Verenex Energy has reported its unaudited interim operating and financial results for the three month period ended March 31, 2009.
Verenex is a Canada-based international exploration and production company with a world-class discovered resource base and exploration portfolio in the Ghadames Basin in Libya.
First Quarter 2009 Highlights
- Announced on February 26, 2009 an acquisition agreement whereby a wholly-owned subsidiary of CNPC International Ltd. ("CNPCI") had agreed to make an offer to acquire all of the outstanding common shares of Verenex by way of a take-over bid for C$10.00 per share in cash.
- On February, 24, 2009, the Company formally requested consent and continues to actively seek the consent of the Libyan National Oil Corporation ("NOC") and the Libyan government for the offer as required under the terms of the Exploration and Production Sharing Agreement ("EPSA") for Area 47 and which is a condition precedent for mailing the take-over bid offer to shareholders under the acquisition agreement. The Chairman of the NOC has publicly stated that the NOC intends to exercise a preemptive right and purchase all of the shares of Verenex at $10 per share. Such intent has not as yet been formally communicated to Verenex and CNPCI.
- On January 28, 2009, the Company entered into an arrangement with Vermilion and its wholly owned France and Denmark subsidiaries to sell the Canadian Bottrel GORR and the Verenex Danish and French subsidiaries for $5.0 million. The transaction closed on February 27, 2009.
- Confirmed the Company's tenth oil and gas discovery in Area 47 at the H1-47/02 new field wildcat ("NFW") exploration well in Block 2. The well flowed at a maximum aggregate rate of 1,315 bopd (gross) of light sweet crude oil and 16.2 mmcf/day (gross) of associated natural gas from 73 feet of perforations in the Memouniat Formation and 82 feet in the Lower Acacus Formation.
- Confirmed the Company's eleventh oil and gas discovery at the I1-47/02 NFW exploration well in Block 2. The well flowed at a maximum aggregate rate of 3,354 bopd (gross) of light sweet crude oil and 6.8 mmcf/day (gross) of associated natural gas from 44 feet of perforations in the Memouniat Formation and 40 feet in the Lower Acacus Formation.
- Confirmed the Company's twelfth oil and gas discovery at the J1-47/02 NFW exploration well in Block 2. The well flowed at a maximum aggregate rate of 7,307 bopd (gross) of light sweet crude oil and 6.5 mmcf/day (gross) of associated natural gas from 65 feet of perforations in the Lower Acacus Formation.
- To date, 12 NFW exploration wells and two appraisal wells have tested at a maximum aggregate rate of approximately 109,981 bopd and 106 mmcf/day of natural gas (gross). These wells have been suspended as potential future oil and gas production wells.
- Drilled and cased the K1 and L1-47/02 NFW exploration wells in Block 2. Formation evaluation results indicated the presence of hydrocarbons in the Lower Acacus, Basal Tanezzuft Hot Shale and Memouniat Formations in the K1 well, and in the Lower Acacus Formation in the L1 well.
- Drilled and abandoned the M1-47/02 NFW exploration well (well No. 20) which was drilled to a depth of 9,900 feet but failed to find hydrocarbons in the target Lower Acacus Formation. This is the first Verenex well to be plugged and abandoned in Area 47.
- Released the KCA DEUTAG Drilling Rig T-19 drilling rig and the KCA DEUTAG Service Rig 32 in early March under the reduced work program and budget for 2009. The Ensign Drilling Rig 28 continues to operate in Area 47.
- Funds flow from operations in the first quarter of 2009 was ($1.9 million) compared to ($0.9 million) for the first quarter of 2008.
- Net loss in the first quarter of 2009 was ($2.6 million) compared to net income of $2.1 million in the first quarter of 2008.
- Working capital surplus at March 31, 2009 was $19.7 million compared to $29.8 million as at December 31, 2008, including cash amounting to $35.1 million (December 31, 2008 - $55.5 million) net of restricted cash amounting to $3.8 million (December 31, 2008 - $4.1 million).
The decrease in working capital is due to the ongoing investments in the Company's Libya operations.
Capital Expenditures (Cdn $)
During the first quarter of 2009, the Company invested approximately $13.7 million. Libya accounted for all of the investment activity level with approximately $10.0 million in drilling, $1.9 million in testing and completions, $0.2 million in geological and geophysical costs and $1.6 million in capitalized General and Administration ("G&A") and office costs.
The Company will continue to actively seek the consent of the NOC and the Libyan government for the sale of Verenex. While this process is underway, operations will continue in Libya.
The Company is seeking NOC approval to drill the N1-47/02 NFW exploration well in the northern part of Block 2 (well No. 21). The Company expects to spud the N1 well by mid-May 2009 subject to NOC approval.
The Company plans to redeploy a service rig to Area 47 in the third quarter of 2009 to test the K1 and L1-47/02 wells and any other successful wells drilled in the second quarter.
The Company is awaiting feedback from the NOC on the A1-47/02 Final Appraisal Report, which was submitted to the Area 47 Management Committee and to the NOC in November 2008. The report requests a declaration of commerciality and provides a preliminary development plan for a 50,000 bopd (gross) Phase 1 development that also includes the nearby fields at B1, C1, D1 and F1-47/02. In mid-March 2009 the Company presented a management summary of the report to a multi-function team established by the NOC to review and make recommendations on the report. Formal feedback from the NOC is expected by the end of May.
Final Appraisal Reports are also nearing completion for the B1, C1, D1 and F1-47/02 fields which are expected to be submitted to the NOC before the middle of 2009.
The Company has sufficient cash reserves to fund its programs over the next few months, given lower than expected spending in the first quarter of 2009. The Company continues to explore financing options, in the normal course, to bridge to a sale closing if this proves necessary.
The maximum combined measured flow rates in each of the tested wells in Libya contained in this press release are not necessarily indicative of the ultimate production rate and may be lower in any commercial development, which will be determined from reservoir engineering studies that constitute part of the appraisal and development planning activities currently underway.