ST. HELIER, JERSEY, March 17 /PRNewswire-FirstCall/ -- Pan-Ocean Energy Corporation Limited ("PanOcean" or the "Company") announces its results for the year ended 31 December 2005 (all amounts in US$). Highlights include:
- Record funds generated from operations of $62.9 million ($2.58 per
share) and profit for the year was up over nine-fold over 2004 to a
record $32.3 million ($1.33/share);
- Production increased 11% to a record 9,398 bopd with increases both
onshore and offshore - onshore export restrictions limited production,
with capacity now at 15,000 bopd;
- Nine wells drilled during the year including three successful
development wells, two successful appraisal wells and four dry
exploration wells, resulting in three-year average finding and
development costs of $10.31/bbl for proved reserves and $7.40/bbl for
proved plus probable ("2P") reserves;
- Commenced construction of a 10-inch export pipeline 33 km from
Tsiengui to Coucal to handle all of the Company's current and future
production from Obangue, Tsiengui and Awoun;
- Commenced Tsiengui production in June, contracted a drilling rig for a
two-year drilling programme, and began development drilling by year-
end in the Tsiengui field;
- Acquired interests in 539,000 acres (218,000 hectares) of exploration
lands including a 25.7% interest in two new offshore exploration
permits, Themis Marin and Iris Marin, and a 40% interest in the
Ibekelia offshore Technical Evaluation Agreement;
- 35.9 mmbbl Proved, 67.5 mmbbl 2P and 121 mmbbl 3P reserves recognized
at year-end by independent engineers, being a 22% increase in Proved
and 14% increase in 2P net of production, and replacing production by
2.9x (Proved) and 3.4x (2P);
- Converted all of the Company's $4.0 million outstanding convertible
subordinated debt with the issuance of 0.5 million Class B Shares and
issued 1.25 million Class B Shares at CDN$32.00, raising
$33.7 million;
- Q4 2005 funds generated by operations was $13.3 million, or $0.52 per
share diluted and profit for the period was $8.9 million, or $0.35 per
share; Q4 production was further limited by Avocette constraints to
9,264 bopd; and
- Outlook for 2006 is 12,000 bopd to 15,000 bopd, exiting 2006 over
20,000 bopd with the Company capable of delivering 30,000 bopd to
40,000 bopd over the next two years.
2005 was a year of planning, logistics, mobilization and execution. Building on the foundation of 2004 exploration drilling success, the Company developed a plan in early 2005 that focused on creating significant value by taking charge of its onshore activity. This is being accomplished through aggressive development of PanOcean's operated interests and working closely with its partners to encourage the same on the Company's non-operated properties. Management identified two key issues, contracting an exclusive drilling rig and construction of an export pipeline, which had to be addressed in order to begin the progression of growth.
Planning
PanOcean entered 2005 with a large undeveloped asset base, in large measure due to exploration success in 2004. The challenge for 2005 was to develop a plan to exploit these assets by building production and cash flow. The Company developed a Five-Year Plan which articulated a field-by-field operating and financial plan incorporating the various technical, operations, logistics and personnel issues associated with each. Driven from a strategy aimed at leveraging independent operations onshore, the plan incorporated the following key objectives:
- Evaluation of the potential of Tsiengui which began with the
completion of a large 3D seismic survey, and the drilling and
completing of three wells to test deliverability with early production
of the field. These data will allow the Company to move forward with
the complete development of the field during 2006 and 2007.
- Design and build a wholly-owned and operated central production
facility, export pipeline and export pumping station with sufficient
capacity to move all of the current and future production from the
core areas of Obangue, Tsiengui and Awoun.
- Securing the exclusive use of a drilling rig onshore for two years to
allow Tsiengui and Obangue development drilling to proceed efficiently
and uninterrupted.
