26 March 2012
Salamander Energy Plc is pleased to announce its full year results for the year ended 31 December 2011. The highlights are:
- 2P Reserves increased by 13.6% to 75.3 MMboe (2010: 66.3 MMboe)
- Average daily production of 18,600 boepd (2010: 20,300 boepd)
- Bualuang East Terrace oil discovery, 8 MMbo added to 2P reserves
- Matured prospect inventory in North Kutei, independent CPR points to 676 MMboe of gross mean prospective resources in four high-graded prospects
- Revenue increased by 26.2% to $408.0 million (2010: $323.4 million)
- Record pre-tax operating cash flow, before working capital changes, increased by 68% to $293.6 million (2010: $174.4 million)
- Record post-tax operating cash flow increased by 82% to $193.9 million (2010: $106.5 million)
- Profit before tax of $112.6 million (2010: loss of $113.7 million)
- Loss after tax of $45.5 million (2010: $169.5 million)
- Year-end cash and funds balance of $85.8 million (2010: $99.2 million)
- Net debt of $210.1 million (2010: $190.2 million)
- Re-aligned portfolio to focus on three core areas
- Disposed of mature, low margin, non-core interests in Offshore Northwest Java (“ONWJ”) and Southeast Sumatra (“SES”) PSCs
- Deepened interest in Kerendan development, Greater Kerendan area, Indonesia
- Expanded acreage position in Greater Bualuang area, Gulf of Thailand through G4/50 farm in
- 2012 average daily production rate forecast to be 12,000-13,000 boepd following disposal of non-core producing assets
- Bualuang Bravo Platform on schedule for installation 3Q 2012
- Ensco-53 rig mobilised for development and exploration drilling in Greater Bualuang area
- Tutung Alpha-3 spudded, gas appraisal drilling ahead
- Signed 12 month contract for Atwood Mako jack up rig in Greater Bualuang area from 3Q 2012
- Exploration drilling in North Kutei to commence 4Q 2012
Chief Executive James Menzies commented:
“2011 was an important year for high-grading the portfolio and refining our strategy. We have also materially grown our reserve base through both successful exploration and commercialising gas resources, and are now reporting record levels of revenue, cash flow and pre-tax profit. We have also taken an important step in defining the potential of our North Kutei acreage with recognition of gross prospective resources of over 670 million barrels of oil equivalent independently verified in the top four prospects.
We are now stepping the operational activity up a gear with two rigs running and a third secured under long-term contract. With our focus on drilling in proved basins where we have a competitive edge, the Board sees great opportunities ahead and we look forward to 2012 with a keen sense of anticipation.”
A recording of the analyst presentation will be made available at www.salamander-energy.com on the afternoon of 26 March 2012
For Further Information:
||020 7432 2680
|James Menzies, Chief Executive Officer
|Geoff Callow, Head of Corporate Affairs
|Brunswick Group LLP
||020 7404 5959
Chairman’s and Chief Executive’s Review
During 2011 the Group commenced a high-grading of its portfolio with the aim of focusing on areas where it has large, operated interests with material upside exposure and high quality, anchor assets. These areas include the Greater Bualuang area, in the Gulf of Thailand; the North Kutei area and the Greater Kerendan area, both in Indonesia. In all of these areas the Group’s position is based around a core asset with upside potential as well as low-risk step out exploration and appraisal opportunities and the chance to add new acreage in areas where we have a detailed knowledge of the hydrocarbon systems.
This re-alignment is a natural progression in portfolio development as the Group matures, and follows our earlier drilling programmes across a diverse range of assets in Southeast Asia. Having identified the three core areas around which to focus the Group’s future growth, the second half of the year saw the Group divest small, non-operated interests in the ONWJ and SES PSC’s. These were highly taxed, high cost barrels which generated relatively limited free cash flow and were in long term decline. The Group used these funds to expand in its core areas with the farm-in to the G4/50 block in the Greater Bualuang area, Thailand and increasing its interest in the Greater Kerendan area, through the acquisition of additional equity in the Bangkanai PSC. Both of these areas offer higher potential returns and more tangible growth opportunities than the ONWJ and SES PSC’s.
With the Group’s renewed focus, assets outside of these high-graded areas are now considered non-core and the Group may determine in the future where appropriate to harvest cash flow, divest or withdraw from these positions.
Despite difficult global economic conditions, the Group’s principal markets of Indonesia and Thailand continue to grow, with the IMF forecasting GDP growth in 2012 of 6.3% in Indonesia and 4.8% in Thailand. The demand for new gas-fired power projects in Indonesia remains strong. This is an important market for the Group as it explores for gas in the Greater Kerendan and North Kutei areas. Demand for gas remains exceptionally strong in the North Kutei area, where the presence of the Bontang LNG plant has led to the growth of a number of local markets for gas, including petrochemicals, fertiliser, power and LNG. With the oil price remaining consistently above the $100 per barrel level since early 2011, the Group’s markets can be described as buoyant.
