CALGARY, ALBERTA--(Marketwire - March 27, 2013) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S.
Antrim Energy Inc. ("Antrim" or "the Company") (TSX:AEN) (AIM:AEY), an international oil and gas exploration and production company, today announces its 2012 year-end financial and operating results. The results include a summary and evaluation of reserves as of December 31, 2012 that have been independently assessed by McDaniel & Associates Consultants Ltd. in accordance with the standards specified by National Instrument 51-101.
All financial figures are unaudited and in US dollars unless otherwise noted.
During 2012, Antrim completed the sale of its Argentina operations and focused solely on its UK North Sea and Irish assets. In November 2012, Antrim achieved a significant milestone when the Causeway Field commenced production. Following first production from the Causeway Field, the Company achieved first production from the Cormorant East Field in January 2013 from the discovery of oil at well 211/21-N94 (the "Contender Well") drilled in October 2012. On March 26, 2013, planning for the development of the Fyne Field was discontinued following a significant escalation of expected future development costs.
Licence P201 Block 211/22a South East Area and P1383 Block 211/23d, Antrim 35.5%
The Causeway Licences include the Causeway Field, the Fionn Field and the West Causeway area. The Causeway Licences total gross proved plus probable reserves decreased by 4% from 12.5 million barrels (4.4 million net to Antrim) to 12.0 million barrels (4.3 million net to Antrim) as at December 31, 2012 (compared to December 31, 2011) due to 2012 production and technical revisions following initial field performance data. Subsequent to December 31, 2012, with an early indication of significant cost increases, Antrim elected to opt out of the Fionn Field development, which will result in a decrease of total gross proved plus probable reserves of 4.9 million barrels (1.7 million net to Antrim).
Production from the Causeway Field averaged 4,081 gross barrels of oil per day ("bopd") (Antrim net 1,194 bopd) from November to December 31, 2012 compared to nil in 2011. Oil production is transported by pipeline to the North Cormorant production platform where it is processed before being exported to the Sullom Voe terminal via the Brent Pipeline System for sale. Under a contract with the purchaser, Antrim invoices and receives payment for its oil in the month after production; however, the purchaser retains certain rights impacting the timing of liftings which may result in no sales in a particular month resulting in deferred revenue. During 2012, no oil revenue was recorded ($nil - 2011) as there were no oil liftings. Deferred revenue of $1.1 million ($nil - 2011) was recognized in 2012 relating to oil produced and collected but not lifted from the terminal.
Rig operations commenced in January 2013 to complete the water injector for the Causeway Field and were completed in February 2013. Anticipated startup of the downhole electrical submersible pump ("ESP") will follow completion of topside modifications on the North Cormorant production platform, and is scheduled for the second half of 2013. The recently completed water injection well is expected to commence operation in 2014, with a possibility of it being accelerated to the second half of 2013.
As part of the sale of a 30% working interest in the Causeway Licences to Valiant Petroleum plc ("Valiant") in October 2011, Antrim entered into a Differential Lifting Agreement ("DLA") giving Valiant the right to 6.25% of Antrim's share of produced oil. Antrim's share of oil produced will be reduced to 29.25% until a cumulative value of $8.9 million after-tax is received by Valiant. Once satisfied, Antrim's working interest in production will revert back from 29.25% to 35.5%.
Under the terms of the Fionn Field Supplementary Agreement with Valiant, Antrim had an option for three months following first oil production from the Causeway Field to opt out of participating in the Fionn Field development and sell its 35.5% working interest share to Valiant for the cost of its 35.5% working share of the Fionn Field pre-investment costs, or to confirm its continued participation by repaying its share of the Fionn pre-investment costs plus interest.
In February 2013, Antrim announced that it had elected to opt out of participating in further development of the Fionn Field. The projected costs associated with the development of Fionn had increased to the extent that the project no longer met Antrim's economic criteria. Subject to all necessary approvals from the UK Department of Energy and Climate Change ("DECC"), Antrim intends to withdraw from the Fionn Field subarea and will not incur any further liabilities. As a result, an impairment charge of $50.4 million was recorded in the fourth quarter of 2012 representing the full carrying value relating to the Fionn Field.
P201 Block 211/22a Contender Area, Antrim 8.4%
The Contender Licence contains the Cormorant East Field. Cormorant East Field total gross proved plus probable reserves increased from nil to 7.3 million barrels (0.6 million net to Antrim) as at December 31, 2012 due to the successful drilling of exploration well 211/21-N94 (the "Contender Well") as announced on October 22, 2012.
On January 14, 2013, Antrim announced that first oil production had been achieved from the Cormorant East Field after 85 days following discovery of the field. Production is processed through the North Cormorant platform before being exported to the Sullom Voe terminal. The Cormorant East Field is initially being produced under primary depletion with a single production well, with the potential to install a water injection scheme and/or additional production wells at a later date. Future drilling locations are being considered by the partners.
