News

Oryx Petroleum Q3 2017 Financial and Operational Results and 2018 Capital Budget

08 November 2017

Calgary, Alberta, November 8, 2017

Higher average production and sales, continued payments for oil sales, and higher netbacks; 2018 plans include further appraisal drilling in the Hawler license area and preparation for exploration drilling in the AGC Central license area

Oryx Petroleum Corporation Limited (“Oryx Petroleum” or the “Corporation”) today announces its financial and operational results for the three and nine months ended September 30, 2017 as well as its 2018 capital expenditure budget. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.

Q3 2017 Financial Highlights:

• Total revenues of $9.8 million on working interest sales of 215,800 barrels of oil (“bbl”) and an average realised sales price of $41.07/bbl
  - 38% increase in revenues versus Q2 2017 and 46% increase in revenues versus Q3 2016
  - The Corporation has received full payment in accordance with production sharing contract entitlements for all oil sales into the Kurdistan Export Pipeline through July 2017 
• Operating expenses of $3.4 million ($15.59/bbl) and an Oryx Petroleum Netback of $9.02/bbl
  - Lower operating expenses and higher netback versus Q2 2017
  - Highest netback achieved since 2015
• General and administration expenses of $2.2 million
  - 14% lower versus Q2 2017 but unchanged versus Q3 2016 due to the inclusion of approximately $0.8 million of costs for technical support that had been applied to capital projects in periods prior to 2017 
• Net loss of $5.9 million ($0.01 per common share) versus net loss of $8.7 million ($0.04 per common share) in Q3 2016
• Net cash used in operating activities of $4.6 million versus $2.1 million in Q3 2016. Q3 2017 result consists of negative Operating Cash Flow of $0.6 million and a $4.0 million increase in non-cash working capital
• Cash used in investing activities was $6.5 million and includes payments related to drilling and facilities work in the Hawler license area, seismic processing and interpretation costs in the AGC Central license area, and reductions in accounts payable
• $46.3 million of cash and cash equivalents as of September 30, 2017 
• The total balance owed under the amended Loan Agreement with The Addax and Oryx Group (“AOG”) was $79.2 as at September 30, 2017, including $3.1 million in accrued interest which will be settled through the issuance of common shares 
• The total balance of principal and accrued interest potentially owed under the contingent consideration obligation to the vendor of the Hawler license area was $71.2 million as at September 30, 2017

Operations Update: 

• Average gross (100%) oil production of 3,600 bbl/d in Q3 2017 vs 2,900 bbl/d in Q2 2017
  - Commencement of production from the ZAB-1 sidetrack well (“ZAB-1ST well”) in August 2017
  - Average gross (100%) oil production of 3,800 bbl/d in October 2017 
• Drilling of the ZAB-1ST well was completed in July 2017 in the Cretaceous reservoir of the Zey Gawra field. After an acid stimulation treatment in August 2017 daily oil production from the well has been increased to approximately 700 bbl/d
  - Based on the well performance of the ZAB-1ST well and the Zey Gawra-1 sidetrack well (“ZEG-1ST well”), the Corporation plans to proceed with the drilling of another appraisal well targeting the Zey Gawra Cretaceous reservoir. The mobilisation of a rig to drill this well has been delayed due to post-independence referendum tensions between the government of the Kurdistan Region (“KRG”) and the federal government of Iraq and is now expected to occur in early Q1 2018 or as soon as conditions improve
• Workovers of the Demir Dagh-8 and Demir Dagh-7 wells in the Cretaceous reservoir are ongoing
  - Initial efforts to bring these wells on production have not succeeded with additional efforts planned in the coming weeks 
• Preparations for the resumption of operations at the Banan field are underway with the re-entry of the Banan-2 well targeting the Cretaceous reservoir and the drilling of a new well targeting the Tertiary reservoir planned in the first half of 2018. Resumption of operations at the Banan field requires authorisation from the KRG
• Full processing and interpretation of 1,921 km2 of 3D seismic data covering the AGC Central license area is ongoing
  - Finalisation of prospect identification and mapping is expected before the end of 2017 with exploration drilling planned in 2019
• On November 2, 2017 the Corporation relinquished its 80% interest in the AGC Shallow license area and, in connection with such relinquishment, has agreed to transfer the outstanding well commitment to the AGC Central license area
• Oryx Petroleum has commenced efforts to divest its interests in the Haute Mer A and Haute Mer B license areas in Congo (Brazzaville)

