Austral Pacific Files 2008 Annual Results
New Zealand-based exploration and production company, Austral Pacific Energy Ltd. has filed its annual audited financial statements for the year ended December 31, 2008.
The company reports continuing liquidity issues, but with the ongoing support of its lender, has embarked upon a plan to reduce its cost base and refocus its activities around the producing Cheal field. The reported loss for 2008 of $43.78 million was driven in large part by:
- write down of the Cheal asset book value (due to reduced reserves, as previously reported);
- expensing the 2007 Cardiff acquisition and workover costs; and
- realized losses from settling forward oil sales contracts in May 2008.
The reduction in Cheal reserves was driven by lower oil volumes due to the reduced thickness of the oil bearing reservoir encountered in the Cheal A6 well and a conservative recovery factor based on the existing well performance over the past twelve months.
Commenting on the results, Austral Pacific chief executive officer, Thom Jewell, said, "The valuation of the Cheal field asset has been calculated on the basis of a zero forward capital spend. We expect to be able to perform well optimization from cash flow. Given a stable production operation, we will seek additional investment for a well drilling program to expand the field and produce additional resources that are not currently recognised in our independent reserves report."
Oil sales increased to $11.77 million from $7.34 million in 2007, due to higher oil prices together with increased production volumes from a full year's permanent production at Cheal. The Cheal A7 well, drilled in July 2008, was brought into production in August through a temporary connection, and construction of permanent tie-in facilities is currently underway.
The initial loan of $23 million from Investec Bank was paid off during the year, but further borrowings to close-out the oil sales contracts in May and settling a gas prepayment liability in December has left the company with a debt of $16.79 million at year-end.
Jewell commented, "Although the financial statements note, as they did last year, that there is a 'significant uncertainty' in relation to the Group's ability to continue as a going concern, the directors have expressed confidence that the company will be able to conclude a longer-term plan with its bankers and continue in operation.
"Austral has been unable to meet certain requirements in its loan agreement with Investec Bank, and has continued to operate under a series of "default waivers" from Investec. Therefore, the company has accounted for the debt as a current liability. This was a major contributor to the 'significant uncertainty' comment in the accounts.