Addax Petroleum has announced its results for the quarter ended June 30, 2009. The financial results are prepared in accordance with Canadian GAAP and the reporting currency is US dollars.
Commenting today, Addax Petroleum's President and Chief Executive Officer, Jean Claude Gandur, said, "Record production performance and improved commodity prices have contributed to another quarter of strong operating cash flows and healthy netbacks. During the quarter, we saw a significant progression in the Kurdistan Region of Iraq through the commencement of crude oil exports from the Taq Taq license area. In addition, we were advised that the deepwater Pathfinder drillship should arrive in August to enable Addax Petroleum to commence exploration in the Deepwater Gulf of Guinea."
"The highlight of the quarter was the offer received from Sinopec International Petroleum Exploration and Production Corporation to acquire all of the outstanding common shares of Addax Petroleum by way of a negotiated cash take-over bid for C$52.80 per common share. Addax Petroleum's Board of Directors considered a number of factors when reviewing the offer and believes that the offer is fair to shareholders and is in the best interests of Addax Petroleum. As a result, the Board of Directors unanimously recommended that shareholders accept the offer and tender their shares accordingly. We believe that this offer appropriately reflects the value we have been able to create and will be beneficial for all stakeholders of Addax Petroleum, including our public shareholders, employees and the countries and communities in which we operate."
- Petroleum sales before royalties in the second quarter (Q2) of 2009 amounted to $735 million, a decrease of 51 per cent over petroleum sales before royalties of $1,493 million in Q2 2008. The decrease in petroleum sales before royalties was primarily driven by a 52 per cent decrease in the average crude oil sales price in Q2 2009 to $59.45 per barrel (/bbl) as compared to $123.17/bbl realized in Q2 2008, offset partially by a 2 percent increase in sales volumes between the same periods.
- Funds Flow From Operations for Q2 2009 decreased 41 per cent to $306 million ($1.95 per basic share) compared to $521 million ($3.37 per basic share) in Q2 2008, largely the result of lower crude oil prices as referred to above.
- Net income in Q2 2009 decreased 87 per cent to $38 million ($0.24 per basic share) compared to $293 million ($1.88 per basic share) in the corresponding period in 2008.
- Capital expenditures decreased by 18 percent to $302 million in Q2 2009 from $369 million in Q2 2008. Development capital expenditures totaled $243 million in the second quarter, a decrease of 19 per cent over development capital expenditures of $300 million in Q2 2008. Exploration and appraisal capital expenditures increased to $58 million in the quarter, an increase of 9 per cent over exploration and appraisal capital expenditures of $53 million in Q2 2008.
- At the end of Q2 2009, bank debt increased to $1,525 million due to the planned use of debt to fund the excess of capital expenditures versus funds generated during the quarter. Debt is drawn under two facilities that consist of a $1.6 billion senior secured reducing revolving borrowing base facility (of which $1.3 billion can be drawn as debt) and a $500 million senior unsecured revolving facility.
- Average gross working interest oil production in Q2 2009 was 143,240 barrels per day (bbl/d) representing an increase of approximately 8 per cent over the 2008 average production of 132,880 bbl/d.
- average oil production from Nigeria in Q2 2009 was 103,290 bbl/d, compared to a Q2 2008 average production level of 105,500 bbl/d;
- drilled four new development wells which included three oil production wells in OML123 and one oil production well in OML126;
- lower production in Q2 2009 was primarily attributed to a gas constraint in gas-lift and the deferred start-up and completion of new production wells, both in the OML123 license area; and,
- completed drilling the OK-19 (Okwori East) exploration well in the OML126 license area,offshore Nigeria, where the well was plugged and abandoned as a dry hole.
- average oil production in Q2 2009 from Gabon was 27,910 bbl/d, compared to a Q2 2008 average production level of 27,390 bbl/d;
- drilled six new development wells in the Addax Petroleum operated Panthere license area, onshore Gabon;
- placed a total of seven new oil production wells on production in the quarter of which five were drilled in the quarter and two were drilled in the previous quarter;
- completed the commissioning at the new Obangue East Central Processing Facility in Q2 2009 with the installation of gas compressors and the commissioning of a second train with a test separator; and,
- completed drilling the Ajomba Main exploration well in the Gryphon Marin license area, offshore Gabon, where the well was plugged and abandoned as a dry hole.
Kurdistan Region of Iraq
- average oil production in Q2 2009 from Kurdistan increased to 12,050 bbl/d due to the commencement of international crude oil exports from the Taq Taq licence area on June 1, 2009;
- obtained approval from the Kurdistan Regional Government for the Taq Taq full field development plan;
- continued expansion of the on-site processing facilities to increase capacity up to 70 Mbbl/d in late 2009; and,
- continued to drill the Kewa Chirmila exploration prospect which is expected to reach target depth in Q3 2009.
Gulf of Guinea Deep Water (Nigeria and JDZ)
- Addax Petroleum previously announced that it signed an agreement with a subsidiary of Transocean Ltd. for the provision and operation of the Deepwater Pathfinder drillship to commence its exploration drilling campaign in the Deepwater Gulf of Guinea. Addax Petroleum expects to receive delivery of the Deepwater Pathfinder in August 2009 and intends to commence the consecutive drilling of four wells, the first of which being the Kina prospect in Block 4 of the Joint Development Zone; and,
- Sinopec JDZ Block 2 Limited has notified the Joint Development Authority of its intent to commence its exploration drilling in August 2009 on JDZ Block 2, where Addax Petroleum holds a 14.3 percent interest.
- Operating netbacks in Q2 2009 decreased 57 percent to $38.98/bbl compared to $91.14/bbl in Q2 2008. Unit operating expenses in Q2 2009 decreased to $7.95/bbl, a decrease of 17 percent over the 2008 level of $9.55/bbl due to savings from fewer workovers and a drag reducer no longer being required in Nigeria to improve oil flow following the installation of a larger 14" pipeline, offset partially by additional pipeline maintenance, increased security costs and higher personnel related costs.
Addax Petroleum's 2009 approved capital expenditure budget was set at approximately $1.6 billion but, as previously indicated, this plan was based on an assumed average Brent Crude price of $60/bbl for 2009. Management continues to adjust the capital program with the goal of balancing expenditures against internally generated funds over the full year. The current full year capital expenditure plan is approximately $1.3 billion, although Addax Petroleum continues to review incremental capital expenditure investment opportunities if oil prices remain at or higher than those experienced in the latter part of Q2 2009. The Corporation's production outlook for 2009 continues to be in line with previous guidance provided. Excluding oil production from the Kurdistan Region of Iraq, Addax Petroleum expects annual average working interest gross oil production for 2009 to be between 132 and 137 Mbbl/d.