Q4 2017 Forecasted and 2018 Budgeted Capital Expenditures: 

• Oryx Petroleum re-forecasted capital expenditures for Q4 2017 are $8 million:
  - Continued efforts to bring the Demir Dagh-7 and Demir Dagh-8 wells online and mobilisation/site remediation at the Banan field in the Hawler license area, AGC Shallow relinquishment settlement, license maintenance and technical support costs 
• Oryx Petroleum budgeted capital expenditures for 2018 are $55 million:
  - $40 million dedicated to the Hawler license area: 8 wells including two short-radius sidetrack wells targeting Demir Dagh Cretaceous, two wells targeting the Zey Gawra Cretaceous, re-entry of existing Banan-2 well targeting the Banan Cretaceous and three wells targeting the Banan Tertiary; flowlines and required facilities modifications needed to accommodate incremental production
• $15 million dedicated to the AGC Central license area including preparations for exploration drilling in 2019, and a contingent payment for 3D seismic acquisition and processing required upon the expected entering of the first renewal of the exploration period in September 2018 

Liquidity Outlook: 

• Oryx Petroleum expects that cash on hand as of September 30, 2017 and cash receipts from net revenues will allow it to fund its forecasted cash capital expenditures and its cash operating and administrative costs and to meet its obligations through late 2018 

CEO’s Comment
Commenting today, Oryx Petroleum’s Chief Executive Officer, Vance Querio, stated:
“During Q3 2017 we increased average daily production and sales by 24% versus Q2 2017 due to the addition of production from the ZAB-1ST well. Gross (100%) oil production averaged 3,600 bbl/d in Q3 2017 and 3,800 bbl/d in October 2017. All production has been sold via the export pipeline and payments for export sales through the end of July have been received in full. Higher sales volumes combined with higher realised oil prices helped us achieve higher net revenue and our highest quarterly netback since 2015.
In recent weeks we have conducted workovers of the Demir Dagh-8 and Demir Dagh-7 wells attempting to re-complete both wells in the Shiranish formation in the Cretaceous reservoir. Efforts to bring the wells on to production, including acid stimulation, have not yet succeeded and additional efforts are planned in the coming weeks. 
We have not experienced any meaningful disruptions to our production operations or delays in receiving sales revenue due to disputes resulting from the Kurdistan Region independence referendum. However, we are delaying further drilling activity until the uncertainty around governance of the oil industry in the Kurdistan Region is addressed and the travel restrictions that restrict our ability to mobilise equipment and personnel are lifted. 
Full processing and interpretation of 3D seismic data covering the AGC Central license area is in advanced stages. Initial results are very encouraging with several large prospects identified. Prospect identification and mapping is expected to be completed by the end of 2017 with exploration drilling planned in 2019. 
We continue to make progress managing and restructuring legacy obligations and commitments. In recent days we have finalised an agreement with the authorities governing the AGC license areas to relinquish the AGC Shallow license and transfer the unfulfilled work commitment to the AGC Central license area for a modest cost. The agreement allows us to defer a sizable obligation otherwise due in March 2018 to a license where we plan significant activity in the next couple of years. We have also commenced efforts to divest our interests in Congo (Brazzaville).
Our 2018 capital budget is focused on our core license areas: the Hawler license in the Kurdistan Region, and the AGC Central license offshore Senegal and Guinea Bissau. In the Hawler license our program includes the drilling or re-entry of eight wells and has been designed to allow us to significantly increase production and better define the development potential of the three key fields in the license. Our budgeted capital expenditures in the AGC Central license are almost all in the second half of 2018 and include a final payment for the acquisition of 3D seismic data currently being processed and interpreted, and preparations for exploration drilling planned in 2019.
We expect that cash on hand and cash receipts from net revenues will allow us to fund forecasted capital expenditures and operating and administrative costs through late 2018. 
We look forward to implementing our plans in 2018 and achieving both higher production in the Hawler license and preparing for an exciting exploration drilling program in the AGC Central license area in 2019.”