Logistics
One of the key challenges of 2005 was operating successfully in an environment of tight supply and rising costs for equipment, materials and services across the oil industry. Tubulars, wellheads, pumping equipment and drilling rigs were all in short supply, which situation was further exacerbated by the destruction of US industry infrastructure in the wake of Hurricane Katrina. The need to incorporate long lead times for key services and supplies required the organization to focus on careful planning and coordination in Gabon. PanOcean's focus paid off as it was successful in securing all of the pipe and equipment and contracts necessary to complete the export pipeline and the Tsiengui Central Production Facility. And, importantly, PanOcean was successful in contracting for the exclusive use of an onshore drilling rig by mid-year, ensuring that the Company could begin execution of the Tsiengui development drilling programme by year-end.
Mobilisation
Another key challenge of the year was to gear up the Company to handle a step-change in the scale of its operations, from managing a 50 km2 3D seismic programme to commencing commercial operations at Tsiengui. At one point there were over 450 employees and contractors staffing Company operations and four projects onshore Gabon. The KCA Deutag T-48 rig was mobilized from Thailand, landed in Gabon and was operating in the field by Q3. Drilling pads and access roads were built and flowlines laid, connecting the new locations with the Tsiengui Early Production Facility constructed in the field. Pipeline and construction equipment were moved on location and began civil works and laying of pipe for the new export line. Before Tsiengui came onstream in June, the Early Production Facility and pipeline to Obangue were completed.
Execution
In 2005, the Company delivered on all of the key objectives set out in the plan formulated at the beginning of the year. The logistical challenges of supply were met and operations were successfully mobilized to deliver on the plan.
Work at Tsiengui has continued to bear fruit, being the primary driver for the recognition of an additional 11.6 mmbbl of 2P reserves to the Company at year end and replacing 2005 production by 3.4 times. With the importance of Tsiengui to the Company, management opted to shoot a 50 km2 3D programme over the field area before finalizing a development drilling programme for the field. The quality of the data was excellent and allowed the technical staff to accurately map the pool. Initially, 17 locations were envisaged to develop the field. After evaluating and interpreting the 3D seismic data, a 31-well development may now be necessary to fully exploit the field.
Early production and further drilling at Tsiengui was also important in providing a foundation for the booking of reserves and crystallizing a full field development plan. The field was brought into production in mid-June from three wells, only nine months from the successful appraisal of the field in 2004.
The Company did have some disappointing exploration results in 2005 as it drilled two offshore and two onshore dry holes. With over 1.8 million gross acres of exploration lands on and offshore Gabon strategically located in the Gamba sub-salt play fairway, management's view of the Company's prospectivity remains undiminished. There were high hopes of continued exploration drilling momentum in Awoun, however the results of Chevalier and Merle in Q3 and Q4 dictated a thorough review and recalibration of the Awoun exploration model. More importantly, both Chevalier and Merle proved both the continuation and thickening of the high quality Gamba sandstone to the north, and it is expected that technical work in 2006 will lead to a resumption in exploration drilling and further seismic acquisition on Awoun in 2007.
On the financial side, the Company continued to improve an already strong balance sheet. In August, all of the $4.0 million subordinated convertible debenture was converted into 0.5 million Class B Shares leaving the Company with no subordinated or convertible debt on the balance sheet. In September, the Company issued 1.25 million Class B Shares at CDN$32.00 per share among institutional investors in Canada and the United States to raise $33.7 million. In an environment of increasing costs, the Company was successful in controlling its operating and capital costs, preserving significant leverage to increasing production volumes and oil prices.
