Valeura Seeks Partner to Enjoy Strong Turkish Prices
Canada’s Valeura Energy reported an operationally strong set of Q1 2020 results from its Turkish gas and oil production business May 12. But at C$0.23 (US$0.16), its share price closed the quarter at a third of its high point, and less than a tenth of where it had closed Q1 2019 (C$2.59).
Net sales averaged 716 boe/d, which was 11% higher than Q4 2019 but down from 768 boe/d in Q1 2019. However its low-cost well workovers – until work stopped in March – yielded higher output capacity and although industrial demand was lower owing to Covid-19, Valeura was able to manage this “primarily by curtailing third-party gas throughput.” Its own equity gas production hardly suffered as a result. But it warned that Q2 would see lower output.
Production revenue in Q1 2020 was $2.8mn, an increase of 6% over Q4 2019 thanks to higher production in Q1, partly offset by the impact of a stronger US dollar on price realisations. It sold its gas for an average $7.08/'000 ft³, up from $6.92/'000 ft³ in Q1 2019.
Gas production generated strong operating netbacks, most recently averaging $24.95/boe over Q1, down slightly from $25.30 in Q1 2019, creating a stream of operating income and underscoring the long-term potential value of the company's unconventional gas resource.
Valeura is assessing the potential for converting reserves into production and a technical study will be completed in Q2 2020 with recommendations on further infill drilling opportunities. Once drilled, there could be a rapid increase in output, it said.
Since Norwegian state Equinor left the partnership in spring, Valeura's working interest has doubled, so it now has 100% of the Banarli exploration licences, and 63% of the deep rights in the West Thrace exploration licence and production leases. Valeura has begun seeking an additional partner with technical and financial resources.
Valeura is also exploring the potential for inorganic opportunities including mergers and acquisitions as low prices bring new opportunities, but without sacrificing its balance sheet strength.
CEO Sean Guest said :"Valeura remains in a strong financial position, with a gas production asset that generates cash flow even in times of economic turmoil, and significant option value on a potentially very large unconventional gas play. We will continue to closely monitor economic conditions in Turkey, and to course-correct our operations as required to protect our ongoing revenue generation."