Under the terms of the farm-out agreement with the operator, 100% of the drilling, completion and tie in costs of the Contender Well were funded by the operator. Antrim will receive its share of production after Antrim's working interest share of the completion and tie in costs is recovered from production revenue.
P201 Block 211/22a Kerloch Area, Antrim 13.65%
The Kerloch Licence includes the Kerloch discovery made in 2007. With the successful drilling of the Contender Well, TAQA also earned a 35% working interest in the adjacent Licence P201 Block 211/22a Kerloch Area, reducing Antrim's working interest from 21% to 13.65%.
P077 Block 21/28a - Fyne, Dandy and Crinan, Antrim 100%
On March 26, 2013 the Company discontinued development of the Fyne Field. Until very recently, estimated costs indicated that the planned Fyne development satisfied the Company's economic threshold and contingent on timing of the redeployment of the FPSO from its current location was on track for a late 2014 start-up. However, projected capital costs have recently increased substantially, and in the Company's view now make the project uneconomic. Prior to the Company's decision to discontinue development, the project had been strongly supported by institutional fund providers.
The majority of costs associated with the Fyne Field were written off in March 2012. No further material write downs associated with the Fyne Field are anticipated as recent work has been confined to front end engineering design work for the subsea facilities and modification to the FPSO.
P1875 21/29d, Antrim 50%
Licence P1875 contains the Erne discovery drilled in 2011 and the Corrib prospect. The Erne sidetrack well 21/29d-11Z well is suspended for possible future incorporation into neighbouring infrastructure. A separate prospect has been identified to the southwest, named Corrib, which may also be assessed for possible future incorporation into neighbouring infrastructure.
P1563 Blocks 21/28b and 21/29c, Antrim 100%
Licence P1563 contains the Carra Prospect, the Riddon and Scavaig discoveries and several other prospects. In October 2012, DECC agreed to waive the contingent well obligation on Licence P1563 Blocks 21/28b & 21/29c as it was determined by Antrim that there was insufficient potential to proceed with drilling. The licence was relinquished in February 2013.
Cyclone and Typhoon
Licence P1784 Block 21/7b, Antrim 30%
Licence P1784 Block 21/7b is located in the Central North Sea, north of the Greater Fyne Area and contains the "Cyclone" and "Typhoon" Tertiary Cromarty prospects. The licence was acquired jointly with Premier (70%, Operator) with a firm well commitment.
In November 2012, Cyclone well 21/7b-4 was drilled and encountered 105 feet of very porous and permeable Tertiary Cromarty sands. Well logs identified only residual oil, suggesting that the trap was breached and the well was plugged and abandoned. As a result, an impairment charge of $5.9 million was recorded in the fourth quarter of 2012, representing the full carrying value relating to Block 21/7b.
Licensing Option 11/5 Blocks 44/4, 44/5 (part), 44/9, 44/10, 44/14, 44/15, Antrim 100%
Antrim holds a Frontier Licence Option (the "Skellig Block") in the Porcupine Basin approximately 110 km off the southwest coast of Ireland. Antrim has licenced, reprocessed and interpreted 2D seismic data and has identified the "Dunree Prospect", a 400 km2 Cretaceous fan complex. Antrim is currently planning a 3D seismic programme and is seeking partners to joint venture on the block. Participation in the block has received strong interest from industry.
Production Sharing Agreement - Pemba and Zanzibar
Antrim holds an option to acquire a 20% interest in the production sharing agreement for the Pemba-Zanzibar exploration licence offshore and onshore Tanzania (the "P-Z PSA") following the pre-drilling (seismic) phase and an additional 10% interest to be exercised up to 180 days following receipt of the initial drilling results. Should Antrim exercise the initial option, costs for the seismic phase associated with Antrim's acquired interests would be repaid from future production. RAK Gas, the Operator, has submitted a proposal for a revised work programme to the federal government of Tanzania. Environmental impact assessment work has commenced, with seismic operations expected to proceed in the near future.
On October 29, 2012, an agreement between the federal government of Tanzania and the government of Zanzibar on the sharing of any future hydrocarbon revenues was announced, potentially ending a moratorium which has delayed exploration of the licence. The agreement has still to be ratified and final details are still to be agreed. It is not yet known what, if any, impact this agreement will have on the P-Z PSA.
On January 23, 2013, Antrim announced that it entered into a $30 million Payment Swap transaction with a major financial institution. The Payment Swap provided Antrim with sufficient funding to meet its commitments for cost overruns on the completion of the production well in the Causeway Field, future costs related to the Causeway water injection well and initial FEED work associated with the Fyne Field.
Under the terms of the Payment Swap, $30 million is repayable in 29 instalments commencing September 2013 and concluding January 2016. The interest rate under the Payment Swap is fixed at 5.1%. To enable Antrim to pay amounts under the Payment Swap, Antrim also entered into a Brent Oil Price Commodity Swap for a forward sale of 657,350 barrels of Brent crude oil at a fixed price of $89.37 covering the period from February 2013 to December 2015.
