Maurel & Prom : Annual Results 2010
By Maurel Prom, PRNEWednesday, March 30, 2011
PARIS, March 31, 2011 - Change of strategy: an improved risk profile
- Sustained effort in known regions: Gabon, Tanzania and Colombia
- Acquisition of assets in Nigeria
- Reinforcement of the Group's financial position: EUR70 million in
OCEANE bonds taken up
Impact on Company accounts: non-recurring exploration expenses
- Group sales increase to EUR346 million (+80%)
- Income from oil production and service activities: EUR111 million
- Exploration write-offs EUR135 million
- Provisions EUR76 million in Tanzania
- Operating income: -EUR109 million
- Net income -EUR139 million
Impact on the valuation of the Group: reserves and production up sharply
- Increase in Group production
- Significant increase in P1+P2 reserves net of royalties: 288 Mboe
- Major resources revealed in discoveries: 419 Mboe
- Major natural gas deposits in Tanzania, Nigeria and Sicily highlighted
by the impact of recent events in Japan
2010 Activity: a change of strategy
Over the course of 2010 the Group developed and consolidated
actions begun in 2009 (restructuring its assets and debt) aimed at balancing
risk in its asset portfolio, and focusing on two major growth vectors, Gabon
and Nigeria, while maintaining significant activity in Colombia.
Capital investment in Gabon and the acquisition of production
assets in Nigeria illustrate the Group's strategic aim to offer its
shareholders a more measured risk profile.
Renewed exploration in Colombia focuses on areas that the
Group knows well and excludes drilling in too-risky prospects. The Group is
actively looking for partners who would want to participate in financing
future work.
Its technical and operational results validate the Group's
development actions for:
i. ramping up production in Gabon and searching out satellite
fields;
ii. increasing production in Nigeria, preparations to start
producing from already-discovered fields and examining supplementary
evacuation solutions;
iii. confirming the potential of the exploration permit in
Colombia highlighted by the discovery at Sabanero and recently at CPO 17;
iv. East Africa is proving to be a promising new region in
terms of natural gas. This interest has been stimulated by a series of recent
discoveries which are now galvanising major players in the sector. The new
gas production in this region will be able to find a natural outlet in Asia
and particularly in Japan which, in light of recent events, is substantially
revising its future gas needs.
Key indicators
in millions of euros 2010 2009*
Sales 346 192
Income from oil production and service activities 111 47
Provisions for depreciation of exploration assets -76
Exploration expenses -135 -53
Other - -3
Income from oil production, exploration and -100 -9
service activities
Operating income -109 -20
Financial income 16 -25
Pre-tax income -93 -45
Net income from continuing activities -145 -46
Net income from discontinued operations 7 -5
Net income, Group share -139 -51
Cash at opening 428 189
Net cash flow from operating activity 77 53
Investments 332 439
Nigeria Acquisition 140 -
Seplat guarantee deposit 125
Cash at closing 95 428
(*) Restated for discontinued operations and
change in accounting methods
Exploration and Production
In Gabon, the Group has been able to develop the Ombg and Omgw
fields virtually immediately and at low cost, thanks to the size of the Onal
production centre which was designed from the beginning to accept production
from potential nearby fields. Accordingly, the OMGW-102, OMGW-201 and
OMGW-103 have been drilled and connected to the production centre. In
addition, on 17 December 2010 the Group obtained Exclusive Exploitation
Authorisation for the Gwedidi (OMGW) and M'Bigou (OMBG) fields.
The Group undertook development work at the OMOC-North field,
discovered in February 2010. Assessment drilling began in late July 2010. The
development investment for this field relates to the drilling of wells and
setting up collection facilities to link them to the Onal field. The
predominantly Base Sandstone wells (OMOC-N-301 and OMOC-N-302) were connected
to the evacuation pipeline from the Onal platforms on 15 December 2010. The
predominantly Kissenda wells will be connected to the production centre via a
new pipeline.
At the same time, the Group is using the OMOC-101 well in
southern Onal to assess the OMOC field discovered in March 2009.
