Circle Oil Plc General Operating Update

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce the following update regarding its operations and forthcoming work programmes for 2013 in its operational areas of Morocco, Egypt, Tunisia and Oman.
Six well drilling programme planned for H1 2013 in the Sebou and Lalla Mimouna Permits
Over 50% increase in gross production from 4.5 MMscfd to between 6.5 and 7.0 MMscfd planned in Q1 2013
Preliminary interpretations of Lalla Mimouna 3D seismic curvey encouraging with wells in the 2013 programme aiming to provide substantial additional reserves
Third offtake agreement added 22 December 2013 for initial additional US$0.5 Million per annum
Four well drilling prgramme comprising of producer and three injector wells planned from now through to the end of July 2013
Gross production averaging 9,091 bopd for January 2013
Additional production now on stream from 12 February 2013 with the start up of associated gas production at an initial rate of 9 MMscfd (1,638 boepd)
AASE-14 ST2 to be tested and hooked up as another additional producer by the end February 2013
Gas processing expected to provide an additional 140-150 bocpd and 35 tonnes of LNG (c.400 boepd) per day
300 sqkm 3D survey in the Mahdia permit to be acquired during Q1 to delineate a drilling location for a well in 2013. Seismic vessel arrived Tunisia 15 February 2013
Two well drilling programme including one well onshore on the Sedoulkech prospect in the Ras Marmour permit targeting 20 MMBO STOOIP and one well planned for the offshore Mahdia permit targeting up to 179 MMBO STOOIP
Offshore 2D seismic survey of 855 km to be completed on nearshore leads in Block 52 as a precursor to drilling in 2014
Finalisation of studies in onshore Block 49 to determine prospectivity to drill
Application for a number of new permits in ongoing
Balance Sheet
Agressive work programme planned utilising robust current cash position and cash flows from rising revenue stream
Cash balances in excess of $20 million at end December 2012, up 40% year on year
Working capital facility of $12.5 million secured to fund existing projects in Egypt thereby enabling Circle use its available cash for alternative projects
Circle is in ongoing discussions with respect to further senior debt to fund company growth plans
Commenting on the announcement Prof. Chris Green, CEO, said:
“Against the backdrop of significant change in the MENA region, Circle has used its experience in the region to consolidate its position and continues to make excellent progress in its core operations. As a result, Circle is now well placed and well funded to accelerate its operations in 2013 and begin unlocking the latent value in its substantial portfolio.”
Despite a backdrop of significant change in the MENA region, over the course of 2012 Circle has made further significant progress in its core operations and as a consequence has established a strong platform from which it can develop its significant portfolio in 2013. Illustrating this progress, 2012 was another successful year for Circle with the drilling of seven wells resulting in an 86% success rate.
Since the start of 2011, Circle has undertaken a substantial capital expenditure programme including the construction and commissioning of a 55 km 8-inch pipeline in Morocco, which has been funded through existing cash resources and cash flows from operations. This operational cash flow, together with the continued improvement in the Egyptian receivables position, has enabled Circle to increase its cash position from US$14.38 million at 31 December 2011 to in excess of US$20 million at year-end. This balance sheet strength has been further augmented through the establishment of the $12.5 million working capital facility.
Circle is well established in the MENA region with a successful track record of discovery, development and production. As a result of these achievements, Circle is now well placed to accelerate significantly its operations in 2013 and unlock the latent value in its substantial portfolio. In addition to developing its existing assets, Circle will continue to assess new opportunities to build on its portfolio in its current areas of operations and throughout the MENA region.
Circle has operated successfully in Morocco for a number of years and has grown its asset base through a successful strategy of identifying and drilling multiple small, but very economic, onshore gas structures. With the favourable local operating and commercial environment in the country it has been able to monetise these discoveries via the supply of gas to local industry. The Company has the significant advantage of having successfully constructed an 8-inch pipeline with the capacity to take up to 23 MMscf per day. This provides considerable scope to further monetise future discoveries from its upcoming work programs, including its proposed third drilling programme consisting of six wells on the Lalla Mimouna and Sebou permits targeting 40-45 bcf of gross recoverable resources. Morocco remains a net importer of energy with scope for supplying gas to local markets at very attractive prices.
Gas delivery through 2012 rose from 2.0 to 2.5 MMscfd (363-455 boepd) to 4.5 MMscfd (818 boepd) and a third small off-taker was added in late December 2012. The off-take is expected to increase further in Q1 2013 with daily supplies rising to between 6.5 and 7.5 MMscfd (1,181-1,364 boepd), which is in line with previous guidance. A further increase is planned for Q4 2013 when additional offtake is expected to take production to between 10.0 and 11.0 MMscfd (1,818-2,000 boepd). Looking forward into 2013, the interpretation of the Lalla Mimouna 3D seismic survey is well advanced and the preliminary interpretations indicate the possibility of up to 160 bcf of additional recoverable resources within the area of 3D coverage. This compares to our existing Sebou reserve base of approximately 30 bcf with additional resources in Sebou still to drill. For the 2013 drilling programme preparation work is underway with drill pipe and associated equipment ordered and the drill rig available. Future discoveries will be linked in to the existing infrastructure by short tie-in and extension pipeline.
