TIDMCORO
RNS Number : 5500I
Coro Energy PLC
02 April 2020
2 April 2020
Coro Energy plc
("Coro", or the "Company")
Statement re Oil Price Volatility
Update on Disposal of Italian Operations
Directorate Changes
Coro Energy, the Southeast Asian focused upstream oil and gas
company, provides the following update in relation to prevailing
global oil prices, the disposal of its Italian operations and on
cost reduction measures now being implemented by the Company to
position Coro for the lower price environment and an anticipated
likely temporary downturn in business development activities.
Statement re oil Price volatility and update on disposal of
Italian operations
The Company's assets currently comprise a 15% non-operated
interest in the Duyung production sharing contract, offshore
Indonesia (the "Duyung PSC"), which contains the recently
successfully drilled Mako gas field and a portfolio of Italian gas
assets (the "Italian Portfolio"), which are subject to an ongoing
disposal process.
Following the highly successful appraisal drilling campaign on
the Mako gas field in Q4 2019, which saw the Tambak-1 and Tambak-2
wells demonstrate the presence of well developed, high quality
reservoir sandstones with a common gas water contact across the
Mako structure, Gaffney Cline and Associates ("GCA") are in the
process of conducting a new independent reserves audit for the Mako
field and the Company looks forward to updating shareholders on the
results of the updated GCA reserves audit, which is now expected to
be published in late April. The Board continue to estimate an
upgrade in the Mako field resource size of an additional c.100 Bcf
in the 2C category as a result of the 2019 drilling campaign (GCA
previously ascribed 2C resources of 276 Bcf and 3C resources of 392
Bcf to the Mako field).
The Mako field is located close to the West Natuna pipeline
system and gas from the field can be marketed to buyers in both
Indonesia and in Singapore, where a heads of agreement with a gas
buyer is already in place. With a Plan of Development approved by
the Indonesian authorities, the conclusion of a gas sales agreement
would mark the next step toward the final investment decision to
develop and commercialise the field, but no further operations in
the field are expected in the near term.
The disposal of the Italian Portfolio, described in a circular
posted to Coro shareholders on 3 December 2019 (the "Disposal"),
was approved by Coro shareholders on 20 December 2019 and
completion of the Disposal remains subject to, inter alia, the
approval of the Italian Ministry of Economic Development. Given the
current situation in Italy in relation to COVID-19, the Company
anticipates ongoing delays in the receipt of Italian ministerial
approvals for the Disposal.
Whilst the Company is not currently an oil producer and expects
that depressed global oil prices will ultimately give rise to
additional potential business development opportunities, the Board
considers that prevailing global events are likely to result in
delays both in the completion of the Disposal and in the Company's
ability to execute further material acquisition(s) in South East
Asia.
As at 31 March 2020 the Company had unaudited cash balances of
approximately $4.5 million. Despite this strong cash position, the
Company considers it to be commercially prudent to significantly
reduce its cost base given it is not possible to predict how long
current difficult market conditions will last.
The Company is therefore now proactively implementing a material
cost reduction exercise to position the Company for current
circumstances. This will see a reduction of approximately $2.3
million of General and Administrative costs on an annualised basis,
resulting in the Company having sufficient working capital to meet
its requirements until April 2021, when the second annual coupon
payment becomes due on Tranche A of the Company's EUR 22.5m 2022
Eurobond.
Further, prevailing gas prices in Italy are significantly lower
than the corresponding period last year and these low prices are
expected to continue through the summer.
As a result and in the light of the COVID-19 outbreak in Italy,
the Company has taken the decision to temporarily suspend
production on its Sillaro, Bezzecca and Casa Tiberi fields. The
fields will continue to be maintained to allow the swift resumption
of production when external conditions improve. The production
suspension is expected to save $0.1 million and also allows the
Company to delay 10-year maintenance activities on Sillaro,
conserving a further $0.3 million. Production at Rapagnano will
continue.
In addition to the directorate changes described below and the
cost reduction exercise, each of James Parsons (Non-Executive
Chairman), Marco Fumagalli (Non-Executive Director) and Fiona
MacAulay (Independent Non-Executive Director) have agreed to defer
25% of their remuneration for a period of three months.
