Valeura Energy very strong financial position with working capital surplus of US$32.2 million and no debt


Valeura Energy Inc (LON:VLU), an upstream oil and natural gas company with assets in the Thrace Basin of Turkey, has reported its financial and operating results for the three month and nine month periods ended September 30, 2020.


· Operations – Return to steady operations throughout Q3 with average production up 10% from Q2 to 615 boe/d, generating petroleum and natural gas sales revenue of US$1.8 million;

· Financial position – A strong financial position, with net working capital surplus of US$32.2 million at September 30, 2020 (including US$31.3 million cash), and no debt;

· Shallow sale – Announced sale of its producing shallow conventional gas business for cash consideration of US$15.5 million, plus royalty payments of up to an additional US$2.5 million;

· Growth – Incremental cash from the shallow sale bolsters the Company’s ability to execute its inorganic growth strategy; and

· Deep play – Valeura’s interest in its 20 Tcfe unrisked mean prospective resource deep, tight gas play will be unaffected by the sale and the Company retains access to infrastructure with work continuing in the period to secure a partner for the Group’s upcoming appraisal campaign.

Sean Guest, President and CEO commented:

“Q3 was a steady quarter with operations conducted safely and with production ramping up to pre-COVID-19 levels.  As announced last month, we have agreed to sell our interest in the producing conventional business, with an effective date of July 1, 2020 and anticipate the deal closing in Q1 of next year. 

Our efforts have resulted in Valeura being in a very strong financial position, which as of September 30, 2020 included a working capital surplus of US$32.2 million, with no debt.  This balance sheet strength, plus the additional approximately US$15.5 million in cash to be received shortly from the shallow conventional sale, places us in an opportune position to access opportunities at a time when our industry is cash starved.  We are focused on value growth and intent on deploying cash to build a more material near-term and mid-term portfolio.  This will complement our longer-term growth opportunity in Turkey, where we retain our full interest in, and control of the deep tight gas appraisal play.”

Q3 Financial and Operating Results Summary

 Three Months Ended
September 30, 2020
Three Months Ended
June 30, 2020
Nine Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019
Financial(thousands of US$ except share amounts)     
Petroleum and natural gas revenues1,8431,9186,5692,1667,524
Adjusted funds flow (1)(1,210)339(819)1,0322,147
Net loss from operations(2,149)(1,899)(4,240)(166)(4,079)
Exploration and development capital2951,7343,9118098,132
Banarli Farm-in proceeds (2)(1,452)
Net working capital surplus32,18233,23132,18239,86739,867
Common shares outstandingBasicDiluted 86,584,98994,463,323 86,584,98994,988,323 86,584,98994,463,323 86,584,98992,406,655 86,584,98992,406,655
Share trading (CDN$)HighLowClose 0.380.300.31 0.440.230.32 0.650.200.31 3.601.912.66 3.991.912.66
Crude oil (barrels (“bbl“)/d)18121813
Natural Gas (one thousand cubic feet (“Mcf“)/d)3,6903,2603,7173,0783,917
Average reference priceBrent  ($ per bbl)BOTAS Reference ($ per Mcf) (3) 42.915.47 29.706.37 41.156.30 61.987.39 64.956.93
Average realised priceCrude oil ($ per bbl)Natural gas ($ per Mcf) -5.43 41.656.24 53.256.28 59.877.30 64.816.83
Average Operating Netback($ per boe) (1)11.6315.2717.7325.0223.91


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(1)  The above table includes non-IFRS measures, which may not be comparable to other companies.  Adjusted funds flow is calculated as net income (loss) for the period adjusted for non-cash items in the statement of cash flows.  Operating netback is calculated as petroleum and natural gas sales less royalties, production expenses and transportation.

(2)  Proceeds received from Equinor to complete spending commitment for Phase 2 of the Banarli Farm-in.  Recorded in the financial statements as a reduction of exploration and evaluation assets.

(3)  BOTAS regularly posts prices and its Level-2 Wholesale Tariff benchmark is shown herein as a reference price.  See the Company’s AIF filed on SEDAR for further discussion.

Additional information and commentary on the three and nine months ended September 30, 2020 is included in the Company’s Management’s Discussion and Analysis, which is available on the Company’s website and on

Strategy Update

Valeura is pursuing a three-pronged strategy intended to leverage the Company’s assets, financial strength, and differentiated capabilities, toward delivering shareholder value. 

Conventional gas production business

Valeura’s strategy has been to maximise the near-term value of its producing conventional gas business.  Monetising the business via its sale to TBNG Limited, as announced in October, will further bolster cash resources which can be redeployed to the growth-oriented components of the Company’s strategy.

The Company’s focus is on satisfying the conditions to closing, which include regulatory approvals and governmental authorisations.  Initial progress is in line with expectations, and Valeura continues to anticipate closing the deal in Q1 2021.

Inorganic growth

Valeura is actively seeking opportunities to grow its business inorganically.  The Company is working with RBC Capital Markets to screen and evaluate deal opportunities, spanning Eastern Europe and the greater Mediterranean region.  In all instances, the Company is adhering to strict evaluation criteria, such that any new asset would add both cash flow in the near term and opportunities for significant follow-on organic growth in the medium term. 

With an increasing number of companies facing liquidity constraints and dwindling cash resources, the M&A landscape is increasingly becoming a buyers’ market.  As such, the Company believes conditions are favourable for inorganic growth to enable a step change in the materiality of its business, while fitting with the team’s international upstream expertise.

Deep gas upside

Valeura is continuing to pursue its 20 Tcfe unrisked mean prospective resource deep, tight gas play in the Thrace Basin.  The Company has engaged Stellar Energy Advisors Limited, with a mandate to secure a partner with technical and commercial expertise suited to a tight gas appraisal play of this magnitude, and anticipates this process continuing throughout Q4 at least.

Pending the entry of a new partner, Valeura Energy is poised to resume appraisal activities rapidly, including drilling the next appraisal well which will target the best quality reservoir encountered to date at the most optimal depth for hydrocarbon flow encountered to date in the dry gas window. Four appraisal well locations have been submitted for government approval.

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