Erin Energy intensifies expansion plans despite losses
Despite an increase in its loss to $151.9 million from $142 million in 2016,Texas Houston based Erin Energy poised for growth as the company has acquired capital assets with a view to propel future earnings.
The Oil and gas exploration and production company, which maintains its listing on the New York Stock Exchange (NYSE) and Johannesburg Stock Exchange (JSE) saw a 30 per cent increase in its full year 2017 revenues at $101.2 million, up from $77.8 million in 2016 as fourth quarter 2017 revenues stood at $21.7 million compared to $21.1 million for the same period in 2016.
“2017 had its challenges for our industry and our company, but Erin Energy’s perseverance and some stabilization of the commodity price, allowed for good progress in many of our efforts.” Femi Ayoade, Chief Executive Officer said on the company’s official website.
Jubril Kareem an energy analyst with Ecobank Research group says when oil company assets are in exploration phrase it’s normal to make a loss in Nigeria Oil and Gas industry.
“Compare to International Oil companies and Seplat which already have established revenue stream, majority of Erin Energy assets are exploration and developmental phrase so there revenue is in the future when these assets they are investing in will start making profits,” Kareem added.
The company’s capital expenditure (CAPEX) surged by 216.48 percent to $61.05 billion in December 2017 as against $19.29 million the previous year.
A negative free cash flow from operating activities of $34.95 million means the oil and gas firm has been investing money in the acquisition of new assets albeit shareholders will have to wait for dividend payment while share-buy backs could be delayed.
The average price received for 2017 was $54.84 per barrel compared to $45.45 in 2016 as exploration expenses totalled $4.6 million for the full year 2017 cash; equally cash equivalents and restricted cash were approximately $33.8 million.
Average net daily production for 2017 was approximately 4,900 barrel of oil per day (bopd) compared to approximately 4,800 bopd for 2016. For the fourth quarter 2017, net daily production was approximately 4,000 bopd compared with 5,800 for the comparative period in 2016. Net production volumes for the year were approximately 1.7 million net barrels of oil compared to approximately 1.8 million net barrels in 2016. The Company’s crude oil inventory was approximately $3.6 million at December 31, 2017.
“The most exciting accomplishments were the farm-out agreemnet to FAR, and more recently PETRONAS, to our offshore blocks in The Gambia and our Miocene discovery with the Oyo-NW well,” Ayoade added.
In February, Erin Energy said its joint partner FAR Ltd. has signed a farm-out agreement with a subsidiary of Malaysia’s Petronas .
The farm-out agreement, expected to be completed March 31, 2018, assigns a 40 percent interest in the A2 and A5 offshore blocks in the Gambia to Petronas with FAR retaining operatorship and a 40percent interest in each block. Erin Energy has a 20 per cent interest in Blocks A2 and A5 following its farm-out to FAR in 2017.
As part of the agreement, Petronas will fund 80 per cent of the joint venture’s Samo-1 well up to a $45 million cap. The well is expected to be drilled in late-2018 and will be the first exploration well offshore the Gambia since 1979.
The Company announced early this year that it had successfully completed the drilling of the Oyo-NW exploration well and that it had discovered hydrocarbons in the Miocene Formation. The well is located approximately 9.5 kilometers northwest of the Oyo Central field on the Company’s offshore Nigeria block 120.
Oyo-NW was drilled to a total vertical depth subsea of 12,218 feet and penetrated multiple sand units with total gross thickness of 260 feet in the depth range from 7,052 – 10,873 feet TVDSS as interpreted from wireline log data including approximately 115.2 feet of gross hydrocarbons in the two Miocene targets, U7.0 and U8.0.(1)
The Company is now planning an appraisal of the discovery for the second-half of 2018, subject to the availability of capital and drilling services.
Erin Energy Corporation is an independent oil and gas exploration and production company focused on energy resources in sub-Saharan Africa. Its asset portfolio consists of 5 licenses across 3 countries covering an area of 6,100 square kilometers (1.5 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana and The Gambia.
The price of Brent crude, Nigeria’s benchmark grade, cooled 0.29 percent to $66 per barrel Wednesday, according to Bloomberg data, Oil production on the other hand has recovered to 1.8 million barrels as at February 2018, according to OPEC data, from as low as 1.2 million barrels daily in the thick of militant disruptions.
These factors contributed to lifting the economy from recession in the second quarter of 2017, according to the National Bureau of Statistics (NBS). The economy has consolidated its exit from recession after growing 0.8 percent in 2017 compared to a 1.6 percent contraction the previous year.
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