Years ended 31 December
(US$000, US$ per Class A and Class B Share)
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2005 2004 % Change
(restated)
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FINANCIAL
Funds generated by operations 62,926 30,922 103%
per Class A and Class B share diluted 2.58 1.45 78%
Profit for the year 32,294 3,094 944%
per Class A and Class B share diluted 1.33 0.15 787%
Operating netback per barrel 22.33 17.65 27%
Capital expenditures 93,525 42,286 121%
Three-year average finding and development
costs (F&D)(1)
Proved ($/bbl) 10.31 7.95 30%
Proved plus Probable ($/bbl) 7.40 5.49 35%
Recycle rate (netback divided by F&D cost)
Proved 2.2 2.2 -
Proved plus Probable 3.0 3.2 (6%)
Working capital 36,003 30,794 17%
Long-term debt 13,500 20,018 (33%)
Long-term debt to funds generated by
operations (years) 0.21 0.65 (67%)
Shareholders' equity 165,617 86,501 91%
Class A and Class B shares diluted
weighted average for the year (000s) 24,362 21,335 14%
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OPERATING
Crude oil production (bopd) 9,398 8,499 11%
Average crude oil price Brent ($/bbl) 54.38 38.27 42%
Average net realised crude oil price($/bbl) 52.48 37.68 39%
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RESERVES
Crude oil (mmbbl)
Proved 35.9 29.4 22%
Probable 31.6 29.9 6%
Proved plus probable 67.5 59.3 14%
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(1) NI 51-101 basis which includes changes in estimated future capital.
All amounts are in US$ unless otherwise indicated.
Highlights of 2005 Performance
PanOcean posted record funds generated by operations of $62.9 million ($2.58 per share) and record production of 9,398 barrels of oil per day ("bopd") in 2005, with production completely unhedged. Capital spending was $93.5 million, substantially all of which related to exploration and development activities onshore and offshore Gabon. The Company participated in drilling nine wells during the year, being three successful development wells, two appraisal wells relating to 2004 discoveries and four dry exploration wells. Development drilling yielded reserve revisions and extensions of 9.9 million barrels ("mmbbl") of proved and 11.6 mmbbl of proved plus probable ("2P") oil reserves. Net of production, proved reserves increased 22% to 35.9 mmbbl and 2P reserves increased 14% to 67.5 mmbbl. Proved and 2P reserve additions replaced production 2.9 times and 3.4 times respectively. In an industry environment of significantly rising costs, the Company was successful in controlling operating costs, with 2005 unit operating costs increasing 11% to average $7.26/bbl, compared to $6.55/bbl in 2004, despite operating at less than capacity onshore during 2005.
Profit after taxation reached record levels of $32.3 million for the year, up nine-fold from 2004 principally due to rising crude oil prices and increased export volumes against a controlled cost structure. Sales volumes increased 12% and Brent prices increased 42% to yield a $64.1 million increase in gross revenue. There were associated significant increases in royalties and taxes paid in Gabon, but overall funds generated by operations doubled over 2004 to $62.9 million and on a per share basis increased 78% to $2.58 per share. In addition to contributions to shareholders' equity from profit during the year, the Company further strengthened its balance sheet by converting the debenture in June and raising equity in September. The Company successfully completed a CDN$40 million equity offering on a bought-deal basis, issuing a total of 1.25 million Class B Shares at CDN$32.00 per share.
Outlook Summary for 2006
2006 will be a transition year for PanOcean and it is all about planning and execution. The Company's objective for 2006 is to deliver a significant step-change increase in production growth. PanOcean intends to achieve this objective by completing the onshore export pipeline mid-year and continuing with sequential development drilling of the Tsiengui field. Exploration/appraisal of the Company's assets will generate five additional wells.
The Company has also achieved significant progress with its partner at Awoun during 2005 which has resulted in a decision to proceed with the field development of Koula in 2006, advancing the co-venturers' earlier plan by a year. A 5,000 bopd Early Production Facility is planned to be installed at Koula and commissioned in 2006, with first oil from Koula expected before year-end. Following the appraisal well planned for West Koula, three development wells are planned for Q3 and Q4.
Another key objective for 2006 is value recognition. PanOcean currently has a significant portion of its assets in an early stage of development. As such, there is limited production history and development drilling to support the full recognition of reserve potential by independent engineers. Management firmly believes that the ultimate reserve potential of the Company's asset base far exceeds that which has been currently recognized.
