costs into the second half of 2021. Collection of overdue net revenues for the November 2019 to February 2020 period and/or working capital support from shareholders is required to be able to fund capital expenditures in the Hawler license area in 2021, to settle obligations currently due to suppliers, and to meet any contingent consideration obligations that become payable in 2020 or 2021.
CEO’s Comment
Commenting today, Oryx Petroleum’s Chief Executive Officer, Vance Querio, stated:
“During the first quarter of this year OP Hawler Kurdistan Limited produced more oil from the Hawler license area than ever before. We identified potential new resources in the Tertiary reservoir in the eastern fault block of the Banan field while drilling a side track of the Banan-1 well. And, we continued to operate safely, without any recordable incidents throughout the quarter, notwithstanding restrictions imposed due to the COVID-19 outbreak. These positive results were unfortunately overshadowed by the precipitous drop in crude oil prices that started during March and the deferral of payments for oil sales.
In the AGC Central license area, work continued toward completing the environmental and social impact study of the license area.
In response to the lower oil prices and deferred payments, we implemented steps to reduce expenditures including shutting-in uneconomic production from the Banan field, reducing personnel costs and limiting near term capital expenditure activity.
We have deferred all drilling of new wells and discretionary facilities expenditures previously planned for 2020 until our free cash generation is restored as a result of a significant increase in oil price or restoration of the payment for past oil sales. We do intend to replace some leased artificial lift systems in the Banan field, where we expect to restore production during the third quarter, with company owned facilities to significantly reduce direct operating expenses.
As a result of two separate transactions being contemplated, one between AOG and the Corporation and the other between our two largest shareholders, shares in the entity holding our interest in the AGC Central license will be transferred to AOG as settlement for the loan due to AOG and Zeg Oil and Gas Limited will acquire control of Oryx Petroleum. Upon closing of the transactions, the Corporation, at least in the near term, will be focused exclusively on the Kurdistan Region of Iraq and will be relieved of both the loan due to AOG and the drilling commitments associated with the AGC Central license.
We believe our improved financial position and reduced cost structure will allow us to maximise the value of the Hawler license area over the coming years. We are excited by our prospects for growth and look forward to an improved operating environment and increasing crude prices for the remainder of 2020.”