Once these works are completed, the wells will be connected to
the OMOC-North evacuation facilities from the second quarter of 2011.
Average production in Gabon over the full year 2010 was 14,618 b/d.
In Nigeria, the Group took a 45% stake in the Nigerian
registered company Seplat. On 30 July 2010 this company acquired 45% of the
mining rights in OML 4, 38 and 41, of which 55% are owned by the Nigerian
National Petroleum Corporation (NNPC). Seplat's other shareholders are the
Nigerian operators Platform Petroleum Limited (22%) and Shebah Petroleum
Development Company Ltd (33%). Production was integrated progressively during
the second half of 2010. Based on the 128 production days in 2010, the fields
produced 17,632 b/d of which Maurel & Prom's share was 3,570 b/d.
Oil and gas production in Venezuela, after oil taxes in kind
of 30%, came to 993 barrels of oil equivalent per day over the full year
2010. Oil accounted for 66% of gross production. This activity is
consolidated by the equity method (as an equity associate) and is therefore
not recognised in Group sales.
In Tanzania, the Kianika-1 exploration well, drilled under the
Mandawa exploration permit (Maurel & Prom operator, 90%), was abandoned. The
objectives of this well had been achieved, showing good reservoir
characteristics and confirming the potential for this theme in this region,
but no hydrocarbon indices were detected.
Note that the Group is in the process of farming out the
interests it holds in Tanzania.
In Colombia, the Cascabel-1 (Tangara) and Bachue-1 (Muisca)
exploration wells were abandoned. Three exploration wells had been drilled
under the Sabanero exploration permit, showing evidence of oil. After
analysing the results, in early 2011 the Group launched a stratigraphic
drilling programme.
In the Congo, the NGoumba-1D and M'Bafou exploration wells,
drilled under the Marine III permit (M&P operator, 75%), were plugged and
abandoned. The Tié-Tié-NE-1 well drilled under the La Noumbi permit (M&P
operator, 49%) encountered a silty sandstone zone that showed hydrocarbon
indices. Measurements at the end of the drilling, however, indicated that
production (mainly natural gas) would not be commercially viable because of
the distance to any potential market. The well was therefore plugged and
abandoned.
In Syria, the Al Asi permit area (M&P operator, 75%) is
situated along the Mediterranean coast north of the Lebanon-Syria border and
covers 8,427km2. Based on 890km of 2D seismic data acquired by the
Group in 2007 and 2008, two zones of interest had been identified. The Draco
prospect was identified in the eastern part. Two (Triassic) Kurrachine
formations that had shown hydrocarbon indices during the drilling of the
Draco-1 well were each tested in turn. The Kurrachine reservoir
characteristics proved to be too degraded to allow hydrocarbon production.
Based on the results from this well, the Group intends to focus its efforts
on the second zone of interest in the western part of the permit area.
In France, the Group took a 25% stake in the Mios exploration
permit. Note that the Group has a 25% stake in the adjacent Lavignolle
exploration permit.
Oil services
During the period, Caroil extended its activity in Cameroon
and the Democratic Republic of Congo. By redeploying part of its fleet to
these new countries, the company has succeeded in keeping the usage rate of
its commercial fleet high (88% in 2010 versus 85% in 2009). Its stock of rigs
remained steady in 2010 with 15 rigs.
Financial summary 2010: Impact of change of strategy
Economic environment
The activity of the Group as well as the economic and
financial environment, are reflected in the financial statements in the
following items. The financial statements were approved by the Board of
Directors on 30 March 2010.
Sales
Sales in 2010 increased sharply to EUR345.8 million, up 80% on
2009. This improvement reflects the ramping up of production from the Gabon
fields and the entry into consolidation of OML 4, 38 and 41 in Nigeria with
two extractions in the fourth quarter of 2010.
In early 2009, at the conclusion of the Reserve Based Loan
(RBL), the Group put in place financial instruments to hedge operational cash
flow based on the price of oil. The average hedge price in the 12 months of
2010 for 6,750 b/d was US$60.4/b, while the average price of Brent was
US$79.4/b. This produced a negative adjustment of EUR37.9 million.