Management continues to believe that the Company's existing asset base has the potential to be developed into 30,000 to 40,000 bopd production over the next two years. PanOcean is executing its plan to actively develop its onshore operated production, focusing on a proactive and aggressive approach to developing the Tsiengui and Obangue fields, as well as working closely with the operator of Awoun towards the acceleration of production from the Koula field.
- the Tsiengui to Coucal 33 km 10-inch export pipeline is expected to be
completed by July 2006, enabling unrestricted access to export
pipeline capacity for all of Tsiengui, Obangue and Awoun production
going forward;
- the Company anticipates participating in the drilling of five
exploratory wells - four onshore and one offshore; drilling and
completion of 20 development wells - 18 onshore and two offshore; a
gas injection well and a water disposal well during 2006;
- Tsiengui development drilling is planned to continue in 2006 with
approximately 15 wells planned to be drilled horizontally from a
series of multi-well pads using the KCA Deutag rig under exclusive
contract to PanOcean - approximately 31 development locations have
been identified at Tsiengui;
- the first two trains of a 33,000 bopd commercial production facility
is planned for completion at Tsiengui by mid-year;
- Awoun development is planned to proceed beginning with early
production of the Koula field and the drilling of three Koula
development wells in 2006;
- in July 2006, production is expected to double from current levels of
approximately 9,300 bopd to exit the year around 20,000 bopd and
achieve 25,000 bopd by Q1 2007;
- funds generated by operations are expected to range between
$90 million and $130 million assuming $55.00/bbl Brent to $65/bbl
Brent and production averaging from 12,000 bopd to 14,500 bopd for the
year;
- funds generated by operations sensitivity to oil prices is
approximately $2.4 million per $1.00/bbl change in Brent oil prices.
HIGHLIGHTS FROM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
A complete set of Audited Consolidated Financial Statements for the year ended 31 December 2005 and the accompanying Management's Discussion and Analysis will be available on SEDAR at http://www.sedar.com/. and on the Company's website at http://www.panoceanenergy.com/ .
Consolidated Income Statement (unaudited)
YEAR ENDED
31 DECEMBER
YEAR ENDED 2004
31 DECEMBER (Restated
(US$000) NOTE 2005 - Note 1)
-------------------------------------------------------------------------
Revenue
Gross revenue 177,571 113,452
Royalties and burdens (34,019) (15,643)
Hedge loss - (13,597)
-------------------------------------------------------------------------
Net revenue 3 143,552 84,212
Cost of sales
-------------------------------------------------------------------------
Operating costs (24,574) (19,723)
Stock-based compensation 18 (194) (99)
Production sharing costs (3,507) (2,245)
Transportation and selling costs (6,364) (5,666)
Depletion (22,459) (16,281)
-------------------------------------------------------------------------
Gross profit 86,454 40,198
Other operating income 6 899 2467
General and administrative expenses (10,657) (9,047)
Stock-based compensation 18 (2,670) (2,755)
Financing costs and similar charges 8 (1,284) (2,996)
Loss on change in fair value of
derivative instruments 16 (2,458) (3,467)
Litigation settlement 9 (3,004) -
Loss on exchange of debenture 5 - (4,284)
-------------------------------------------------------------------------
Profit before taxation 67,270 20,116
Income tax 10
Current (33,521) (17,022)
Deferred (1,455) -
-------------------------------------------------------------------------
(34,976) (17,022)
-------------------------------------------------------------------------
Profit for the year 32,294 3,094
-------------------------------------------------------------------------
Profit per share 19
Basic 1.38 0.15
Diluted 1.33 0.15
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Balance Sheet (unaudited)
YEAR ENDED
31 DECEMBER
YEAR ENDED 2004
31 DECEMBER (restated
(US$000) NOTE 2005 - Note 1)
-------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents 48,882 43,900
Trade and other receivables 11 15,796 9,918
Inventories 12 5,864 4,187
-------------------------------------------------------------------------
70,542 58,005
Petroleum and natural gas properties 13 163,253 80,871
-------------------------------------------------------------------------
233,795 138,876