Directorate Changes
Given the unprecedented oil price decline, inability to travel
due to the COVID-19 pandemic and related market changes, including
the short term downturn in regional business development
transactions, the Company has decided to immediately reduce its
executive staffing and associated cost base. Following consultation
with cornerstone investors and in line with current practices in
other companies, the Company's Nominations and Remuneration
Committee has offered the executive directors the options of: (a)
taking an unpaid sabbatical; (b) receiving 3 months' notice
(subject to conditions), payable in new ordinary shares in the
Company, for the termination of their employments; and/or (c)
stepping into a NED role. In putting these options to the executive
directors, the Company has made the difficult but robust decision
to not offer cash payments to outgoing executives. Andrew Dennan,
the Company's CFO, has elected to become a Non-Executive Director
of the Company with immediate effect. James Menzies, the Company's
CEO, has not accepted any of the options offered to him and, in
light of this and, inter alia, the need for the Company to cut
costs to conserve cash resources in the current environment, the
Board has therefore taken the decision to terminate his employment
with immediate effect and without payment (notwithstanding any
notice provisions in his service agreement). Share options
previously awarded to Mr. Menzies have now lapsed and the Company
will provide further updates, as appropriate, regarding any claims
or settlement made by or reached with him. Following the
termination of his employment, Mr. Menzies is required to resign as
a statutory director of Coro group companies.
In support of the necessary cost reduction programme, Nick
Cooper has offered his resignation as a Non-Executive Director to
further reduce Board costs. The Board has accepted his resignation
and he will leave the Board with immediate effect.
Following these changes, the Board will consist of James
Parsons, Andrew Dennan, Marco Fumagalli and Fiona MacAulay in the
roles of Non-Executive Chairman, Non-Executive Director,
Non-Executive Director and Independent Non-Executive Director
respectively and the composition of the Company's audit and
remuneration committees will be unchanged. When external conditions
improve, Executive Directors will be appointed to re-energise
Coro's regional business development activities.
Each of the Non-executive Directors will provide support to the
Company's executive management functions where required and
appropriate to do so. Peter Christie, the Company's existing Group
Financial Controller, will now report directly to the Coro Board,
taking on the additional executive duties as Interim CFO. Leonardo
Salvadori, Managing Director of Italy, will continue to report
directly to the Coro Board and will also take on additional
executive duties across South East Asia.
The Board has full confidence that this structure will deliver
continuity and protect and maintain the value of the Company's
asset base during these challenging conditions.
In his role as a Non-Executive Director, Andrew Dennan's
remuneration will be on the same 25% deferred basis for a period of
three months as the other remaining directors of the Company. He
retains the 15,000,000 options exercisable at 4.38 pence previously
awarded to him. His prior employment contract with the Company has
been terminated for no consideration by mutual agreement.
Statement re COVID-19
COVID-19 has had a huge impact across the oil and gas industry
and, coupled with the recent dispute between Russia and Saudi
Arabia over oil production volumes, has led to a very significant
drop in oil and gas prices. Given the pre-production nature of the
Company's assets, COVID-19 has had limited direct impact on Coro's
assets in South East Asia but, as outlined above, the disposal of
the Company's Italian assets is anticipated to be delayed.
Production operations in Italy have been unaffected to date, with
the assets being managed through a combination of on-site working
within social distancing guidelines or remote oversight, with all
appropriate safety procedures remaining in place to protect staff
and local communities. While our operational capability is largely
unaffected, we have taken the decision to temporarily suspend
production on unprofitable fields in Italy as set out above. Coro's
staff in Italy, the UK and South East Asia are like many others
working remotely wherever possible and the Company's priority
remains ensuring their health and safety during this difficult
period.
James Parsons, Non-Executive Chairman of Coro, commented:
"These are unprecedented times not just for the oil and gas
industry but wider society as countries around the world face up to
the challenge presented by COVID-19 and its health, social and
economic impact. The ensuing commodity price volatility has only
made the task tougher for E&P companies, but the Board
continues to believe in Coro's long term prospects and the now
proven quality of its Mako asset, as well as its ability to add
further opportunities to the portfolio when macro conditions
improve. There remain opportunities in oil and gas, particularly in
strong regional gas markets like Asia and in special situations,
however, in the near term, we have moved decisively in the
interests of the Company and its shareholders to protect our
balance sheet in order to ensure Coro can weather the difficult
period the industry currently faces. I am delighted that Andy will
be staying on in a Non-Executive capacity."
Further announcements will be made, as appropriate, in due
course.
For further information please contact:
Coro Energy plc Via Vigo Communications
Ltd
Cenkos Securities plc (Nominated Adviser) Tel: 44 (0)20 7397 8900
Ben Jeynes
Katy Birkin
Vigo Communications Ltd (IR/PR Advisor) Tel: 44 (0)20 7390 0230
Patrick d'Ancona
Chris McMahon
Mirabaud Securities Ltd (Joint Broker) Tel: 44 (0)20 3167 7221
Peter Krens
Ed Haig-Thomas
Canaccord Genuity Ltd (Joint Broker) Tel: 44 (0)20 7523 4617
Henry Fitzgerald-O'Connor
James Asensio
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
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END
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