Addax Says 3Q07 a Record Quarter
Addax Petroleum (TSX:AXC and LSE:AXC) announced its financial and operational results for the quarter ended September 30, 2007. The financial results are prepared in accordance with Canadian GAAP and the reporting currency is US dollars. In addition, the Corporation outlined its capital investment budget and production outlook for 2007 and 2008.
This announcement coincides with the filing with the Canadian and UK securities regulatory authorities of Addax Petroleum's Financial Statements for the quarter ended September 30, 2007 and related Management's Discussion and Analysis.
Commenting, Addax Petroleum's President and Chief Executive Officer, Jean Claude Gandur, said: "The third quarter has been a record quarter for Addax Petroleum from both an operational and financial standpoint, continuing the strong growth momentum established in the first half of 2007. In addition to the steady growth in our Nigeria operations, we have made significant improvements at our fields in Gabon, both from an operational and production perspective. We also have made valuable progress at Taq Taq, delivering our most prolific step-out appraisal well to date. In the deepwater Joint Development Zone, we have significantly enhanced our portfolio with the addition of a 40% interest in JDZ Block 1. Looking forward into 2008, we foresee another exciting year of high activity and growth."
Selected Financial Highlights:
Petroleum sales before royalties in the third quarter of 2007 amounted to $925 million, an increase of 58% over petroleum sales before royalties of $584 million in the third quarter of 2006. The growth in petroleum sales before royalties arose from the combination of increased petroleum sales volumes and increased average crude oil sales price, up by 10% to $74.31 per barrel (/bbl) as compared to $67.60/bbl realized in the corresponding period in 2006.
Net income in the third quarter of 2007 was $122 million, an increase of 63% over net income of $75 million in the third quarter of 2006. Net income per share (basic and diluted) increased by 53% to $0.78 per share in the third quarter of 2007 compared to $0.51 per share in the corresponding period in 2006.
Funds Flow From Operations for the third quarter of 2007 increased 37% to $335 million compared to $244 million for the corresponding period in 2006. Funds Flow From Operations increased by 30% to $2.15 per share (basic) in the third quarter of 2007 compared to $1.65 per share in the corresponding quarter in 2006. On a diluted basis, Funds Flow From Operations per share increased by 25% to $2.06 per share in the third quarter of 2007 compared to $1.65 per share in the corresponding period in 2006.
New Business Highlights:
As previously announced on September 25, 2007, the Corporation has agreed to acquire a 40% working interest in Block 1 of the Joint Development Zone ("JDZ") from a subsidiary of ExxonMobil for a consideration of $78 million and 2 per cent of Addax Petroleum's share of profit oil produced from Block 1. Completion of the acquisition is subject to the approval of the Joint Development Authority of the JDZ. Upon completion of the acquisition, Addax Petroleum will have working interests in JDZ Blocks 1, 2, 3 and 4.
Selected Operational Highlights:
Average working interest oil production in the third quarter of 2007 was 128.2 thousand barrels per day (Mbbl/d), an increase of 40% over third quarter 2006 average oil production of 91.5 Mbbl/d. Nigeria production increased by 17% to 104.5 Mbbl/d in the third quarter of 2007 compared to 89.1 Mbbl/d in the corresponding period in 2006. Gabon contributed 23.7 Mbbl/d in the third quarter of 2007 compared to 2.4 Mbbl/d in the third quarter of 2006, when the Gabon production assets were acquired. Total oil production during the quarter was 11.8 MMbbl, as compared to oil sales volumes of 12.4 MMbbl during the quarter.
Continued step-out appraisal success in the Taq Taq field in the Kurdistan Region of Iraq and exploration success in OML137 offshore Nigeria, where a potentially significant gas discovery was made at Udele West at the start of the third quarter.
Capital expenditures, excluding new business acquisition considerations, farm-in fees and license signature fees, increased by 47% to $281 million in the third quarter of 2007, up from $191 million in the third quarter of 2006. Development capital expenditures totaled $250 million in the third quarter of 2007, an increase of 92% over third quarter 2006 development capital expenditures of $130 million. Exploration and appraisal capital expenditures decreased to $31 million in the third quarter of 2007 from $61 million in the third quarter of 2006.
Throughout the third quarter of 2007, the Corporation directly operated seven drilling rigs, four offshore Nigeria, one onshore Nigeria and two onshore Gabon, and indirectly operated one further drilling rig in the Kurdistan Region of Iraq through its joint venture company, Taq Taq Operating Company.
Development project highlights in the third quarter of 2007 include:
- Four new development wells were drilled, three on OML123 and one on OML124;
- All four new wells were placed on production during the quarter;
- Surface facilities development was ongoing at the OML123 license area.
- Six development wells were drilled on the Corporation's onshore license areas;
- Five of the six new onshore wells were placed on production;
- Surface facilities development was ongoing at the onshore Maghena and offshore Etame license areas.
- Exploration and appraisal activity and highlights in the third quarter of 2007 include:
- Gulf of Guinea Shallow Water (Nigeria and Cameroon):
- One exploration well was drilled on OML137, offshore Nigeria resulting in the Udele West discovery;
- As previously reported on July 12, 2007, the Udele-2 discovery well discovered seven gas bearing intervals with individual gross gas columns of between 41 and 113 feet, 542 feet in aggregate. The discovery well was suspended and the Corporation intends to re-enter and deepen the well and carry out flow tests over selected intervals at a later date;
- In Cameroon, the Corporation contracted for a shallow-draft drilling rig to start shallow water exploration drilling on the Ngosso license area in the first quarter of 2008. Dredging work is ongoing to provide access to the planned drilling location.
- The Corporation has started a 3D seismic survey over the southern portion of the Maghena and Awoun license areas. The Corporation anticipates that the 3D survey, once acquired, processed and interpreted, will provide valuable information in the further development, appraisal and exploration of this area, which contains the Obangue, Koula and Damier fields.
- Gulf of Guinea Deep Water (Nigeria and JDZ)
- Technical studies are ongoing to evaluate exploration prospect drilling locations.
- Kurdistan Region of Iraq
- As previously announced on September 6, 2007, a successful step-out appraisal well, TT-07, was drilled and tested at an aggregate rate of 37.6 Mbbl/d from three separate intervals. The TT-07 well was drilled approximately 2.9 kilometers south-southeast of the crestally-located TT-04 well;
- During the third quarter, the TT-08 and TT-09 step-out appraisal wells were spudded approximately 1.7 kilometers east and approximately 1.7 kilometers south west of the TT-04 well, respectively. Both wells are being drilled with the purpose of appraising the flanks of the Taq Taq field.
- Presently, the TT-09 well has been drilled to total depth and is being prepared for flow testing, the results of which will be announced following the completion of testing;
- Drilling of the TT-08 well has progressed to just above the reservoir and the remainder of the well will be drilled and tested following the TT-09 flow testing;
- Acquisition of a 3D seismic survey over the Taq Taq field and 2D seismic surveys over the Kewa Chermila area and east of Taq Taq were concluded in the third quarter.
- Operating netbacks in the third quarter of 2007 increased by 15 per cent to $54.94/bbl compared to $47.90/bbl in the third quarter of 2006. Unit operating expenses in the third quarter of 2007 decreased slightly by 3% to $6.29/bbl compared to the third quarter 2006 level of $6.47/bbl, reflecting unit cost improvements due to increased production and sales which was partially offset by increasing operating costs due to industry demand.
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