Pre-Close Trading Statement -
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Immediate Release |
2nd February, 2011 |
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GULFSANDS PETROLEUM PLC
Pre-Close Trading Statement - 2010 Operations
London, 2nd February, 2011: Gulfsands Petroleum plc ("Gulfsands", the "Group" or the "Company" - AIM: GPX), the oil and gas production, exploration and development company with activities in Syria, Iraq, Tunisia, Italy and the U.S.A., is pleased to provide the following pre-close trading statement on 2010 operations. All numbers are unaudited.
2010 Production and Sales
Group production in December 2010 averaged 11,300 barrels of oil equivalent per day ("boed") on a working interest basis, an increase of 21% over the January 2010 average of 9,326 boed. In Syria working interest production averaged 10,289 barrels of oil per day ("bopd") in December 2010 vs. 8,256 bopd in January 2010. Average Group working interest production for the year as a whole was 10,316 boed of which 9,165 bopd was in Syria (all oil) and 1,151 boed was in the US (42% oil, 53% gas and 5% Natural Gas Liquids ("NGLs")). The US numbers exclude the production from the package of Gulf of Mexico assets sold in December 2010 with effect from the 1 May 2010 effective date of the transaction.
In Syria entitlement production net to Gulfsands under the Production Sharing Contract ("PSC") was approximately 40% of working interest production, and in the US the aggregate royalty burden was approximately 22% of working interest production.
In Syria there were 13 wells on production at year end (10 at Khurbet East and 3 at Yousefieh) compared with 7 wells on production at the start of the year.
The average realised oil price in 2010 in Syria was $74.6/barrel ("bbl"), representing a discount to dated Brent of $4.9/bbl. In the US the average realised prices were $76.5/bbl and $5.1/thousand cubic feet ("mcf") respectively.
2010 Activity
In Syria 6 new development wells were drilled, of which 4 were placed on production and 2 are currently suspended. In addition 4 exploration wells were drilled on Block 26, none of which were commercially successful, and a fifth, Twaiba, was spudded. All exploration expenditure in Block 26 is fully cost-recoverable against existing production. 1060 km² of additional 3D seismic was acquired during the year and is currently undergoing processing.
In terms of facilities, a 22 kilometre pipeline linking the Khurbet East early production facility to the Syrian Petroleum Company ("SPC") facilities at Tel Adas was completed in late September enabling the former trucking operation to be discontinued. The contract for the construction and installation of the 50,000 barrels of fluid per day ("bfd") central processing facility ("CPF") at Khurbet East was awarded to Saipem in November at a contract cost of €94 million. The facility is expected to be operational before the end of 2012. The initial payment under this contract was made after year-end.
In Tunisia the Lambouka-1 offshore exploration well (Gulfsands 30% interest) was drilled in Q3 and was suspended as a potential gas discovery. Gulfsands' share of the cost of the well was US$13.5 million. It is intended to re-enter and side track this well in due course.
Capital expenditure during the year was in the region of US$40 million.
Balance Sheet Position
At year end the Group had free cash balances of approximately US$80 million and no outstanding debt. In addition the Group's US subsidiary had a total of US$13 million of restricted cash principally backing abandonment bonds in the US. The sale of assets in the US which closed earlier this week, will release approximately US$5.6 million of this restricted cash in addition to the transaction proceeds of US$4.4 million.
Change of Accounting Policy
Gulfsands will be adopting a "successful efforts" accounting policy for its 2010 financial statements, and will be restating prior years accordingly. This is likely, inter alia, to result in the write-off of its share of unsuccessful exploration wells in Syria.
2011 Planned Activity
Production Guidance
Syrian working interest production is planned to increase during the year from approximately 10,300 bopd to approximately 12,000 bopd, averaging just over 11,000 bopd, subject to the successful de-bottlenecking of the early production facility. US working interest production is expected to average 650 boed.
Activity Guidance
In Syria 2 rigs will be in operation throughout the year, drilling a minimum of 6 exploration wells on Block 26 interspersed with 5 development wells on the Khurbet East and Yousefieh fields. The individual prospects, to be drilled after the current Abu Ghazal and KHE-101 wells, are still being worked on and will be announced in due course.
The processed data cube for the 3D seismic is expected to be received in late Q2 and interpretation will commence thereafter.
In Tunisia, activity after the onshore Sidi Daher well (expected to be spudded late February) will depend largely on the outcome of that well. Offshore, interpretation and mapping of the Dougga gas discovery (Shell 1981) and leads identified in the 640 square kilometre 3D area acquired in H1 2010 will be completed. Prospects identified will be matured for possible future drilling. A study of the potential commerciality of gas at Dougga and Lambouka will follow.
