Global Energy Development PLC, the Latin America focused petroleum exploration and production company, has announced its interim results for the six months ended June 30, 2009.
CHAIRMAN'S STATEMENT & REVIEW OF OPERATIONS
Whilst 2008 saw the Company report record annual financial results, the swift decline in the oil price through the second half of 2008 continued into 2009. The resultant average West Texas Intermediate ("WTI") crude oil price in the first half of 2009 was US $51.57 per barrel, a 53.6% decline against the first half of 2008 (first half of 2008: average WTI: US$111.14).
The decline in the oil price was reflected in the Company's Revenues, down 49.6% to US $9.0 million (first half of 2008: US $17.9 million), with net production (after all royalty payments) for the first half of 2009 moderately higher at 199,403 barrels of oil ("bbls") (first half of 2008: 181,790 bbls).
The Company took efforts to cut costs against the depressed oil price. Cost of Sales was reduced by 14.7% to US $6.4 million (first half of 2008: US $7.5 million) and Administrative Expenses were cut by 16.1% to US $2.4 million, mainly due to a reduction in the number of employees and consultants (first half of 2008: US $2.8 million). Despite this, Profit from Operations was US $0.3 million against US $7.7 million for the first half of 2008 and the Company recorded a Loss before Taxation of US $0.4 million for the first half of 2009 (first half of 2008: Profit before Taxation US $7.1 million). The Company had no bank debt during the Period and continues to have no bank debt to service.
Activity levels during the first half of 2009 were hampered due to the aforementioned oil price and the ensuing reduced cash flow from operations. Capital expenditure was confined to production-lifting cost reduction and environmental protection projects.
The oil price recovered slightly towards the end of the Period and three of the four wells previously shut-in for uneconomic reasons were put back on production during May and June 2009 and are now averaging approximately 325 barrels of oil per day ("bopd") gross.
The second half of 2009 looks brighter with a continued concentration on reducing costs and higher oil prices (averaging approximately US $66 per barrel of WTI to date). In tandem, operating activity levels have increased with, notably, the acquisition of 3D and 2D seismic underway at the Colombian Rio Verde contract in preparation for planned drilling in the first quarter of 2010. This seismic acquisition represents the vast majority of the Company's contractually required spend for the next six months and therefore the Company is confident that it can remain compliant with all its contracts.
During July 2009, the Company requested that Phase 3 of the Peruvian Block 95 contract be suspended due to delays in receiving certain environmental and community sub-permits necessary to initiate the Company's exploratory program. Confirmation of the suspension has since been received from Perupetro S. A., the Peruvian State Oil Company. Phase 3 will recommence once the sub-permits are received and will be extended by the length of the suspension. Phase 3 requires a US $2.0 million seismic acquisition program or the drilling of a well within the Bretana field.
The Company believes that the industry will continue to strengthen and that it will have increased available cash flow. In preparation for this the Company is assessing, along with its independent reserve engineers, projects within the Company's portfolio that would result in the quickest return on investment and have a positive impact on production volumes and reserves.
The Company continues to be well placed despite the recent industry downturn and is confident of being able to resume growth in the near future.
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