TIDMVLU
RNS Number : 7381S
Valeura Energy Inc.
13 July 2020
VALEURA ENERGY TRADING UPDATE
Calgary, July 13, 2020: Valeura Energy Inc. (TSX:VLE, LSE:VLU)
("Valeura" or the "Company"), the upstream natural gas company
focused on the Thrace Basin of Turkey, provides a trading update
for the three-month period ended June 30, 2020. This is in advance
of the Company's full financial and operating results which will be
announced on August 12, 2020.
Value Proposition
As of June 30, 2020, the Company was in a strong financial
position, with no debt and a cash balance of US$30.7 million.
Spending during the second quarter related to drilling two shallow
exploration commitment wells and conducting testing operations on
the Devepinar-1 well in the deep gas play. The Company continues to
manage its capital and operating costs aggressively to protect
Valeura's strong net cash position.
The Company's cash value is over 50% higher than its current
market capitalisation, which is approximately US$20.0 million(1) .
As a result, management believes Valeura shares offer compelling
value based on:
-- Cash of US$30.7 million at June 30, 2020;
-- A producing conventional shallow gas business in a strong gas
price market with externally evaluated NPV(10) of US$23.8 million
at December 31, 2019, based on after-tax value of 1P reserves;
-- Upside value attributable to its unconventional deep gas play; and
-- The expectation that inorganic opportunities such as mergers
and acquisitions will play a role in the Company's growth, as the
Company seeks to leverage its strong financial position.
Ongoing production operations
Second quarter 2020 production averaged 521 boe/d, comprised
primarily of gas produced from the Company's ongoing conventional
shallow gas programme. This is a decrease of 27% over the prior
quarter, reflecting lower natural gas demand from its customer base
due to the combined impact of a reduction in local industrial
activity in light of the COVID-19 pandemic and national holidays in
Turkey. Toward the end of the quarter, economic activity and gas
demand had begun to ramp up as Turkey's lockdown restrictions
reduced, resulting in production increasing by 40% in June,
compared to the lower rates experienced in May.
Price realisations in the second quarter were effectively
unchanged from the first quarter on a Turkish Lira basis and
averaged US$6.24 per thousand cubic feet ("Mcf"), reduced from the
prior quarter by 12%, reflecting a strengthening US dollar in
relation to the Lira. Effective July 1, 2020 the Government of
Turkey lowered the natural gas reference price in Turkish Lira by
10%.
Operations in Turkey are returning to normal with
COVID-19-related restrictions being eased. Valeura personnel have
resumed both office and field work arrangements and the Company is
preparing to resume production enhancement work, including
workovers and production testing of its two recently drilled
shallow exploration commitment wells. Wireline logs indicate that
both wells encountered gas zones.
Continuing deep gas appraisal
The Company is pleased that on July 1, 2020, the Government of
Turkey announced the extension of Valeura's three exploration
licenses at Banarli and West Thrace until June 27, 2022. This is
the first of up to three possible two-year extensions providing a
period of up to six additional years to explore and appraise the
deep play before the requirement to convert the licences to
production leases. This first licence extension period carries an
obligation to drill a well on each license. These commitments can
be fulfilled by either deep appraisal wells or shallow exploration
or production wells.
During the second quarter Valeura resumed production testing of
the Devepinar-1 well in which the Kesan Formation had been
previously stimulated at three depths between 4,640 and 4,765
metres. This zone flowed gas to surface over a cumulative total of
41 days, producing an aggregate 28.6 MMcf of natural gas, of which
approximately 75% was produced into the Company's infrastructure
and sold to customers. The well's average initial production rate
over 30 days (IP-30) was 890 Mcf/d, and over the course of the test
period, declined to approximately 170 Mcf/d for the final 7 days of
flow. Testing and evaluation of this section in the well has now
been completed and the well has since been shut in. Pressure build
up data will now be acquired to assist in interpretation.
Based on the new Devepinar-1 flow test data which was tested
deep with the Kesan Formation, the Company is continuing studies to
identify sweet spots for the play where higher porosity reservoir,
which is normally encountered in the top approximately 300m of the
Kesan Formation, is coupled with enhanced natural fracturing to
yield a higher sustained gas flow rate. Refined 3D seismic
interpretation, petrophysical analysis and reservoir modelling work
will be used to build an inventory of potential locations for
future vertical and horizontal appraisal drilling.
Valeura will seek a new partner to participate in the play, for
a programme which will target additional deep appraisal wells,
stimulation, and testing.
Growth Strategy
The Company is evaluating several potential inorganic growth
transactions, including mergers and acquisitions, and has engaged
RBC Capital Markets to support certain of these opportunities.
Management believes the conditions are favourable for inorganic
growth to play a significant role in the forward strategy as the
current market environment is generating a flow of new deal
opportunities which the Company is well-positioned to pursue given
its enviable financial position.