Capital Expenditure Guidance
2011 will see a material increase in capital expenditure as the majority of the CPF expenditure will occur this year. Total capital expenditure is expected to be in the region of US$100 million of which about one third will be exploration expenditure. Syria is expected to account for some 90% of total capital expenditure. It should be noted that development and exploration expenditure on Block 26 in Syria is cost recoverable from production.
At current oil prices Gulfsands expects to be able to finance this capital expenditure from our operating cash flow.
Announcement of Preliminary Results for 2010
Gulfsands will be announcing its preliminary results for 2010 at 7.00 am on Monday 4 April. Later that day a presentation will be given to analysts on the Group's exploration programme for the remainder of 2011.
For more information please contact:
Gulfsands Petroleum (London) +44 (0)20 7434 6060
Richard Malcolm, Chief Executive Officer
Andrew Rose, Chief Financial Officer
Kenneth Judge, Director: Corporate Development & Communications
Buchanan Communications Limited (London) +44 (0)20 7466 5000
Bobby Morse
Ben Romney
Chris McMahon
RBC Capital Markets (London) +44 (0)20 7653 4000
Josh Critchley
Matthew Coakes
Martin Eales
ABOUT GULFSANDS:
Gulfsands is listed on the AIM market of the London Stock Exchange.
Syria
Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. This field is producing at an average gross production rate of approximately 18,000 barrels of oil per day through an early production facility. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and is currently producing approximately 3,000 barrels of oil per day. Block 26 covers approximately 5,414 km2 and encompasses existing fields which currently produce over 100,000 barrels of oil per day, and are operated mainly by the Syrian Petroleum Company. The current exploration license expires in August 2012. Gulfsands' working interest 2P reserves in Syria at 31 December 2009 were 46.0 mmbbls.
Tunisia
Gulfsands is acquiring working interest positions in two exploration permits in Tunisia (Chorbane and Kerkouane Permits) and one exploration permit in Southern Italy (G.R15.PU) from ADX Energy Ltd the operator of all three permits. The Company's interest in these permits remains subject to the completion of the Company's farm obligations and various approvals from the governments of Tunisia and Italy.
Kerkouane Permit - Offshore Tunisia
G.R15.PU Permit (Pantelleria Permit) - Offshore Italy
G.R15.PU, is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4,500 km2.
The operator has identified multiple leads and targets on these permits. Drilling operations were recently completed at the Lambouka-1 well where gas was encountered in the Abiod Formation. However, as a result of down-hole problems, no fluid samples or gas flow were established. The well was suspended with the intention of re-entering at a later date and drilling and testing the reservoir in a sidetrack hole up-dip of the existing discovery.
Gulfsands has completed its earn commitments with respect to the Kerkouane and Pantelleria Permits with the drilling of the Lambouka-1 well. Gulfsands has earned a 30% working interest in both permits by paying approximately 35% of the cost the Lambouka-1 well and reimbursing the operator for a portion of various pre-drill costs that include a recently completed 3D seismic programme.
Chorbane Permit - Onshore Tunisia
The Chorbane permit is located in central Tunisia and covers an area of 2,428 km2. The permit is surrounded by several producing oil fields and extensive oil & gas infrastructure. Gulfsands' forward work commitment for the Chorbane permit includes the drilling of one exploration well in the first quarter of 2011 for which Gulfsands will pay 80% of the first $5 million in drilling costs, and 40% of the drilling costs in excess of $5 million, so as to earn a 40% interest in the permit.
A number of prospects and leads have been indentified within the permit, the most prospective being a large tilted horst block ("Sidi Daher") where the operator has identified multiple potential targets estimated to hold recoverable mean un-risked prospective resources of 175 billion cubic feet of gas ("bcfg") and 44 million barrels of oil from Tertiary and Cretaceous aged reservoirs.
Iraq
Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Maysan Gas Project in Southern Iraq, following completion of a feasibility study on the project, and is negotiating details of a definitive contract for this regionally important development. The project will gather, process and transmit natural gas that is currently a waste by-product of oil production and as a result of the present practice of gas flaring, contributes to significant environmental damage in the region. The Company is actively engaged in discussions with respect to financing and potential equity partners. Gulfsands has no reserves in Iraq.
Gulf of Mexico, USA
The Company owns interests in 32 leases offshore Texas and Louisiana, which include 20 producing oil and gas fields with proved and probable working interest reserves at 31 December 2009 of 3.4 mmboe (figures adjusted for the disposal of non-core properties in December 2010).
Certain statements included herein constitute "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements are based on certain assumptions made by Gulfsands and as such are not a guarantee of future performance. Actual results could differ materially from those expressed or implied in such forward-looking statements due to factors such as general economic and market conditions, increased costs of production or a decline in oil and gas prices. Gulfsands is under no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.
More information can be found on the Company's website www.gulfsands.com
This information is provided by RNS
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