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Attention Business Editors
Stratic Energy Corporation - Business Update and 2010 Outlook
CALGARY and LONDON, Feb. 9 /CNW/ - Stratic Energy Corporation (TSX
Venture: 'SE', AIM 'SE.') ("Stratic" or the "Company") is pleased to provide a
business update and review of its plans for 2010.
The Company also announces that a conference call will take place today
at 12 noon Eastern Time (5pm London Time) during which a question and answer
session on the Company's portfolio and strategy will be held. Call in details
may be found at the end of this press release.
Overview
<<
- West Don 2009 gross production 1.89 mmbbls (equivalent to an
annualised average of 5,151 bopd, 892 bopd net to Stratic)
- Water injection operational issues resolved, reservoir pressure
showing signs of recovery
- Gas lift stability improved
- Tie in to Thistle/Brent pipeline system on schedule for February
2010 completion
- Partnership investigating third production well to accelerate
production from southern region of the field
- Crawford field development work continues on track, focusing on
reducing costs and FDP submission by mid year 2010
- Planned participation in Bugle North well in Bowmore area, subject to
Joint Well Agreement
- Completed drilling operations on Al Tayr 101 in Syria, well plugged
and abandoned after unsuccessful testing
- Signed Letter of Intent for farm-out of F Quad acreage offshore
Netherlands, to include a possible carried exploration well
- Completion of sale of Italian business on schedule for closing by end
of first quarter 2010
- Amended bank facility provides new $10 million short-term line of
credit and deferral of scheduled 2009 year end repayments of
approximately $25 million, to be repaid out of Italian disposal
proceeds
- Change in North Sea strategy and shift towards increased activity in
lower cost international areas.
>>
Operations
Production from Stratic's West Don field totalled 1.89 million barrels
(mmbbls) (gross) for 2009, equivalent to 5,151 barrels of oil per day (bopd)
on an annualised basis (892 bopd net to Stratic), ahead of the Company's
November guidance of 1.75 million barrels.
Operational stability has improved with the two producing wells
responding to gas lift and issues around the water injection process resolved.
There are now clear signs of water injection support at the producing wells.
Progress towards the changeover from tanker export to a permanent pipeline
export route is on track, with the shutdown for the changeover scheduled to
commence shortly. The field is expected to be exporting from the Northern
Producer, over the Thistle platform and into the Brent pipeline system, by the
end of February. This will substantially improve operational uptime and
processing plant stability.
Operator Petrofac is planning a drilling campaign on the neighbouring Don
Southwest field and we expect that a third production well will also be
drilled in the southern sector of the West Don field as part of this campaign.
Pressure communication across the field has now been successfully
demonstrated, which is expected to result in this well accessing incremental
reserves as well as accelerating production from the southern area of the West
Don field.
The Crawford field continues to progress towards field development plan
(FDP) submission and project sanction. Operator Fairfield is focusing on
reducing costs of the development, and is investigating the possibility of a
long term contract for a jack-up unit to conduct both drilling and production
operations, as well as assessing the relative benefits of using multilateral
completions rather than hydro fracturing for the Triassic development wells.
FDP submission is expected by mid year 2010, with the possibility of
development activity commencing early in 2011 and first oil later that year.
In the Bowmore licence area, discussions are being held with the
licensees of the P815 licence (the Nexen operated block containing the Bugle
discovery) regarding the drilling of a joint well close to the block boundary
of the P815 and P1465 licences. Stratic's participation in this well, which is
subject to the satisfactory conclusion of a Joint Well Agreement between the
parties, would qualify as the second of the two commitment wells required on
licence P1465, after the 15/24a-9 Bowmore appraisal well drilled in 2009. This
Nexen operated well will target a possible northern extension of the Bugle
discovery, and is currently expected to spud during February using the
Transocean Glomar Arctic IV semi-submersible drilling unit.
In December, in line with licence requirements, blocks 16/3d, 210/19a and
210/20a were relinquished. Stratic held a 100% interest in each of these
blocks and elected to relinquish the licences rather than commit to drill
within a short timeframe at high equity levels. Stratic expects to reapply in
the recently announced 26th UK offshore licensing round for some or all of the
relinquished acreage, and is in discussions with potential partners with a
view to forming bidding groups.
Following the conclusion of drilling operations on the Al Tayr 101 well
in Syria that has been plugged and abandoned, Stratic and its partners are
reviewing their position in block 17, which is shortly due to be extended or
relinquished. Although no decisions on block 17 have been made, the
partnership remains encouraged by the prospectivity identified in Syria and
will be evaluating further opportunities in the country over the coming
months.
