Burford Capital Regulatory News (BUR)

16 Jan 2007 07:01

Burren Energy PLC16 January 2007 16 January 2007 Burren Energy Plc ("Burren" or "the Company") Trading and Operational Update Burren Energy Plc (LSE:BUR), the FTSE 250 independent oil and gas explorationand production company, today provides a trading and operational update ahead ofits preliminary results for the year ended 31 December 2006, to be announced on19 March 2007. The figures contained in this statement are preliminaryunaudited and may be subject to change in the 2007 financial statements. Highlights Operational • 2006 average Group production of 34,200 bopd, in line with previous guidance, and an increase of 9% on 2005 • 15 million bbls proven & probable reserves (management estimates) added in 2006 from exploration & appraisal drilling in Turkmenistan, more than replacing 2006 Group production • First of six step-out appraisal wells on Loufika shallow discovery in Congo has encountered hydrocarbons and is awaiting testing • Water injection in Turkmenistan continuing to show positive early results • New licence award in Yemen (Block 17) bringing Burren's total licences in Middle East to six Financial • Crude sales price discount to Brent improved from US$7.22 in 2005 to US$5.15 in 2006 • Robust balance sheet with cash resources of just over US$200 million at year-end Corporate • Two senior appointments made: • Simon Gill, previously the COO of Nelson Resources and CEO of Chaparral Resources, appointed Operations Director • Ian Bingham, formerly with Perenco and Nimir Petroleum, has been appointed as Chief Geophysicist Outlook • Strong fundamentals from core producing areas to continue • Total of 16 exploration wells to be drilled in 2007, of which 13 in Congo • At least 50 development wells planned in 2007 • Intensification of water injection programmes in Turkmenistan and Congo • Targeting acquisition of proven reserves in core areas Atul Gupta, Chief Executive Officer, commented: "2006 proved to be a strong year for Burren, with increased production, improvedcash flows and discoveries in Congo and Turkmenistan which, based on results sofar, meant that reserves more than replaced last year's production. "Going into 2007, Group fundamentals remain very strong and we particularly lookforward to our ongoing exploration drilling in Congo and the expansion of thewater-injection programmes in Turkmenistan and Congo, which have the potentialto improve production efficiencies and increase reserves." Enquiries : Burren Energy Tel: 020 7484 1900 Atul Gupta, Chief Executive OfficerAndrew Rose, Chief Financial Officer Pelham PR Tel: 020 7743 6676James HendersonAlisdair Haythornthwaite Trading Overview The results of exploration drilling last year have yielded two discoveries, inCongo (Loufika Shallow) and in Turkmenistan (Nebit Dag Deep), both of which areready for commercial production. Appraisal drilling on both discoveries iscontinuing; however, based on the results so far, we have more than replacedreserves produced during 2006. Group working interest production averaged 35,100 bopd in H2, slightly aboveexpectations, to give an average of 34,200 bopd for 2006 as a whole, an increaseof 9% on 2005. Production was split 48% Turkmenistan, 52% Congo. Decemberworking interest production averaged 35,000 bopd. 2006 full year entitlement production was 19,100 bopd, broadly the same as inthe first half of the year. The average crude sales price for the year was US$58.38 / bbl, (2005 : US$47.82/ bbl) representing an average discount of US$5.15 (2005 : US$7.22) to datedBrent. The Group finished the year with cash balances of just over US$200 million,compared with US$125 million at the start of the year, and no debt. Turkmenistan Exploration Two exploration drilling programmes were conducted in the year : a deepprogramme targeting the potential extension of the deeper Burun field reservoirsimmediately to the east of that field and a shallow programme on a series ofprospects in the eastern half of the Nebit Dag PSA area. The deeper programme resulted in the discovery of the Nebit Dag Deep field andadditional reserves within the Burun field itself (north and south flank)resulting in a total addition to proven & probable working interest reserves ofaround 15 million bbls as at 2006 year-end (based on management estimates). Anew development area, covering an area of 47 km(2), has been declared which,when approved by the Turkmen authorities, will enable appraisal drilling tocontinue beyond the