Included within the 2013 drilling programme is the re-entry of the KAB-1 well, which was drilled but not logged in the previous drilling campaign. The other wells in the campaign will target prospects in both the Sebou and Lalla Mimouna permits with the aim of providing substantial additional reserves and replacing reserves from gas production since the previous drilling campaigns
Further drilling campaigns are planned for 2014 to enhance the reserve levels and supply additional offtake.
In Egypt, where significant changes and challenges have occurred over the last two years, excellent progress has been made with the development of the Al Amir SE and Geyad oilfields. Operations have remained unaffected throughout the period of change and we are now closing in on the final stages of the initial development of these two oilfields. In line with the production rates at the end of Q4 2012, the initial daily production of oil in the first quarter of 2013 is expected to be in the order of 9,200 to 9,500 bopd. In addition to this the 12 inch gas pipeline has now been tied in and gas production started up on 12 February. Initial gas production is in the 8.0 to 9.0 MMscfd (1,456-1,638 boepd) range with the additional benefit of processing of the gas expected to provide another 140-150 barrels of condensate per day and 35 to 40 tonnes per day (c.400 boepd) of LNG.
Work on finalising the development and day to day operations of the Al Amir SE and Geyad Oilfields will continue through 2013. The 2013 work programme includes the drilling of four wells (one producer and three injectors) during the first half of the year. These will bring both fields to a relatively mature development stage, which is expected to increase the free cash flow generated for the group. Capital expenditure will then reduce considerably and the Company and its partners expect to benefit from the significant historic capital expenditure over the coming years.
In late 2012 the Company drilled the Bou Argoub-1 well in the Grombalia permit which although resulting in a non-commercial discovery this time again showed the working petroleum system in this proven oil producing area. Following a significant amount of preparatory work in 2012, the Company sees a period of greater activity across its Tunisian acreage in 2013.
The rig that drilled Bou Argoub-1 is moving to drill the Sedouikch prospect in the Ras Marmour permit in southern Tunisia. This will commence drilling in Q1 2013 targeting Lower Cretaceous sandstones in structures with a potential 19MMBO of STOOIP.
In the offshore Mahdia permit, Circle will undertake a 300 sq km 3D survey in Q1 2013 targeting the El Medouini and West El Medouini prospects to provide the data for choosing the final drilling location for a well. This well is expected to be drilled in 2013. Initial estimates of the two prospects indicate the possibility of resources of 47 MMBO* STOOIP in the Medouini and 125.1 MMBO STOOIP * in the West El Medouini prospect.
During 2012 the Company undertook an extensive 2D seismic survey on Block 49 with a view to identifying suitable drilling targets. Final interpretations of the data are currently being completed to fully understand the prospectivity of the block.
In Block 52, the Company identified a number of significant exploration targets, however these targets were located in deep water. As a result, the Company believed that the most appropriate course of action was to seek a farm-in partner to drill these prospects.
Detailed interpretation of the existing datasets in Block 52 in 2011 and 2012 pointed also to the possibility of three additional significant inshore targets in the shallower nearshore waters (0-40 metre water depth). To fully develop these inshore prospects a marine 2D seismic acquisition programme is planned and is presently being tendered to commence acquisition as soon as possible. The survey will add the data necessary to determine prospect size and ranking and permit Circle to take a decision on sole-risk drilling in the block.
In 2013 efforts to farm-out our prospects in the deepwater of Block 52 will continue coupled with the efforts to obtain further technical information on the three shallower water prospects.
Balance sheet and financing
As set out above, Circle has managed to significantly strengthen its cash position over the course of 2012. This has been achieved through increased production and a significant improvement in the Company’s EGPC receivables position. With cash at year-end in excess of US$20 million augmented by the US$12.5 million working capital facility, Circle is well placed to fund and execute its plans for 2013.
With continuing increases in gross revenues anticipated and a bankable proven reserve position, Circle is working towards concluding a senior debt arrangement in the first half of 2013.
This debt, when in place, combined with a robust net cash position and working capital facility already in place will ensure fast tracking and expansion of operations within our existing portfolio as well as allow for the introduction of new assets both in terms of exploration and production.
In total some 12 wells are presently planned which build on previous successful groundwork. Revenues and net profit have grown over the previous years and coupling this to Circle’s growing available net cash and the working capital facility should provide the funding for the acceleration of the planned work programme in 2013. Circle presently has a balanced portfolio of producing assets, together with significant exploration upside and in terms of the latter, a number of these have the potential to materially increase the asset base of the Company.
* Circle Oil internal estimate with 3rd party validation
SOURCE: Circle Oil Plc
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