United Oil & Gas PLC - Operational & Corporate Update
2 April 2020
("United" or the "Company")
Operational & Corporate Update
· Completion of low capital expenditure gas pipeline project at Al Jahraa
· Production of gas and elimination of flaring increases gross production in
· All Egyptian production, including new gas supply, has positive operational cashflow, even at current low market prices
o Low operating costs at Abu Sennan of around
o The Company's pre-payment facility with BP provides downside price protection by effectively hedging 6,600 bbls of oil per month at
o c. 20% of United's net production is gas which is sold under a fixed contract that is relatively insensitive to oil-price changes
· Drilling operations are continuing at the El Salmiyah 5 infill well within the El Salmiyah field
Response to Market Conditions
· Proactive measures taken by United and its partners to reduce near-term Capex commitments during current oil-price uncertainty and the impact of Covid-19
o Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021
o Deferral of Egyptian Capex reduces 2020 infill campaign from 4 to 2 wells, significantly reducing gross 2020 Capex estimates. Further optimisation of the Capex and Opex budgets is being considered.
o Completion of post-Egyptian-acquisition licence review sees divestment plans for selected non-core assets in the
o Substantial cut in administrative expenditure resulting in further cost savings
· Measures taken to minimise the impact of oil-price uncertainty and Covid-19 will help safeguard the company during the current industry challenges, with the aim of putting it in a position to take advantage of future opportunities
I am delighted that production in
"Post completion of the Egyptian acquisition, we indicated our intention to review our portfolio and to optimise our investment strategy. The economic and political uncertainty created by Covid-19 and the current low oil prices have created considerable challenges for our industry. United's leadership team have reviewed our business in-depth and have mapped out what we believe is a sensible course through the months ahead. We are focussing on investment which we believe will deliver the most immediate return for our business. Where expenditure can be deferred with limited impact, we are doing so. Where expenditure or indeed where licences offer a more uncertain or marginal return, we are being prudent and stepping away.
"United's goal is to focus expenditure where it can deliver immediate benefit, maintain cashflow and emerge from this period of uncertainty in a position of strength, relative to the industry. We believe that this strategy can achieve that. We will continue to keep shareholders briefed on developments as they happen."
Al Jahraa Gas Pipeline and Production Update
The construction of a 10km gas pipeline, linking the Al Jahraa Field, which lies within the Abu Sennan concession, to the neighbouring KPC facility has been completed. The project made use of existing facilities, and total gross costs were kept to below
Not only has the completion of the pipeline reduced the amount of flaring on the asset, it has also increased the overall gross production levels from the Abu Sennan concession to c. 8,400 boepd on a gross basis (1,850 boepd net to United's working interest). The current production levels are more than double where they were 12 months ago, and this has in part been driven by the recent success at the ASH-2 Well, which continues to produce at over 3,000 bopd. Plans to further develop this field are still being progressed.
Current Drilling Operations
The El Salmiyah 5 drilling operations continue. This is an infill well targeting multiple undrained reservoirs within the El Salmiyah field. The well is making good progress and we look forward to updating the markets on this well in due course.
2020 Drilling Schedule
Kuwait Energy Egypt (KEE), the operator of the Abu Sennan concession, has indicated that due to the current low oil price, they plan to reduce the 2020 Capex costs on the licence significantly. This will include deferring at least two of the four planned 2020 infill wells.
United are fully supportive of this approach, which will enable the asset to remain cash-flow positive in the current low oil-price environment. It is worth re-stating that the operating costs on the Abu Sennan concession are low, at around
Although the Company had previously been keen to expedite this development programme, and we would wish the circumstances were otherwise, the delay and associated Capex deferral (
Markets will be aware that the licence operator, Tullow Oil plc has written down the value of the Walton Morant licence in their most recent Preliminary Results schedule.
United has indicated to the Jamaican authorities that it wishes to explore options for continuing to progress what United believe to be a transformative licence. Discussions have been initiated with the Government, and we will update the market in due course.
Review of Licences
Following completion of the Egyptian acquisition, United is now a full-cycle E&P company with net production of over 1,800 boepd. The Company had stated its intention to review the asset base and against the backdrop of uncertainty created by Covid 19 and low oil prices, is taking decisive action to rebalance the portfolio.
United will therefore not be continuing its option on
At completion of this process United will have strong production in
United will continue to evaluate new venture opportunities during the current industry challenges, with the aim of putting the company in a position to move quickly should conditions improve.
United adopts a conservative financial strategy as evidenced by both the commodity price hedging and the mix of the capital structure. The Company's pre-payment facility with BP is based on a floor price of
The Company has worked with the Operators of its key assets to reduce and defer capital programmes. The Company has also made significant decisions around the cost base of the Company and has implemented some significant changes which are expected to realise approximately
Under the terms of the Crown SPA, and subject to FDP approval, United expects a further
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
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+44 (0) 20 7628 3396
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+44 (0) 20 3137 1902
Cenkos Securities Plc (Joint Broker)
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+44 (0) 20 7397 8900
+44 (0) 131 220 6939
Murray (PR Advisor)
+353 (0) 87 6909735
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+44 (0) 207 236 1177
This information is provided by RNS, the news service of the
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