expiry of the exploration licence in February 2007. Afurther six appraisal wells are scheduled in 2007, of which three are currentlydrilling. The shallow programme resulted in the declaration of the Uzboy development areaas previously announced. Production In addition to exploration, the 2006 capital programme was focused on waterinjection and facility upgrades, which will increase throughput capacity to the30,000 bopd level required to handle future production increases and furtherreduce reliance on Turkmenneft processing facilities by 2008. Gross productionaveraged 21,200 bopd in H2, and set a field record of 22,200 bopd during themonth of November. For the full year, gross production averaged 19,900 bopd andworking interest production, after deduction of the state's "Initial Oil"entitlement, averaged 16,300 bopd, up 6% over 2005. The water injection programme has continued to progress: some 6,800 bwpd is nowbeing injected into two horizons, one shallow and one deep, via a total of eightinjector wells. Material increases in production rates have been observed in twoshallow producer wells and one deep producer as a result of this injection.Plans for 2007 are to recomplete a further 12 wells as injectors and to increasehigh pressure injection capacity to 30,000 bwpd. The first of the two new purchased deep rigs is now in operation and is drillingone of the Nebit Dag Deep appraisal wells. The second rig is expected to be inoperation towards the middle of the year with the intention of releasing the twoexisting contracted rigs as soon as practicable. The two new rigs will bring toa total of seven the number of workover and drilling rigs owned and manned byBurren in Turkmenistan, thereby protecting the Company from future rig shortagesand allowing us to complete the development of the Burun field in acost-effective manner. Gas Commercialisation Negotiations continue with the Government of Turkmenistan over thecommercialisation of the Group's gas resources. The Turkmen authorities haveindicated a preferred route, involving the use of existing state-owned pipelinesto which the Burun field is already connected. Funds for installation of gasmetering equipment, to this end, have been included in the 2007 budget presentedto the Turkmen authorities. Presidential Elections Following the death of President Nyazov of Turkmenistan just before Christmas,an acting President was appointed and preparations are under way forpresidential elections to be held in mid-February. Burren continues to maintaina strong working relationship with the country's Oil Minister, and has notexperienced any disruption in day-to-day operational activities. Congo Exploration Tioni-1, the well located some 5km to the southwest of Loufika where a shallowoil discovery was made in September, was spudded on 23 December to target theVandji reservoir which is the source of production in M'Boundi. After the Tioniwell, four further Vandji exploration prospects will be drilled in 2007: threeon the Kouilou licence (Nanga, Zingila and Tchivouba), and one on the La Noumbilicense (Dongou). Well LFK-2, the first of six more shallow step-out wells on Loufika and locatedsome 2km to the north-west of the LFK-1 discovery well, has encounteredhydrocarbons and will be tested shortly. A further announcement will be made assoon as additional information becomes available. Additionally, a recentlyimported light drilling rig is undergoing final preparations and will bedeployed shortly to drill exploration wells on several Loufika-type prospects tothe north-west along the basin margin. The 812 km 2D seismic acquisition programme on Noumbi has been largely completedand processing has begun. Production Gross production on M'Boundi in for the full year was 56,100 bopd, compared with57,300 in H1. Production for the month of December was 53,600 bopd . Burren's2006 working interest production in Congo, including its share of the muchsmaller Kouakouala field, was 17,900 bopd, up 12% over 2005, although it shouldbe noted that Burren's share of M'Boundi production reduced from 35% to 31.5%with effect from 1 January 2006 (as announced previously). The water injection programme will commence shortly, after a delay owing to thelate delivery of certain items of equipment. The operator is planning to startinjecting into the first two wells later in January and there are plans toconvert 18 wells to injectors in 2007.There are also plans to increase theinjection capacity of the facilities from 20,000 bwpd to 60,000 bwpd