Addax Announces Quarterly Results

Addax Petroleum Corp.

Addax Petroleum Corporation, an international oil and gas exploration and production company with a strategic focus on Africa and the Middle East, has reported its results for the quarter ended September 30, 2006. The financial results are prepared in accordance with Canadian GAAP and the reporting currency is US dollars.

This announcement coincides with the filing of Addax Petroleum's Third Quarter Financial Statements and Management's Discussion and Analysis which can be accessed through the Corporation's website at and through

CEO's Comment

Addax Petroleum's President and Chief Executive Officer, Jean Claude Gandur, said: "Our Nigeria operations continued to deliver excellent performance including the successful change-out of the OML123 FPSO and surpassing, for the first time in Addax Petroleum's history, the production milestone of 100,000 barrels in one day. In addition, during the third quarter, Addax Petroleum significantly expanded its reserves base, development opportunities and exploration acreage through the acquisition of PanOcean Energy's business. As the acquisition closed in September, there has been minimal operating and financial contribution to our third quarter results, however, we anticipate an ever-growing contribution from the Gabon operations. I believe that our efforts and results during the third quarter will result in an excellent 2006, our first year as a public company, for Addax Petroleum and for its shareholders."

Selected Financial Highlights

  • Petroleum sales before royalties in the third quarter of 2006 amounted to $583.9 million, an increase of 51 percent over petroleum sales before royalties of $385.7 million in the same quarter in 2005. Petroleum sales before royalties contribution from the acquired PanOcean Energy business was $20.9 million, representing just under 4 percent of the quarter's sales.
  • The average crude oil sales price increased 13 percent to $67.60 per barrel (/bbl) as compared to the average crude oil sales price of $59.88/bbl recorded in the comparable quarter in 2005.
  • Net income in the third quarter of 2006 was $75.2 million ($0.51 per share), a decrease of 12 percent over net income of $85.6 million ($0.73 per share) in the corresponding quarter of the previous fiscal year. The decrease is attributable mainly to tax losses available in 2005 and fully utilized prior to the third quarter of 2006. Net income in the first nine months of 2006 was $189.7 million ($1.37 per share), an increase of 13 percent over net income of $168.0 million ($1.44 per share) in the corresponding period of the previous year.
  • Funds Flow From Operations in the third quarter was $244.5 million, an increase of 50 percent over third quarter 2005 cash flow from operations of $163.2 million. Funds Flow From Operations for the first nine months of 2006 increased 91 percent to $614.4 million compared to $322.2 million in the first nine months of 2005.
  • Acquisition of the business of PanOcean Energy Corporation Limited ("PanOcean Energy") which is focused solely in Gabon for a cash consideration of $1,441 million on September 7th.
  • PanOcean Energy acquisition funded by a combination of (a) internal funds, (b) drawings under a new $1.0 billion acquisition loan facility of which $850.0 million was drawn at September 30th, 2006 and (c) the public offering of 14.75 million common shares upon conversion of subscription receipts which realized net proceeds of $342.7 million for the Corporation.

Operational Highlights

  • Average working interest gross oil production in the third quarter of 2006 was 91.5 thousands of barrels per day (mbbls/day) an increase of 23 percent over third quarter 2005 average production of 74.2 mbbls/day. Production contribution from the acquired PanOcean Energy business was 2.4 mbbls/day, or under 3 percent, averaged over the quarter.
  • Capital expenditures, excluding the acquisition consideration for the PanOcean Energy business, increased by 83% from $117.0 million in the third quarter of 2005 to $214.1 million in the same period in 2006. Development capital expenditures totaled $118.9 million, including development capital expenditures of $25.2 million in PanOcean Energy since acquisition. License acquisition and exploration and appraisal expenditures amounted to $95.2 million, including $10.9 million of capitalized fees associated with the PanOcean Energy acquisition, $23.0 million towards license acquisition of OPL291 offshore Nigeria (see "Recent Developments") and exploration and appraisal expenditure of $55.1 million on the Okwok and Taq Taq fields, offshore Nigeria and in the Kurdistan Region of Iraq respectively, where some wells drilled have been or will be suspended as potential future producers.

Development project highlights during the third quarter include:


  • conversion of Oil Prospecting License OPL90 to Oil Mining License OML126 obviating the need for partial relinquishment of undeveloped license acreage;
  • the start-up of the first development well on the Nda field on OML126 within six months of approval by the Nigerian authorities of its Field Development Plan;
  • safe and successful change-out of the OML123 FPSO whereby the Knock Taggart FPSO was replaced by the larger Knock Adoon FPSO;
  • bringing on-stream of five additional development wells, two in OML123 and three in OML126; and
  • ongoing surface facilities development at the Oron and Adanga fields on OML123.


  • construction of the Addax Petroleum-operated Tsiengui Central Production Facility and export pipeline, scheduled to be operational during the fourth quarter of 2006;
  • drilling and completion of two horizontal development wells on each of the onshore Tsiengui and Obangue fields including, on each field, step-out wells which suggest larger most-likely oil in place estimates; and
  • ongoing installation and commissioning work offshore on the Vaalco-operated Avouma field, scheduled to be operational during the first quarter of 2007.

Exploration and appraisal highlights in the third quarter include:

  • Nigeria: start of the Okwok field 2006 exploration and appraisal campaign within one week of completion of the acquisition of a 40 percent participating interest in the property. The exploration and appraisal campaign was completed in October having met its objectives and two of the wells drilled were suspended as potential future oil producers;
  • Kurdistan Region of Iraq: conclusion of drilling and coring operations on the first new well on the Taq Taq field, TT-04, indicating a gross oil column in excess of 500 meters. Well completion and testing operations are ongoing at TT-04 and a second well, TT-05, has been spudded; and
  • Other areas: analysis and technical studies, including rig-sourcing enquiries, are ongoing on the Corporation's other properties including OPL225 offshore Nigeria, Ngosso offshore Cameroon and deepwater JDZ Blocks 2, 3 and 4.
  • Operating netbacks were up 9% to $47.90/bbl as compared to $44.14/bbl in the third quarter of 2005. Unit operating expenses increased to $6.47/bbl, an increase of 6 percent over the third quarter 2005 level of $6.10/bbl.


The Board of Directors of the Corporation has declared a dividend of CDN$0.05 per share for the third quarter of 2006. The dividend is payable on December 14th, 2006 to shareholders of record on November 30th, 2006.

Recent Developments

In October, the Corporation acquired a 72.5 percent participating interest in OPL291, a deepwater block offshore Nigeria close to the world-class Agbami field and on trend with several other large oil fields in the deepwater offshore Nigeria. In consideration the Corporation has paid a signature bonus to the government of Nigeria of $55 million and $35 million as a farm-in fee to the license holder, Starcrest Nigeria Energy Limited ("Starcrest"), an indigenous Nigerian oil company. In addition, the Corporation has agreed to carry Starcrest's 27.5 percent share of exploration and field development costs.


The Corporation's outlook for 2006 is in line with guidance provided to date. Addax Petroleum expects annual average working interest gross oil production to approximate 88 to 90 mbbls/day from its Nigeria and Gabon operations.

The Corporation will host a management presentation to financial analysts on November 21, 2006 and intends to provide further guidance for 2006 and future years at that time.