Excluding the impact of hedges, 74% of sales in 2010 came from
oil production in Gabon and in Nigeria and 26% from the drilling activity of
the wholly owned M&P subsidiary Caroil.
Operating income
The contribution to operating income by production activities
was up sharply as a result of growth in hydrocarbon sales.
The corresponding contribution of petroleum services was in
line with the previous year.
Operating income from production and petroleum services takes
into account depreciation for Caroil drilling rigs in the amount of EUR16.5
million, as well as EUR45 million impairment for asset depletion in Gabon
fields and EUR4 million asset depletion in Nigerian fields.
Amortisation of asset depletion was up sharply (EUR49 million
in 2010 versus EUR19 million in 2009) linked directly to increased
production. Operating income from production and petroleum services was
EUR111 million compared to EUR47 million in 2009, a rise of 135%.
Steady exploration activity in recent years is reflected in
significant expenses and provisions of EUR211 million.
In Tanzania, Maurel & Prom is continuing its efforts to
capitalise on the significant investments undertaken to date. With respect to
the Bigwa-Rufiji and Mafia (BRM) permit, the contractual exploration phase
ends in 2015. An as-yet unamortised EUR144 million, representing exploration
investment undertaken in this BRM region, has been recognised in the Group's
accounts. Studies in the amount of EUR19 million, as well as EUR21 million
work that led to the M'Kuranga discovery will be recognised at their full
value for the duration of the exploration phase. An amount in the region of
EUR104 million corresponds essentially to work carried out on the Mafia-Deep
well. The local volume of gas related to this well was evaluated by
Schlumberger to be between 1.97 and 4.15 Tcf (1.0 and 2.2 Tcf as Group share
net of royalties). Additional studies will need to be carried out to
determine what proportion of these resources are commercially viable. Maurel
& Prom has no plans to fund such studies and is looking for a partner to do
so. The assessment costs will be lower if they can be carried out at the
initially drilled well. The Group estimates that the value of re-using the
Mafia-Deep drilling works is EUR26 million, which suggests a required
provision of EUR76 million.
Operating income for fiscal 2010 was a negative -EUR109
million.
Financial income
The cost of net financial debt was EUR38 million, including:
- Interest expense on OCEANE 2014 and OCEANE 2015 in the
amount of EUR28 million and on other borrowings in the amount of EUR7.7
million (including Reserve Based Loan);
- Income from cash in the amount of EUR4 million of which EUR3
million was payment of a deposit guaranteeing the EUR140 million loan to
Seplat;
- Losses on derivative instruments in the amount of EUR6
million (unrealised profit).
Taking into account EUR59 million realised capital gains,
EUR50 million of which arises from the revaluation upwards of the EUR/US$
exchange rate at fiscal year-end (EUR/US$ closing rate 1.44 at 31 December
2009 and 1.336 at 31 December 2010), net financial income was a positive
EUR16 million.
Net consolidated income
Tax expense was EUR57 million. This includes EUR29 million for
the fiscal year in review (Caroil EUR6 million, EUR17 million in Gabon as tax
for cost oil and EUR6 million in Nigeria) and EUR27 million deferred tax.
The consolidation on an equity basis of the Group's stake in
the joint venture Lagopetrol was essentially the main contributor to EUR4.5
million consolidated income, and the net proceeds from disposals of
activities contributed a further EUR6.7 million (from earn-out clauses
related to Colombian/Hocol assets).
The net consolidated income of the Maurel & Prom Group was
-EUR139 million
Balance sheet
The balance sheet total at 31 December 2010 was EUR1,849
million. The Group's share of equity capital was EUR835 million versus EUR940
million at 31 December 2009, down EUR105 million due to its income
underperformance.