during theyear and order long lead items to further increase water injection capacity to120,000 bwpd in 2008. As a result of the drilling of injector wells, there will be fewer developmentwells drilled on M'Boundi this year : 11 net new producers are planned comparedto 23 in 2006. As part of the sale by Heritage Oil Corporation of its Congolese assets, Burrenhas exercised its pre-emption rights in relation to the Kouakouala field andpurchased an additional 8.3% interest for US$2.0 million. Burren now has 33.3%of Kouakouala, with Maurel & Prom holding the rest. Among Kouakouala's moreimportant assets is the export pipeline to the Djeno terminal which, in additionto transporting M'Boundi crude, could provide an export route for a newdiscovery such as Loufika. Middle East Egypt Processing of the 550 km(2) 3D seismic cube on East Kanayis has now beencompleted and interpretation has commenced. Structural mapping is focussed ondelineating prospects at cretaceous levels along trend from existing fields andat the deeper Jurassic target. It is planned to drill prospects at both levelsin 2007 subject to rig availability. On North Hurghada Marine reprocessing of existing seismic has commenced and itis planned to acquire up to 250 km(2) of new 3D seismic in Q2 2007. Yemen Tenders for acquisition of 3D seismic over 500 km(2) of Block 6 are inpreparation, with the aim of commencing acquisition in mid 2007. Explorationdrilling is not expected to be until early 2008. Negotiations will commence soon to finalise a PSA for Block 17, which wasawarded to Burren in December 2006. Oman The acquisition of 2,775 km of 2D seismic on offshore Block 50 has beencompleted and processing has commenced. A decision regarding drilling will bemade in Q3 2007. India HOEC is currently drilling a horizontal appraisal well on the PY-1 gas field,the results of which should be available in February 2007 and will be used tomake a decision as to the timing of full field development. The Vinayaka-1exploration well drilled in Q4 2006 by HOEC on Block CY-OSN-97/1 in the offshoreCauvery basin was dry, and a second basement prospect, in the same block, may bedrilled after the rig has tested the PY-1 well. HOEC raised US$33m via a rights issue in October, in which Burren was allottedslightly more than its pro-rata amount thus taking the Group's stake to 27%. Business Development With cash at year-end of some US$200 million and no outstanding debt the Grouphas substantial financial capacity to add new assets. A number of differentpotential opportunities are under review with the focus being on acquiringexisting reserves and production, within Burren's existing geographic focusareas, which also have significant development and appraisal upside. Management Appointments During the period, Burren has made two senior appointments to strengthen itsmanagement team. Simon Gill has been recruited as Operations Director and IanBingham as Chief Geophysicist. Simon Gill, aged 51, was previously the Chief Operating Officer of NelsonResources and the Chief Executive Officer of Chaparral Resources (76% owned byNelson). Before joining Nelson Resources in October 2003, he worked for Texaco(ChevronTexaco) for 24 years. He has assumed direct responsibility for Burren'sfield operations in Turkmenistan and Congo. Ian Bingham, aged 50, was previously Senior Geophysicist with Perenco, prior towhich he had the same role at Nimir Petroleum (which became KnightsbridgePetroleum). He will work closely with Brian Thurley, Technical Director, inrealising the value of the Group's exploration portfolio. Outlook We expect 2007 to see an intensification of exploration drilling in Congo whichwill be followed towards the end of the year and in 2008 with explorationdrilling in Egypt, Yemen and Oman. An uninterrupted programme of developmentdrilling will continue in Turkmenistan and Congo. Production in 2007 is forecast to be around 35,000 bopd with much of thedevelopment work focussed towards water-injection, the benefit of which will beto improve field productivity and increase reserves. Capital expenditure is anticipated to be some 10% ahead of 2006 levels at aroundUS$235 million, of which some US$50 million will be exploration, excluding anypossible asset acquisition related expenditure. At current Brent price levelsthe Group expects to enjoy significant free cash flow to finance new businessopportunities and returns to shareholders. This information is provided by RNS The company news service from the London Stock Exchange