On the operational side, production averaged 18,600 boepd for the year, despite the sale of the ONWJ and SES PSC’s in the second half of 2011. Production comprised of 84% liquids and 16% gas while average realisations during the year were $104.45 per barrel (2010: $73.16 per barrel) and $5.47 per Mcf (2010: $5.12/Mcf).
Even allowing for disposals, the Group grew its 2P reserves by 9.0 MMboe (13.6%) during the year reporting a 2P figure of 75.3 MMboe at year end, representing a reserve replacement ratio of 235%. Alongside this, the Group’s proved reserve base grew by 37% to 48 MMboe (64% of the 2P figure), reflecting the continued successful development of the Group’s flagship Bualuang oil field.
Since the drilling of the play-opening Angklung-1 well at the end of 2010, our technical teams have been working hard throughout 2011 to define the prospectivity in our acreage in the North Kutei area, offshore Indonesia. The well has opened an exciting new oil & gas play located offshore East Kalimantan, close to the Bontang LNG plant, an area with a strong market for gas. We are therefore pleased to have had an independent third party Competent Persons Report (CPR) report commissioned and recently completed, analysing the potential of our acreage. This CPR report highlights the potential for over 676 million barrels of oil equivalent of gross mean prospective oil & gas resources in the top four high-graded prospects in our acreage. We are continuing our technical work on our operated blocks and look forward to testing the prospectivity of this new play area.
On the financial front, the increase in average realisations drove revenue to record levels of $408.0 million (2010: $323.4 million) and we are pleased to report a record post tax operating cash flow of $193.9 million (2010: $106.5 million) and record profit before tax of $112.6 million (2010: loss of $113.7 million). The Group reported a year end cash and cash equivalents position, including restricted bank deposits, of $85.8 million (2010: $99.2 million).
The Group recognises, and takes seriously, the need for it to be a responsible corporate citizen. The Chief Executive oversees the implementation of the Group’s policies in this area from Anti-Bribery and Corruption (“ABC”) through to Health and Safety, community engagement and employment practices. A focus area in 2011 was the implementation of a new code of conduct reflecting the new ABC legislation and the roll-out of a comprehensive training programme to educate all employees on their responsibilities in this area. The Group has also embarked on a review of its internal policies and reporting structure with regards to corporate responsibility matters in order to enhance its performance in this area and this will be concluded in 2012. More details can be found in the Corporate Responsibility section of this report.
We strengthened the senior management team during 2011, creating the new positions of Group Technical Director and Exploration Manager, Indonesia, reinforcing our position as having one of the leading and most capable operating teams in the region. We were also delighted to welcome Dr. Jonathan Copus as Chief Financial Officer, the Board has been impressed by the contribution he has already made in his short time with us. Since the period end we have further strengthened the Board with the appointment of Dr Carol Bell as a non-executive director. We would also like to thank all our staff for their continued dedication, professional attitude and enthusiasm.
Following the strategic rationalisation in 2011 and the material growth in the Group’s reserve base, the 2012 drilling programme will see Salamander directing its resources to operating in its core focus areas where it has discoveries, is looking to progress field developments and conduct low risk step out exploration. We therefore already have a detailed understanding of the hydrocarbon systems in our core basins and this is reflected in the relatively low risk nature of the programme. As a result, we are increasingly confident that we can capture material value through the drill-bit. Meanwhile, the core business continues to grow with production expected to rise to over 20,000 boepd in 2014.
With a more focused approach, the Group will seek to accelerate its plans across its core areas. The Board believes that Salamander has never been better positioned to create and capture value for shareholders and we look forward to the year ahead with a keen sense of anticipation.
||Chief executive Officer
|23 March 2012
||23 March 2012
Key Performance Indicators
|Working Interest Production (boepd)
||Lower year-on-year production following the sale of interests in the ONWJ and SES PSC’s during 2H 2011.
||Production in 2012 is expected to average 12,000-13,000 boepd. Production is forecast to rise to over 20,000 boepd in 2014.
|Finding, Development & Acquisition Cost per barrel (3 yr average) ($ per boe)
||Represents an all in cost of the reserves base. 2011 saw the addition of low cost reserves from the Kerendan field and reflects reserves upgrades and exploration success on the Bualuang field/East Terrace.
||The Group is looking to add reserves close to infrastructure through development/exploration activity in a number of core areas.
|Operating Costs ($ per boe)
||Opex per bbl was broadly in line with 2010.
||Opex per bbl is expected to stay broadly flat in 2012 before falling in 2013 as production from Bualuang rises.
|Operating Cash Flow ($ per entitlement boe)
||Operating cash flow per barrel growth due to higher gas realisations, stronger oil prices and an increase in the proportion of oil in the production mix
||The disposal of the low margin ONWJ/SES production should also improve cash flow on a unit basis.
(3 year average)
||The Group materially increased reserves during 2011.
||Successful development drilling on the Kerendan field could lead to commercialising further gas resource and further reserve bookings.
|Lost Time Injury Frequency (per million man hours)
||Three LTI’s were reported in 2011. The LTIFR is in line with
the OGP average.
|The Group targets zero Lost Time Injuries every year and has an active HSE plan to help try to achieve this.
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