Investments
The total amount of investments made in 2010 was EUR472
million, and breaks down as follows:
in millions of euros COLOMBIA GABON CONGO TANZANIA SYRIA PERU
EXPLORATION 52.8 110.8 27.5 40.8 9.4 2.8
DEVELOPMENT 0.1 61.7 0.1 0.5 - 0.0
DRILLING 7.8 4.3 9.6 0.4 - -
TOTAL 60.7 176.7 37.1 41.7 9.4 2.8
(table continued)
in millions of euros OTHER $ TOTAL NIGERIA GROUP
ACQUISITION TOTAL
EXPLORATION 2.0 246.2 64.0 310.2
DEVELOPMENT 0.2 62.5 76.0 138.5
DRILLING 1.4 23.4 - 23.4
TOTAL 3.6 332.0 140.0 472.0
Cash flow
At 31 December 2010, Maurel & Prom had treasury assets of
EUR220 million, of which EUR95 million was in the form of cash or cash
equivalents. The Group's cash position was impacted by the following factors:
- redemption on 1 January 2010 of OCEANE 2010 in the amount of
EUR183 million of which EUR6.2 million was interest, and the payment of
EUR22.6 million interest for OCEANE 2014 on 31 July 2010;
- a sustained investment effort for all Group operations:
exploration in the amount of EUR246 million, including the assessment of the
Omoc-North field and well as development, mainly in Gabon, in the amount of
EUR63 million linked to the development of Caroil activity (EUR23 million);
- purchase of assets in Nigeria for EUR140 million;
- cash flow generated by operating activities (EUR77 million);
- transfer of the earn-out clause related to Colombian assets
in the amount of EUR45 million;
- realised financing:
- Reserve Based Loan in the amount of EUR224 million;
- a new OCEANE bond issue in the amount of EUR70 million;
- EUR37 million facility agreed by Standard Bank, exercisable
until 31 March 2011;
- EUR71 million participation in a loan agreement in Nigeria;
- foreign exchange impact (-EUR41 million);
- EUR125 million paid to guarantee the acquisition of assets
in Nigeria.
P1+P2 reserves net of royalties 288 Mboe
As at 1 January 2011, the Group's reserves (oil + gas) came to
288 Mboe, up 74% compared with 1/1/2010 (see press release of 28 March 2011).
The size of the resources (419 Mboe, excluding Mafia Deep)
allows the Group to envisage a significant rise in reserves over the next few
years.
Book income for 2010 incorporates substantial
exploration-related expenses that produced no discovery. Accounting standards
require oil companies to immediately post to expenses the corresponding
amount of exploration infrastructure works. Any increase in reserves is
reflected in future cash flow.
None of these resources take into account the potential from
future exploration activity, which the Group intends to pursue in these
countries.
Outlook 2011
In 2011, the Group will focus its efforts on two distinct
growth vectors: Gabon, where the Group's experience plays a strategic role,
and Nigeria, which seems to have massive hydrocarbon resources. At the same
time, it will be carrying out assessment work in Colombia where the Group has
just teamed up with a strategic partner who has renowned experience in
heavy-oil production.
In Gabon, the emphasis will be on developing the OMOC-North
and OMOC fields in the south-west of Onal. A programme of works has been
implemented with the drilling of at least three exploration wells and the
acquisition of seismic lines.
Production levels should remain steady until the OMOC-North
field starts production, scheduled to begin once work is completed to connect
to the ONAL production centre.
In Nigeria, Seplat (M&P 45%) has begun operations to maximise
production and delineate the resource. A programme is under way to ramp up
drilling and assessment wells over the course of the year and achieve between
30,000 b/d and 35,000 b/d of production at 100% (6,000 to 7,000 b/d M&P
share).
Seplat (M&P 45%) has entered into a US$200 million refinancing
agreement allowing it to repay the $187 million bridge loan by BNP Paribas
(first payment US$20 million at end 2010, final payment US$167 million on 31
March 2011). At the same time, the US$167 million residual guarantee was
unblocked in favour of Maurel & Prom. In addition, Seplat (M&P 45%) will use
the available component of some US$30 million to partially repay the
shareholder advance agreed by Maurel & Prom when buying out OML 4, 38 and 41.
In Colombia, the Group's agreements with Pacific Rubiales
Energy specify that it will finance all operations to delineate, develop and
start production at the Sabanero discovery, as well as any voluntary
exploration programme.