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Trade and other payables 14 34,539 26,871
Current portion of long-term debt 16 - 340
-------------------------------------------------------------------------
34,539 27,211
Non-current liabilities
Interest bearing loans 16 13,500 20,018
Deferred taxation 10 1,455 -
Provisions for abandonment 17 18,684 5,146
SHAREHOLDERS' EQUITY
Capital stock 18 49,357 45,247
Reserves 116,260 41,227
-------------------------------------------------------------------------
165,617 86,501
-------------------------------------------------------------------------
233,795 138,876
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Statement of Cash Flows (unaudited)
YEAR ENDED
31 DECEMBER
YEAR ENDED 2004
31 DECEMBER (restated
(US$000) 2005 - Note 1)
-------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 32,294 3,094
Adjustments for:
Depletion and depreciation 23,373 16,723
Accretion of abandonment liability 418 380
Accretion of debenture liability 64 108
Loss on change in fair value of derivative
instruments 2,458 3,467
Deferred taxation 1,455 -
Convertible debenture interest - 12
Stock-based compensation 2,864 2,854
Loss on exchange of debenture - 4,284
-------------------------------------------------------------------------
Funds from operations before working capital
changes 62,926 30,922
Increase in trade and other receivables (5,878) (737)
Increase in inventories (787) (1,581)
Increase in trade and other payables 1,806 6,591
-------------------------------------------------------------------------
Net cash from operating activities 58,067 35,195
-------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Petroleum and natural gas property
expenditures (93,525) (46,276)
Increase in trade and other payables 5,862 14,381
Insurance settlement - 3,990
Cash distribution to former subsidiary - (1,997)
-------------------------------------------------------------------------
Net cash used in investing activities (87,663) (29,902)
-------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Re-purchase of shares (670) (2,410)
Options exercised 3,018 1,568
Deferred finance charges 710 748
Redemption of preference shares - (83)
Shares issued 31,520 23,440
-------------------------------------------------------------------------
Net cash provided by financing activities 34,578 23,263
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 4,982 28,556
-------------------------------------------------------------------------
Cash and cash equivalents at start of period 43,900 15,344
-------------------------------------------------------------------------
Cash and cash equivalents at end of period 48,882 43,900
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Statement of Changes in Shareholders' Equity (unaudited)
ACCUM
SHARE CAPITAL -ULATED
(US$000) CAPITAL RESERVE PROFIT TOTAL
-------------------------------------------------------------------------
Note 18 18
-------------------------------------------------------------------------
Balance as at 1 January 2004 40,055 5,498 15,600 61,153
Fair value of financial instruments 4,540 - 4,540
Preference shares redeemed (30) (53) - (83)
Shares issued 4,062 19,378 - 23,440
Shares converted 187 (187) - -
Equity value of convertible
debenture - 2,101 - 2,101
Loss on repurchase of exchangeable
debenture - 4,207 - 4,207
Stock-based compensation - 2,854 - 2,854
Distribution to former subsidiary - - (11,862) (11,862)
Profit for the year - - 6,279 6,279
Options exercised 1,642 (74) - 1,568
Normal course issuer bids (642) (1,768) - (2,410)
-------------------------------------------------------------------------
Balance as at 31 December 2004 45,274 36,496 10,017 91,787
PRIOR PERIOD ADJUSTMENTS
Reclassification of equity value
of convertible debenture - (2,101) - (2,101)
Loss on change in fair value of
derivative instruments - - (3,467) (3,467)
Restatement of accretion of
debenture liability - - 282 282
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Balance as at 1 January 2005
(restated - Note 1) 45,274 34,395 6,832 86,501
Shares issued 2,500 29,020 - 31,520
Debenture converted 985 9,105 - 10,090
Stock-based compensation - 2,864 - 2,864
Profit for the year - - 32,294 32,294
Options exercised 674 2,344 - 3,018
Normal course issuer bids (76) (594) - (670)
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Balance as at 31 December 2005 49,357 77,134 39,126 165,617
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See accompanying Notes to the Consolidated Financial Statements.