______________________
(1) Based on June 30, 2020 TSX closing price of C$0.315/share
and C$/US$ exchange rate of 0.7367
For further information, please contact:
Valeura Energy Inc. (General and Investor Enquiries) +1 403 237 7102
Sean Guest, President and CEO
Heather Campbell, CFO
Robin Martin, Investor Relations Manager
Contact@valeuraenergy.com , IR@valeuraenergy.com
Canaccord Genuity Limited (Corporate Broker) +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor, James Asensio
CAMARCO (Public Relations, Media Adviser) +44 (0) 20 3757 4980
Owen Roberts, Monique Perks, Hugo Liddy, Billy Clegg
Valeura@camarco.co.uk
Oil and Gas Advisories
A boe is determined by converting a volume of natural gas to
barrels using the ratio of 6 Mcf to one barrel. Boes may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 boe is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. Further, a
conversion ratio of 6 Mcf:1 boe assumes that the gas is very dry
without significant natural gas liquids. Given that the value ratio
based on the current price of oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilising a conversion on a 6:1 basis may be misleading as an
indication of value
Reserves
Reserves disclosure in this announcement is based on an
independent reserves evaluation as at December 31, 2019 conducted
by DeGolyer and MacNaughton in its report dated February 25, 2020,
which was prepared using guidelines outlined in the Canadian Oil
and Gas Evaluation Handbook and in accordance with National
Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"). Additional reserves information as
required under NI 51-101 is included in the Company's 2019 AIF
filed on SEDAR. The forecast prices used to calculate reserves
value are $7.53/Mcf for natural gas and $65.77/bbl for light and
medium crude in 2020, and these prices both escalate at 2% per year
going forward. This natural gas price forecast is for the TBNG
assets, and the realised price for the Banarli assets is
approximately 97% of this price. More details on prices are
included in the Company's 2019 AIF filed on SEDAR.
Advisory and Caution Regarding Forward-Looking Information
Certain information included in this new release constitutes
forward-looking information under applicable securities
legislation. Such forward-looking information is for the purpose of
explaining management's current expectations and plans relating to
the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes, such as making
investment decisions. Forward-looking information typically
contains statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", "project",
"target" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this new
release includes, but is not limited to: the timing for
announcement of financial and operating results; management's
belief that the Valeura shares offer compelling value, the
expectation that the Company will conclude a merger or acquisition
deal; the Company's remaining work programme obligations; the
Company's ability to find another partner for the deep
unconventional gas appraisal programme; and the potential for
inorganic opportunities to play a role in the Company's growth.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things: the
resumption of operations following the COVID-19 pandemic; political
stability of the areas in which the Company is operating and
completing transactions; continued safety of operations and ability
to proceed in a timely manner; continued operations of and
approvals forthcoming from the Turkish government in a manner
consistent with past conduct; future drilling activity on the
required/expected timelines; the prospectivity of the Company's
lands, including the deep potential; the continued favourable
pricing and operating netbacks in Turkey; future production rates
and associated operating netbacks and cash flow; decline rates;
future sources of funding; future economic conditions; future
currency exchange rates; the ability to meet drilling deadlines and
other requirements under licences and leases; the ability to
attract a new partner in the deep play; the ability to identify
attractive merger and acquisition opportunities to support growth;
and the Company's continued ability to obtain and retain qualified
staff and equipment in a timely and cost efficient manner. In
addition, the Company's work programmes and budgets are in part
based upon expected agreement among joint venture partners and
associated exploration, development and marketing plans and
anticipated costs and sales prices, which are subject to change
based on, among other things, the actual results of drilling and
related activity, availability of drilling, high-pressure
stimulation and other specialised oilfield equipment and service
providers, changes in partners' plans and unexpected delays and
changes in market conditions. Although the Company believes the
expectations and assumptions reflected in such forward-looking
information are reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and
unknown risks and uncertainties. Exploration, appraisal, and
development of oil and natural gas reserves are speculative
activities and involve a degree of risk. A number of factors could
cause actual results to differ materially from those anticipated by
the Company including, but not limited to: the risks of further
disruptions from the COVID-19 pandemic; the risks of currency
fluctuations; changes in gas prices and netbacks in Turkey;
potential changes in joint venture partner strategies and
participation in work programmes; uncertainty regarding the
contemplated timelines and costs for the deep evaluation; the risks
of disruption to operations and access to worksites; potential
changes in laws and regulations, the uncertainty regarding
government and other approvals; counterparty risk; risks associated
with weather delays and natural disasters; and the risk associated
with international activity. The forward-looking information
included in this new release is expressly qualified in its entirety
by this cautionary statement. See the 2019 AIF for a detailed
discussion of the risk factors.
The forward-looking information contained in this new release is
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this new release is expressly qualified by
this cautionary statement.
Additional information relating to Valeura is also available on
SEDAR at www.sedar.com .
This Announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR"). Upon
the publication of this Announcement, this inside information is
now considered to be in the public domain.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction,
including where such offer would be unlawful. This announcement is
not for distribution or release, directly or indirectly, in or into
the United States, Ireland, the Republic of South Africa or Japan
or any other jurisdiction in which its publication or distribution
would be unlawful.
Neither the Toronto Stock Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Toronto
Stock Exchange) accepts responsibility for the adequacy or accuracy
of this news release.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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