The Group announces the sale, to a subsidiary of the
Argentinean group INTEGRA, of Maurel & Prom Venezuela, which holds 26.35% of
Lagopetrol. The payment will be gradual and will recover the full book value
of the asset.
The Board of Directors will propose to the General Meeting of
12 May 2011 a dividend of EUR0.25 per share (for payment 27 May 2011).
All the work completed in 2010 and undertaken in 2011 should
allow the Group to significantly increase its production over the next few
years while the alliance with Pacific Rubiales allows it to largely disengage
from exploration risks while retaining a large part of the potential should
it prove successful.
Consolidated Financial Statements for fiscal year 2010
Assets
In thousands of euros 31/12/2010 31/12/2009
Intangible assets 520,625 457,731
Property, plant and equipment 722,845 547,432
Non-current financial assets 62,226 21,030
Investments accounted under the equity method 39,991 32,508
Non-current derivative instruments 0 37,912
Deferred tax assets 12,505 10,647
Non-current assets 1,358,192 1,107,260
Inventories 14,948 4,095
Trade receivables and related accounts 71,084 33,434
Other current financial assets 260,422 31,671
Other current assets 44,169 39,432
Income tax receivable 350 1,518
Current derivative instruments 3,931 162
Cash and cash equivalents 95,423 427,576
Current assets 490,327 537,888
Total Assets 1,848,519 1,645,148
Liabilities
In thousands of euros 31/12/2010 31/12/2009
Share capital 93,405 93,364
Additional paid-in capital 221,483 221,607
Consolidated reserves 740,179 753,972
Treasury shares (81,501) (78,664)
Net income, Group share (138,776) (50,650)
Equity, Group share 834,790 939,629
Non-controlling interests 1 1
Total net equity 834,791 939,630
Non-current provisions 5,687 15,346
Non-current bonds 329,586 260,770
Other non-current borrowing and financial debt 210,574 0
Other creditors and sundry non-current liabilities 271
Non-current derivative instruments 14,395 14,976
Deferred tax liabilities 58,986 27,339
Non-current liabilities 619,499 318,431
Current bond borrowing 13,346 195,682
Other current borrowing and financial debt 125,307 53
Trade payables and related accounts 70,842 89,165
Income tax payable 16,128 3,849
Other creditors and miscellaneous liabilities 120,988 45,277
Current derivative instruments 30,031 40,395
Current provisions 17,587 12,666
Current liabilities 394,229 387,087
Total Liabilities 1,848,519 1,645,148
Consolidated Income Statement
In thousands of euros 31/12/2010 31/12/2009*
Sales 345,805 191,851
Other income 293 848
Purchases and change in inventories (33,147) (26,439)
Other operating purchases and (82,975) (56,801)
expenses
Tax expense (24,147) (6,620)
Personnel expense (26,870) (20,297)
Amortisation charges (67,870) (35,258)
Depreciation of exploration and (211,478) (56,472)
production assets
Provisions and impairment of (6,432) (7,738)
current assets
Reversals of operating provisions 2,933 3,913
Gain (loss) on asset disposals 1 3,068
Other expenses (5,422) (9,708)
Operating income (109,309) (19,653)
Gross cost of debt (35,838) (35,669)
Income from cash 4,048 1,922
Net gains (loss) on derivative (5,997) 36,200
instruments
Net cost of debt (37,787) 2,453
Other financial income and 53,749 (27,419)
financial expenses
Financial income 15,962 (24,966)
Income before tax (93,347) (44,619)
Income tax (56,569) (11,508)
Net income from consolidated (149,916) (56,127)
companies
Net income from equity associates 4,487 10,121
Net income from continuing (145,429) (46,006)
operations
Net income from discontinued 6,653 (4,644)
operations
Net consolidated income (138,776) (50,650)
Net income, Group share (138,776) (50,650)
Non-controlling interests 0 0
Earnings per share
Basic -1.21 -0.44
Diluted -0.91 -0.44
Earnings per share from
discontinued operations
Basic 0.06 0.04
Diluted 0.05 0.04
Earnings per share from continuing
