Carnarvon Petroleum Limited (ASX:CVN) has advised shareholders that while it takes the COVID-19 virus and fall in oil prices very seriously, it is confident the company is in a strong financial position to mitigate the impacts and continue business as ususal.
Carnarvon managing director and chief executive officer Adrian Cook said: “We have experienced market volatility in the past, such as with oil prices falling in 2015.
“During those times we also carefully assessed the situation and felt confident to remain active, working through the uncertainty and volatility that was present at the time.”
Cook said this considered approach put the company in an incredibly strong position that resulted in the discovery of the Dorado field in 2018.
He said: “We have once again taken the time to carefully assess market conditions.
“Our strong conviction is that the COVID-19 virus issue and low oil prices will be resolved in time.”
To reduce the spread of the virus, Carnarvon staff are actively avoiding potential virus bearing situations and key management personnel are rotating in teams between working from home and the office to ensure the business operates seamlessly should it enter the business.
Dorado development continues
Carnarvon’s strategy has intentionally targeted projects that have the potential to produce in low cost environments and thereby absorb extreme economic events such as the global market response to the virus.
The sheer size and nature of the Dorado field means that it is a strong and robust project which is expected to produce at globally competitive capital and operating costs per barrel.
Cook said: “We are of the view that the most appropriate course of action at the current time is to continue to focus on the delivery of our plans, and that includes supporting the operator in advancing the Dorado development.”
The company considers this work a priority and does not anticipate the Front-end Engineering and Design (FEED) phase will be prevented from commencing this year.
“Very strong financial position”
Carnarvon believes that the current spot prices for oil do not represent longer term prices expected to be realised in ‘normal’ market conditions and, after careful consideration around when first production from Dorado is expected, is confident it makes sense to proceed with the businesses’ plans unchanged.
Cook said: “Importantly, through careful management, we are in a position to proceed with our plans because of the very strong financial position of the company.
“At 31 December 2019 we reported cash of $119 million.
“Since this time, we have been very prudent with our outlays and we will have more than enough financial resources available to cover our 2020 expenditure.
“Based on our current forecasts, we will also have more than enough to reach the Final Investment Decision for the Dorado liquids development.”