Cabot Energy (AIM: CAB), the AIM quoted oil and gas company focussed on creating predictable production growth in Canada, announces its audited full year results for the year ended 31 December 2018.
2018 Group Highlights
Production & Financial
- Average gross crude oil production of 703 barrels of oil per day (“bopd”), up 71% (2017: 411 bopd)
- US$47 per barrel average crude oil sales price achieved, up 10% (2017: US$43 per barrel)
- US$12.2 million revenue, up 154% (2017: US$4.8 million)
- Under US$20 per barrel average production costs, reduced by 38% (2017: US$32 per barrel)
- US$3.9 million Canada gross profit before depletion and amortisation*, a tenfold increase from the previous year (2017: US$0.34 million)
- US$6.2 million loss before tax (2017: US$4.0 million loss)
- US$0.9 million cash on the balance sheet as at 31 December 2018 (31 December 2017: US$1.8 million)
- US$15.5 million gross equity raise in January 2018
Upgraded Reserves and Resources
Canada
- 26% increase in Net Proven Plus Probable (“2P”) reserves to 3.6 million barrels of oil equivalent (“mmboe”) (2017: 2.9mmboe)
- 2P net present value (pre-tax), using a 10 per cent discount rate (“NPV10”) value of US$48.3 million or US$13.4/barrels of oil equivalent (“boe”)
- 339% increase in net 2P reserves plus mid-case contingent and prospective resources of 42.2 mmboe, and 282 well locations were generated from a basin-wide study and land acquisitions
Italy
- Total mean gross prospective resources of 933 mmboe (793 mmboe net to Cabot Energy):
– 653 mmboe gross in the Adriatic Cygnus Prospect (513 mmboe net to Cabot Energy); and
– 280 million barrels (“mmbbl”) gross in the Sicily Channel Vesta Prospect (all net to Cabot Energy)
Operations
- Performance of the six horizontal wells drilled in the winter of 2017/2018 were assessed to inform the basis of learning and estimated forward production type curves for these and planned new wells
- Independent facilities review for all the Group’s main processing and pipelines in the area confirmed at least 30,000 barrels of liquid per day (“blpd”) capacity available for fluids processing and transportation
- Southern Adriatic seismic ante-operam largely completed, ready to progress permits in Italy once 18-month Italian government review of hydrocarbon prospecting, exploration and development activities is completed
Corporate
- Acquisition of 25% of the Canadian assets to take the Group’s ownership to 100% ownership and operatorship, to maximise efficiency and returns
- Overhaul of management team with appointment of Scott Aitken as Chief Executive Officer, Petro Mychalkiw as Chief Financial Officer and Campbell Airlie as Chief Technical Officer
- Significant strengthening of all operational and reporting controls to ensure robust internal processes are in place following outcome of strategic, operational and financial review
- Reservoir operations team now Calgary based to increase efficiency, responsiveness and ownership of operations and work programmes
Post Period End
- Fundraise of £2.53 million (US$3.4 million) in March 2019
- Revenue for Q1 2019 of US$2.0 million (Q1 2018: US$3.4 million)
- Average Q1 2019 gross production of 511 bopd (Q1 2018: 725 bopd)
- Average Q1 2019 crude oil sales price of approximately US$44 per barrel (Q1 2018: US$51) and an average Edmonton Light Oil (“Edmonton”) price discount to the West Texas Intermediate (“WTI”) price of approximately 9%, reflecting the restoration of the historic price differential
- Engaged a specialist financial advisory firm to source Canada asset-level debt finance for the development drilling of the Company’s proven and probable reserves in Canada, commencing with a fully funded 2019 summer work programme
- While management remain confident that the debt finance discussions will result in a successful outcome for the Group, no debt commitments have yet been secured
- Supportive majority shareholder, High Power Petroleum (“H2P”), has indicated its willingness to provide limited short-term funding, pending the satisfactory progression of the ongoing debt finance discussions
Scott Aitken, Chief Executive Officer, commented: “2018 has been a year of necessary transition for Cabot Energy, with significant cultural and operational changes implemented throughout the Group.
“Despite growing average annual production in Canada by 71% to 703 bopd, enabling a 154% increase in revenues, the Board uncovered significant unbudgeted cost overruns. Since joining as CEO in June 2018, I made it a priority to comprehensively upgrade the Company’s financial planning, reporting and controls processes.
“From an operational standpoint, we achieved a 339% reserves and resources upgrade in Canada with a 282 well location inventory, underlining our confidence to deliver sustainable production growth. In Italy, an independent resources report reinforced the Group’s belief that we have a leading position which offers world-scale, high-impact exploration potential. The key now is to optimise the potential of our assets by adopting a managed, lean approach. To this end, we are encouraged that our renewed focus on financial and operational discipline has successfully reduced production costs to less than US$20/bbl.
“The Board is currently in advanced discussions to secure both short-term funding from its shareholder H2P and has also engaged a specialist financial advisory firm to source Canada asset-level debt financing to ensure that Cabot Energy is fully funded to commence its 2019 summer work programme and support the growth of the business. The heavy lifting has now been completed and, provided we secure appropriate financing, we believe we will be in a greatly improved position to deliver sustainable value for all shareholders from our contrasting portfolio of production and exploration assets.”
*Gross profit before depletion and amortisation is a measure of profitability which is not specifically defined under IFRS or other generally accepted accounting principles. It is a measure of a company’s operating performance which can be used to compare profitability among companies, as it eliminates the effects of accounting for acquisitions and capital expenditures.