The following table summarizes Antrim's reserves as at December 31, 2012 prior to the Company's decision not to participate in the development of the Fionn, Fyne and Crinan Fields:
| Antrim's Interest in Reserves as at December 31, 2012 |
| (based on forecast price and cost assumptions) |
| || Oil || Gas || NGL || Total |
| Category || Mbbl || mmcf || mbbls || Mboe |
| Proved || 836 || - || - || 836 |
| Proved plus probable || 16,626 || - || - || 16,626 |
| Proved plus probable plus possible || 28,804 || - || - || 28,804 |
| || || || || |
| Present Value Cash Flow After Income Tax as at December 31, 2012 ($ 000's) |
| (based on forecast price and cost assumptions) |
| || PV || PV || PV |
| Category || 0% || 5% || 10% |
| Proved || 40,890 || 38,898 || 37,074 |
| Proved plus probable || 365,566 || 303,526 || 254,177 |
| Proved plus probable plus possible || 726,765 || 598,828 || 499,976 |
Antrim's reserve information and reports pursuant to National Instrument 51-101 are available in Antrim's Annual Information Form which will be filed on SEDAR at www.sedar.com.
In February 2013 Antrim elected out of participating further in the Fionn Field development and on March 26, 2013 the Company discontinued development of the Fyne and Crinan Fields following a significant escalation of expected future development costs. The impact on Antrim's reserves (based on McDaniel's December 31, 2012 reserve estimates) is as follows:
UK Proved plus Probable Reserves
| Net |
| At December 31, 2012 || 16,626 || |
| Less: || || |
| || Fionn Field || (1,727 || ) |
| || Fyne and Crinan Fields || (11,758 || ) |
| Revised proved plus probable reserves || 3,141 || |
The updated present value cash flow after income tax using a 10% discount rate is $144,775,000.
Financial Discussion of Continuing Operations
All amounts reported in this MD&A related to the three month periods ended December 31, 2012 and 2011 are unaudited.
| || Three Months Ended |
| Year Ended |
| || 2012 || || 2011 || 2012 || || 2011 |
| Financial Results ($000's except per share amounts) || || || || || || |
| Cash deficiency from operations (1) - continuing operations || 8,138 || || 833 || 13,388 || || 3,747 |
| Cash deficiency from operations per share (1) || 0.04 || || 0.00 || 0.07 || || 0.02 |
| Net loss - continuing operations || 67,155 || || 15,975 || 134,859 || || 55,110 |
| Net loss || 67,155 || || 14,951 || 134,544 || || 52,970 |
| Net loss per share - basic, continuing operations || 0.37 || || 0.09 || 0.73 || || 0.32 |
| Total assets || 96,520 || || 239,177 || 96,520 || || 239,177 |
| Working capital (deficiency) || (10,734 || ) || 52,674 || (10,734 || ) || 52,674 |
| Capital expenditures || 26,771 || || 10,634 || 63,034 || || 14,702 |
| Bank debt || - || || - || - || || - |
| || || || || || || |
| Common shares outstanding (000's) || || || || || || |
| End of period || 184,731 || || 184,116 || 184,731 || || 184,116 |
| Weighted average - basic || 184,848 || || 184,108 || 184,388 || || 173,997 |
| Weighted average - diluted || 185,681 || || 185,530 || 185,528 || || 175,412 |
| || || || || || || |
(1) Cash flow from operations and cash flow from operations per share are Non-IFRS Measures. Refer to "Non-IFRS Measures" in Management's Discussion and Analysis.
Antrim expects to see increased production from the Causeway Field following deployment of the ESP in the second half of 2013, and the implementation of the water injection scheme scheduled to commence operation in 2014, with a possibility of it being accelerated to the second half of 2013.
Following the discovery of the Cormorant East Field by the Contender Well, Antrim anticipates planning at least one appraisal well, downdip of the discovery well and a plan to explore the adjacent fault compartments.
Recent seismic studies on the Skellig block in the Porcupine Basin offshore Southwest Ireland has high graded the Dunree Prospect, adjacent to the licence holding the Dunquin Propsect, which is expected to be drilled by its operator and joint venture partners in the second quarter of 2013. Antrim is currently seeking partners to joint venture on the block and has received strong interest from the industry.
Commenting on the results, Stephen Greer Chief Executive said, "Antrim intends to continue adding value to its North Sea producing properties. However, in our view the degree of cost escalation seen in the sector requires that the Company takes a cautious approach to any new investment in small North Sea fields. As part of this strategy the Company recently took the decision to opt out of the continuing oil development at the Fionn Field and the planned development of the Fyne Field because costs had begun to rise dramatically. The Company will continue to use its production revenues from the North Sea to invest in new ventures wherever they are considered to add value. In this regard the Skellig Block offshore Ireland is an early stage exploration venture where Antrim intends to add significant value for its shareholders