Production in Turkey totaled 5.1 billion cubic feet (bcf) of gas in 2009,
an average of 13.9 million cubic feet of gas per day (mmscf/d) (1.6 mmscf/d
net to Stratic), in line with Ryder Scott's 2P production estimate. Production
remained steady throughout the year on the Ayazli and Akkaya fields, whilst
production from the East Ayazli field was intermittent, with short bursts of
production corresponding to the addition of incremental perforation intervals.
At year end the East Ayazli field was shut-in.
In a short drilling programme late in 2009, two exploration wells, West
Ayazli and East Akkaya, were drilled by operator TPAO using the Saturn jack-up
drilling unit. The West Ayazli well drilled to a total depth of 2,545 meters
after encountering gas bearing Akcakoca sands between 643 and 763 meters. The
uppermost of these sands was found to be pressure depleted, and so connected
to the Ayazli field. Sands encountered deeper in the section were found to be
less depleted. These gas bearing sands were tested at 10 mmscf/d, and have
been completed to allow cross flow from the lower sands into the upper
intervals in communication with the Ayazli field. The East Akkaya well was
drilled to a total depth of 1,400 meters, and was plugged and abandoned as a
dry hole.
Stratic is currently marketing its interests in Turkey with a view to
concluding a sale by mid 2010.
In the Netherlands, Stratic has signed a Letter of Intent to farm-out its
F Quad acreage. On completion of the farm-out agreement and subject to
Ministry approval Stratic will be fully carried through the next phase of
exploration activity, including the possibility of drilling an exploration
well. Stratic continues to examine alternative development options for its P8
Horizon West development before seeking to bring in one or more farm-in
partners.
Financial
Stratic ended 2009 with net debt of $106.5 million, comprising cash
(excluding restricted cash) of approximately $6 million, bank debt of $48
million and subordinated convertible loans of $64.5 million.
Under recently agreed amendments to the bank facility, an additional
short-term line of credit of approximately $10 million is now available for
general corporate purposes, providing increased flexibility to fund the
business near-term. This is repayable, together with scheduled repayments
under the facility of approximately $25 million which have been deferred from
the end of 2009, from the proceeds of sale of the Company's Italian business
amounting to an estimated $45 million, expected to complete around the end of
the first quarter, 2010.
In 2010, based on a Brent oil price averaging $75 per barrel, Stratic
expects to generate approximately $35 million of production revenue after
royalties and field operating costs. This includes revenues from our Turkish
business up to the mid-year, following which the business is assumed to have
been sold. Planned development expenditure in 2010 is forecast to be
approximately $20 million, primarily on West Don including the third
production well under consideration. No significant development capital
expenditure is expected on the Crawford field in 2010, pending project
sanction targeted later in the year, at which point additional finance will be
required to be in place. Subject to banks' approval, the existing bank loan
facility is likely to be available to finance a portion of Stratic's share of
development expenditure on the field.
Committed exploration and appraisal expenditure in the UK and Syria for
2010 currently stands at about $10 million, with a further $10 million
earmarked for exploration in new areas, subject to available cash flow in the
second half of the year. During 2010, based on the current facility
projection, Stratic expects to make loan repayments to its banks totaling
approximately $35.5 million, substantially reducing the projected loan to an
outstanding balance at year end of approximately $12.5 million.
Strategy and Outlook
Stratic's strategy over the last few years has been to build a
production-based business in the North Sea and Italy, by accessing existing
discoveries and advancing those discoveries through further appraisal,
development and ultimately into production. During this period the company
built an attractive portfolio of appraisal and development properties,
including West Don, Crawford, Bowmore, Cairngorm, Breagh and Horizon West in
the North Sea, and the Longanesi gas field in Italy. By its nature, such a
strategy is very capital intensive, relying on ready access to both equity and
debt markets, and proved to be unsustainable during the world financial crisis
we have experienced over the last two years.
In response to these market conditions, we determined to sell two of our
key undeveloped assets - Breagh and Longanesi - to reduce associated unfunded
future development costs, and our existing debt levels arising from the
development of West Don, consequently lowering our production outlook in the
future and the scale of our activities generally. In addition, it has
subsequently become clear that the availability of debt finance for small
North Sea development projects will be severely limited for the foreseeable
future. As a consequence, we do not believe that trying to grow the company by
this route remains viable and we are therefore adopting a new strategy to
reflect the changed circumstances.