Summary of Quarterly results
----------------------------
The following is a summary of quarterly results for the Company for the eight most recently completed quarters:
-------------------------------------------------------------------------
(US$000 and $ per Class A and Class B Share)
2005 2004 (restated(2))
-------------------------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Gross
Revenue 42,235 57,539 35,461 42,336 34,348 35,309 23,243 20,552
Profit (loss)
for the
period 8,944 11,891 7,533 3,926 (2,594) 5,908 2,035 (2,255)
Funds gener-
ated by
operations
after
tax(1) 13,336 22,933 13,885 12,772 5,941 13,441 5,625 5,915
Total
assets 233,795 207,389 161,511 149,942 138,876 106,014 98,536 99,348
Non-current
liabili-
ties 33,639 24,415 29,946 26,692 25,164 24,090 10,421 18,351
-------------------------------------------------------------------------
Capital
expenditures
Explora-
tion 14,058 3,405 4,129 353 11,793 6,485 1,389 1,843
Develop-
ment 14,924 19,364 29,522 6,151 4,200 6,664 4,743 4,589
Non-
petroleum 417 624 186 391 40 210 189 141
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Per Class A
and Class B
Share -
diluted
Profit (loss)
for the
period 0.35 0.49 0.32 0.17 (0.12) 0.28 0.09 (0.11)
Funds
generated
by opera-
tions(1) 0.52 0.94 0.59 0.54 0.25 0.63 0.27 0.30
-------------------------------------------------------------------------
Daily average
production
(bopd) 9,264 10,108 9,127 9,083 9,261 8,817 7,565 8,250
-------------------------------------------------------------------------
(1) Funds generated by operations is a non-IAS/ non-GAAP (Generally
Accepted Accounting Principles) term that represents earnings before
depletion, depreciation and accretion, future income taxes and
stock-based compensation. Funds generated per share is calculated
using the same weighted average number of shares outstanding as
earnings per share.
(2) Restated for the retroactive implementation of revised versions of
IAS 32 "Financial Instruments: Disclosure and presentation" and IAS
39 "Financial Instruments: Recognition and measurement".
Consolidated Income Statement by Quarter (unaudited)
----------------------------------------------------
Year
Three months ended ended
-------------------------------------------------------------------------
31 March 30 June 30 Sept 31 Dec 31 Dec
(US$000) 2005 2005 2005 2005 2005
-------------------------------------------------------------------------
Revenue
Gross revenue 42,336 35,461 57,539 42,235 177,571
Royalties and burdens (11,314) (5,470) (10,957) (6,278) (34,019)
-------------------------------------------------------------------------
Net revenue 31,022 29,991 46,582 35,957 143,552
Cost of sales
Operating costs (5,421) (4,459) (7,556) (7,138) (24,574)
Stock-based compensation (41) (51) (51) (51) (194)
Production sharing costs (1,063) (790) (1,056) (598) (3,507)
Transportation and selling
costs (1,156) (1,465) (2,066) (1,677) (6,364)
Depletion (5,403) (4,404) (6,173) (6,479) (22,459)
-------------------------------------------------------------------------
Gross profit 17,938 18,822 29,680 20,014 86,454
Other operating income 199 204 142 344 889
General and administrative
expenses (2,501) (2,702) (2,424) (3,030) (10,657)
Stock-based compensation (1,752) (306) (306) (306) (2,670)
Financing costs and similar
charges (505) (456) 35 (358) (1,284)
Loss on change in fair
value of derivative
instruments (1,419) (1,039) - - (2,458)
Litigation settlement - - (3,004) - (3,004)
-------------------------------------------------------------------------
Profit before taxation 11,960 14,523 24,123 16,664 67,270
Income tax
Current (8,034) (6,990) (7,977) (10,520) (33,521)
Deferred - - (4,255) 2,800 (1,455)
-------------------------------------------------------------------------
(8,034) (6,990) (12,232) (7,720) (34,976)
-------------------------------------------------------------------------
Profit for the period 3,926 7,533 11,891 8,944 32,294
-------------------------------------------------------------------------
Profit per share
-------------------------------------------------------------------------
Basic 0.17 0.33 0.51 0.36 1.38
Diluted 0.17 0.32 0.49 0.35 1.33
-------------------------------------------------------------------------
Fourth Quarter
--------------
Total fourth quarter production decreased by 8% from Q3 to 9,264 bopd primarily as a result of continued curtailments of Obangue/Tsiengui export volumes through the Avocette terminal. Offshore production accounted for 62% of total production, unchanged from the previous quarter.