operations
Basic -1.27 -0.40
Diluted -0.96 -0.40
(*) Restated for discontinued operations and change in
accounting methods
Cash Flow Statement
In thousands of euros 31/12/2010 31/12/2009*
Consolidated net income from continuing
operations (145,429) (46,006)
Tax expense for continuing operations 56,569 11,508
Consolidated income from continuing
operations before tax (88,860) (34,498)
- Net increase (reversals) of amortisation,
depreciation and provisions 72,093 10,450
- Unrealised gains (losses) due to changes
in fair value 41,242 (471)
- Past exploration charge and write-off charge 135,126 53,823
- Calculated expenses and income related to
stock options and similar benefits 2,017 2,060
- Other calculated income and expenses 17,151 (547)
- Gains (losses) on asset disposals (1) 167
- Income (loss) from equity associates (4,487) (10,121)
- Other financial items 7,124 778
Cash flow before taxes 181,405 21,641
Payment of tax due (15,866) (13,264)
Change in working capital requirements
for operations (88,122) 44,965
- Customers (33,754) (19,318)
- Suppliers (24,251) 39,553
- Inventories (8,950) (988)
- Other (21,167) 25,718
NET CASH FLOW FROM OPERATING ACTIVITIES 77,417 53,343
Disbursements for acquisitions of
tangible and intangible assets (473,147) (384,556)
Proceeds from disposals of intangible
and tangible assets 4,887 77,739
Disbursements for acquisitions of financial
assets (unconsolidated securities) (4,440) (15,135)
Proceeds from disposal of financial assets
(unconsolidated securities) 10,321 (399)
Acquisition of subsidiaries 0 (13,933)
Increased interest in equity associates 0 6,861
Change in loans and advances granted (137,269) 840
Other cash flows from investing activities 0 573
Net proceeds from operations sold 44,565 457,240
NET CASH FLOW FROM INVESTING ACTIVITIES (555,083) 129,230
Amounts received from shareholders as
part of capital increases (2,910) 6,222
Dividends paid (11,532) (40,045)
Proceeds from new loans 416,766 285,829
Interest paid (7,124) (778)
Borrowing repayments (205,711) (211,176)
Treasury share acquisitions (2,836) 7,352
NET CASH FLOW FROM FINANCING ACTIVITIES 186,653 47,404
Impact of exchange rate movements (41,158) 8,872
CHANGE IN NET CASH (332,171) 238,849
Cash and cash equivalents at start of period 427,544 188,695
NET CASH AND CASH EQUIVALENTS AT END OF PERIOD 95,375 427,544
(*) Restated for discontinued operations and change in accounting methods
The Group's consolidated financial statements have been duly audited. The
auditor's report is being prepared. The pending financial statements are
available on the Company's website:
This document may contain forward-looking statements regarding
the financial position, results, business and industrial strategy of Maurel &
Prom. By nature, forward-looking statements contain risks and uncertainties
to the extent that they are based on events or circumstances that may or may
not happen in the future. These projections are based on assumptions we
believe to be reasonable, but which may prove to be incorrect and which
depend on a number of risk factors such as, fluctuations in crude oil prices,
changes in exchange rates, uncertainties related to the valuation of our oil
reserves, actual rates of oil production and the related costs, operational
problems, political stability, legislative or regulatory reforms, or even
wars, terrorism and sabotage.
Maurel & Prom is listed on Euronext Paris - Compartment A - CAC
mid 100 Index
ISINFR0000051070 / Bloomberg MAU.FP / Reuters MAUP.PA
Next meeting:
1/4/2011 Analyst presentation (10 am)
12/5/2011 General Meeting (10 am)
www.maureletprom.fr
For more information: www.maureletprom.fr
Communication:
INFLUENCES
t : +33(0)1-42-72-46-76
e : communication@agence-influences.fr
Communication: INFLUENCES, t : +33(0)1-42-72-46-76, e : communication at agence-influences.fr
Tags: France, March 31, Maurel & Prom, Paris