The company's revised North Sea strategy is as follows:
<<
- generate maximum near term value from the asset base by continuing to
invest in, and press for performance improvements on, West Don,
including the drilling of a third production well in 2010
- work to optimise the Crawford development plan and related financing
arrangements with a target of submission for approval by mid 2010
- complete existing exploration and appraisal activity (principally in
the Bowmore area, and Cairngorm), but not seek new opportunities
beyond the existing licence areas.
In addition to this revised North Sea strategy, the Company will also
pursue a new growth strategy in selected lower cost overseas areas by:
- seeking material exploration and appraisal opportunities in the
Middle East (and possibly North Africa) building on the established
office, operating capability and business network available to us in
Syria
- improving the frequency of drilling activity to increase interest in
the Company - targeting 4 or 5 wells per year, starting mid year 2010
- exploring predominately onshore plays with promoted activity to
reduce costs
- funding exploration from North Sea cash flow, against a more
conservative balance sheet following restructuring
- focusing our efforts to increase the critical mass and reach of
Stratic's business through local partnerships and alliances, or in
combination with other companies.
>>
Kevin Watts, Chief Executive, commented: "I am pleased to report that we
have made significant headway in both refocusing our strategy to reflect the
current economic and operating environment and putting in place a sound
financial platform on which to execute it, a process we started more than a
year ago and which is ultimately expected to raise well in excess of $100
million from asset sales. Operationally, we remain optimistic about future
reservoir performance at West Don and we look forward to further efficiencies
once offshore loading is discontinued. We are also working towards sanctioning
and financing the Crawford development later in 2010, and our forward drilling
program in the North Sea is expected to include a further well in the Bowmore
area, together with a third production well on West Don. Alongside our North
Sea asset base we will be seeking to build up a portfolio of exploration and
appraisal opportunities in lower cost areas. This is likely to take some time
to establish fully, but we are clear about our immediate objective of
accessing at least a couple of opportunities that can be drilled in the second
half of the year."
Conference Call Dial in Details
Stratic's management will host a conference call today, Tuesday February
9, at 12.00 noon Eastern Time (5.00 p.m. London Time) during which a question
and answer session on the company's operations, business and strategy will be
held. To participate in the conference call, please dial (647) 427-7450 or
(888) 231-8191 in North America. UK residents should call on 0800 051-7107. To
listen to the webcast enter
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2953720
A replay of the conference call may be accessed for one week until
February 16, 2010 by dialing (001) 416 849-0833 or 1-800 642-1687 and entering
pass code 53850009.
Notes to Editors:
About Stratic: Stratic Energy Corporation is a Canadian-incorporated
international oil and gas business operating principally in the North Sea. The
Company currently has oil production from the West Don field in the UK North
Sea and gas production from the South Akcakoca licences in the Black Sea,
offshore Turkey. The company has further discoveries in the North Sea that are
candidates for future development, most notably the Crawford field, which is
expected to receive development consent in 2010. The Company has recently
undertaken a major restructuring programme to reduce debt levels by selling
its interests in two gas development projects, Breagh in the North Sea and
Longanesi in Italy, with expected proceeds in excess of $100 million. Once
this restructuring programme is complete, expected in mid 2010, the Company
intends to concentrate on its existing development assets in the North Sea but
deploy its higher risk exploration capital in lower cost areas in the Middle
East and North Africa. Stratic's shares are listed on the TSX Venture Exchange
in Toronto and on AIM, London and its principal operating office is in London,
UK.
TSX-V notification
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the contents of this release.
Stratic's Chief Operating Officer, Dr Mark Bilsland BSc (geology), PhD
(petroleum petrophysics), and member of the SPE, is the qualified person who
has reviewed and approved the technical information in this announcement for
the purposes of the AIM Rules for Companies (incorporating the Guidance Note
for Mining, Oil and Gas Companies).
-30-
/For further information: Kevin Watts, President and Chief Executive
Officer, +44 20 7766 7900; John van der Welle, Chief Financial Officer, +44 20
7766 7900; Mark Bilsland, Chief Operating Officer, +44 20 7766 7900; Patrick
d'Ancona, M: Communications, +44 20 7920 2347; Canadian Investor Relations,
Roger Fullerton, (952) 929-7243, Email: roger.fullerton@straticenergy.com,
Website: www.straticenergy.com/
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