# Valeura Energy strong financial position and actively pursuing additional targets

- Link: https://www.directorstalkinterviews.com/valeura-energy-strong-financial-position-and-actively-pursuing-additional-targets/4121076088
- Published: 2022-08-05T07:14:20+01:00
- Author: Giles

**[Valeura Energy Inc](https://www.directorstalkinterviews.com/company/valeura-energy-inc/vle.to).**(
TSX:VLU), the upstream oil and gas company with assets in the Thrace Basin of Turkey
and in the offshore Gulf of Thailand, reported today its unaudited financial and
operating results for the three and six month periods ended June 30, 2022.

In Q2 2022, Valeura signed and then closed a share purchase agreement to acquir**
e KrisEnergy International** (Thailand) Holdings Ltd. which owns and operates two
licences in the offshore Gulf of Thailand. The Acquisition includes the suspended
Wassana oil field and the fully appraised Rossukon oil field. Additionally, through
a separate agreement, the Company has agreed to acquire the Mobile Production Unit
_Ingenium_ (“MOPU”) which is on location at the Wassana oil field.

**Highlights**

·    Announced the independent third-party reserves and resources assessment associated
with the Acquisition: proved and probable (2P) reserves of 6.5 million bbls of oil
at Wassana, best estimate (2C) unrisked contingent resources of 4.7 million bbls
of oil at Rossukon (development pending), on a net working interest basis^(1);

·    Commenced planning and procurement activities to re-activate production at 
the Wassana oil field, with aim of restoring up to 3,000 bbls/d net production in
Q4 2022^(1);

·    Planning for Q3 2022 inspection works to re-certify the MOPU;

·    Advanced commercial discussions regarding procurement of a Floating Storage
and Offloading vessel (“FSO”) for Wassana;

·    Continuing safe operations on the MOPU, with no recorded health or safety incidents;

·    Commenced technical and commercial work for the development to support a final
investment decision later this year on development of the Rossukon oil field; and

·    Continuing efforts to secure a suitable farm-in partner for the Turkey tight
gas play.

1 Throughout this announcement, net interests in Licence G10/48, Licence G6/48, 
the MOPU and in their associated fields’ production, reserves, and resources are
presented on a working interest acquired basis to the Valeura-controlled special
purpose vehicle, Panthera Resources Pte. Ltd., in which Valeura holds 85% of the
share capital.

> **Sean Guest, President and CEO of Valeura commented:**
> _“During the second quarter, we agreed, announced, and then closed our Gulf of
> Thailand acquisition, a transaction which is exactly in line with our strategy
> to provide near-term cash flow and mid-term growth through the mergers and acquisitions
> market. For total consideration of US$19.3 million (including initial and contingent
> consideration and the MOPU acquisition), we have acquired 6.5 million bbls of 
> 2P oil reserves in addition to 2C contingent oil resource volumes of 4.7 million
> bbls on an unrisked, best estimate basis, with an assessed 84% chance of development._
> _We have moved quickly to integrate the Thailand business into our Company, and
> have set our sights on restoring production from the Wassana oil field during 
> the fourth quarter of this year. To that end, offshore operations have begun to
> ensure readiness of the MOPU and to conduct a major facility inspection to complete
> its mandatory re-certification – expected to be completed in Q3. In addition, 
> we are now in advanced negotiations to lease a suitable FSO for Wassana’s production
> and have begun discussions regarding timing for development of the Rossukon oil
> field with our partner and with the Thailand regulator. Elsewhere in our business,
> we are continuing efforts to find a farm-in partner for our Turkish deep gas play,
> where several parties are currently evaluating the opportunity._
> _Our financial position at the end of the quarter remains strong, with no debt,
> and nearly US$30 million in cash on hand. This sets us up well to bring the Wassana
> field on production and continue our M&A-led growth strategy, where we are actively
> pursuing additional targets in the Southeast Asia region.”_

**Financial Update**

As of the end of Q2 2022, Valeura had cash and cash equivalent resources totalling
US$29.7 million, and no debt. This compares to a cash position of US$39.8 million
at the end of the prior quarter. The change in cash position during Q2 2022 primarily
reflects the Acquisition. Cash associated with the Acquisition of US$4.1 million
comprising mainly the maintenance and administrative costs between the effective
date and close, and US$4.2 million in phased payments towards the purchase of the
MOPU.

As the Acquisition closed just prior to the end of Q2, 2022, the Company has now
begun recording expenses, spending, etc., in relation to the Thailand business from
that date forward.

The Company received no revenue attributable to petroleum and natural gas sales 
or royalties during Q2 2022. However, given strong gas prices in Turkey, the Company
is entitled to receive the full US$2.5 million capped maximum royalty payment in
relation to the 2021 sale of its Turkey gas producing business. The remaining royalty
amount to be paid to Valeura is approximately US$0.4 million, which has been invoiced
and recorded as a receivable.

**Operations Update**

Valeura’s operations are squarely focused on resuming oil production at the Wassana
field in Q4 2022. Offshore work continues to be performed safely, with no recorded
incidents as the team performs ongoing routine maintenance work on the MOPU. Subsequent
to the end of the quarter, work has commenced on the MOPU to ensure its readiness
for production operations. The Company will shortly complete the inspection work
relating to the mandatory re-certification of the facility. All of these key activities
are expected to be completed in Q3 2022. 

Valeura has also made strides toward securing a suitable FSO for Wassana, and is
in advanced commercial discussions. Timing for arrival of the FSO is expected to
drive the schedule for re-start of the Wassana oil field, expected in Q4 2022 at
an initial rate of up to 3,000 bbls/d (net working interest).

Separately, the Company has progressed its planning, technical and financing arrangements
for a five-well infill drilling programme on the Wassana field, where it expects
to commence drilling operations in late Q2 2023. The team are currently finalising
well designs and expect to hire a drilling rig and procure the key long lead equipment
this quarter. The Company is targeting an increase in oil production rates to 4,500
bbls/d, consistent with the externally-evaluated 2P reserves profile, which includes
6.5 million bbls of oil (net working interest).

**Commercial Update**

Valeura is engaged in discussions with regulators and partners relating to development
of the Rossukon oil field. While a formal field development plan was submitted by
the previous operator and has been approved by regulators, the Company is exploring
the optimal timing and the potential for a phased development schedule to bring 
Rossukon’s 4.7 million bbls of 2C resources on stream (unrisked, best estimate 2C
resources, net working interest) in Q4 2023. Valeura will provide more clarity on
the Rossukon development plan in due course.

Valeura’s Thrace basin tight gas play in Turkey continues to see interest from potential
farm-in partners, driven in large part by the substantial increase in European gas
prices. Several parties are evaluating a potential partnership with the Company 
in Turkey, however, no assurances can be given that such evaluations will result
in a partnership with the Company.

**Ongoing Strategy**

Valeura has created a foundation in the Southeast Asia region and is well positioned
to grow further by way of mergers and acquisitions. As such, the Company is continuing
to evaluate additional targets that will further bolster near-term cashflow while
providing opportunities for additional medium-term re-investment to generate value
through further growth. In the longer-term, Valeura continues to believe the 20 
Tcfe prospective resources tight gas appraisal play in Turkey represents a significant
source of potential long-term value.

**Financial Statements**

Valeura’s condensed interim consolidated financial statements and Management’s Discussion
and Analysis for the three and six months ended June 30, 2022 and 2021 are available
on the Company’s website.

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