Ophir Energy Prepares for 'Prudent' Exploration Drilling Campaign

Oil and natural gas producer Ophir Energy plc is preparing to return to a considered, prudent pace of exploration drilling from late 2016 to take advantage of lower exploration costs, says the company’s chief executive Nick Cooper.

Ophir is planning to drill a well in Block 1 and Block 4 offshore Tanzania between the fourth quarter of this year and the first quarter of 2017, targeting in excess of 1 trillion cubic feet of gas. The company also has one well commitment in Cote D’Ivoire by 1Q 2018 and has the option to drill wells in Equatorial Guinea, Gabon, Myanmar and East Indonesia.

The company recorded an average daily production rate of 11,000 barrels of oil equivalent per day in the first half of the year, which was in line with expectations according to a company statement. Ophir received revenues of $52 million during the six months ended June 30, compared to $86 million during the same period last year. The company registered a pre-tax loss of $70 million during 1H 2016, down from $123 million last year.

Ophir Energy expects cash flow from production to land between $50 million and 70 million for the full year 2016 and expects its capital expenditure to be between $140 million and $170 million. Net cash is expected to hold between $175 million and $225 million.

“Ophir’s strategy is to be a sustainable explorer, focused on delivering net asset value per share growth by finding resources at low cost and then monetizing them in the way that maximizes the price achieved,” said Nick Cooper, Ophir chief executive.

“Ophir’s cash flow and net cash position provide sufficient funding to make discretionary investments across the portfolio. Our cost rationalization programs have delivered substantial savings in running costs and these efforts continue, thereby minimising NAV per share erosion and maximizing shareholder returns,” he added.

Following the release of the latest results statement from Ophir, First Energy Capital described market reaction to the news as negative.

“Market reaction [is] negative on what appears to be a reduction of forecasted net cash by YE16,” said FirstEnergy in a brief research note to Rigzone.

“While we would have expected the YE16 net cash guidance to increase in line with the $10-30 million latest capex guidance reduction (-$50 million versus the guidance of early 2016), YE16 net cash guidance has dropped $50 million,” FirstEnergy added.