An 8% decrease in average Brent Crude oil prices from $61.64/bbl to $56.91/bbl for the quarter combined with a 24% decrease in export volumes resulted in a 27% decrease in gross revenue from $57.5 million to $42.2 million in Q4. This resulted in a 100,000 bbl increase in crude oil inventory at 31 December 2005, from 148,000 bbl to 248,000 bbl. Export volumes were down to 747,000 bbl from 980,000 in the previous quarter, a result of the Avocette curtailments and a delayed Etame lifting.
Net working capital decreased by 30% to $36.0 million as a result of increased capital spending and reductions in funds from operations over the quarter.
The profit for the period was $8.9 million, down from $11.9 million in the previous quarter. This was mainly due to the following factors:
- Reduced sales volumes at reduced Brent prices resulting in a
$15.3 million decrease in gross revenue over Q3, or 27%, along with an
associated $4.7 million reduction in royalties and burdens.
- Production costs reduced by $1.3 million to $9.5 million due to
reduced export volumes, and depletion costs increased by $0.3 million
as a result of revised depletion calculations following the
independent engineering reports at the end of 2005.
- General and administrative expenses were up by $0.6 million over the
prior quarter, primarily as a result of increases in professional and
legal fees during the quarter.
The resulting funds generated by operations for the period was $13.3 million, or $0.52 per share diluted.
Capital expenditure was $29.4 million for the fourth quarter, compared to $23.4 million in the previous quarter.
- A total of $19.4 million was incurred on Tsiengui (Maghena), with
$12.2 million relating to development drilling, $4.1 million on
pipeline construction and $2.2 million relating to production
facilities.
- Awoun incurred expenditure of $5.6 million in the quarter, with
$4.3 million relating to the Merle and Chevalier exploration wells,
and the remainder spent on geological and geophysical exploration and
development studies.
- Company expenditure on the Etame license for the quarter was
$2.1 million, with $2.0 million of this spent on the development of
production facilities, mainly on the Avouma development platform.
- $1.1 million was incurred on the Iris Marin permit in relation to the
Iris-Oboga Marin-1 well.
- Obangue incurred $1.0 million with the majority of this having been
incurred on the NZOB-2A water injection well rehabilitation.
PanOcean is an international energy company engaged in the exploration, production and marketing of oil and natural gas. PanOcean's asset portfolio is focused on conventional light oil production in Gabon, West Africa. PanOcean's Class B Subordinate Voting Shares and Class A Common Shares are listed for trading on the Toronto Stock Exchange under the symbols POC.SV.B and POC.MV.A respectively. PanOcean has 24,687,611 Class A and Class B Shares outstanding. The Toronto Stock Exchange neither approves nor disapproves the information contained in this news release. For further information on PanOcean, please visit the Company's web site at http://www.panoceanenergy.com/ .
Forward Looking Statements
This disclosure contains certain forward-looking estimates that involve substantial known and unknown risks and uncertainties, certain of which are beyond PanOcean's control, including: the impact of general economic conditions in the areas in which the Company operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations, therefore PanOcean's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking estimates and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking estimates will transpire or occur, or if any of them do so, what benefits, including the amounts of proceeds, that PanOcean will derive therefrom. All statements included in this press release that address activities, events or developments that PanOcean expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, completion and production timetables and costs to complete well. These statements are based on assumptions made by PanOcean based on its experience perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.
