August 8, 2013
Po Valley Energy Ltd. (ASX: PVE) announced today its 2013 half year results for the six months ended 30 June 2013.
Half year operating results were adversely affected by reduced gas
production at both of the Company’s producing fields and lower realised
gas prices. The Company has also impaired the carrying value of its
Castello field in view of its lower and less certain production
prospects. This impairment is a non-cash item and has resulted in a half
year statutory loss.
Half year revenues from gas sales totalled €2,999,368 which was about
30% lower than the prior corresponding period. As a result, earnings
before interest, tax, depreciation, amortisation and impairment charges
(EBITDA) amounted to €905,666 compared to €2,651,645 for the prior
corresponding period. The lower EBITDA achieved during this period
resulted from gas production being around 11 percent lower relative to
the prior corresponding period and also to a lower average gas price
during the half year of €27 cents per cubic metre compared to the price
of €36 cents per cubic metre achieved during the prior corresponding
period which coincided with a significant spike in global oil prices.
The Company’s gas sales are now based on the Italian spot market prices
rather than a reference rate pegged to oil and other hydrocarbon
benchmark prices. In addition, operating costs were higher during this
half year period, mainly due to a number of non-recurring operating
expenses incurred during the installation of the condensate separator at
Sillaro and technical expenses related to the reserve and resource
audit and Competent Person’s Report. But for these one-off items,
operating expenses and corporate overheads would have been broadly in
line with the prior corresponding period.
The Company reported a statutory consolidated loss of €5,625,677 for the
half year including a non-cash write down of €5,021,112 relating to its
Vitalba (Castello) well and related production assets. Excluding the
write down, the net loss would have been €604,565.
|Net Profit after Tax
|Earnings per share (€cents)
|Cashflow from operations
As at 30 June 2013 the Group had €2,409,995 in cash and net current
assets of €2,365,185 with borrowings standing at €5.0 million. The
Company’s cash reserves were boosted during the period by receipt of
funds of €359,000 representing the second tranche of the share placement
approved by shareholders in February 2013 and by a net increase in
borrowings under its new banking facilities of €1.0 million less
transaction costs associated with the creation of that new facility.
During the first half of 2013, average daily gas production from the
combined Sillaro and Castello fields was approximately 60,000 cubic
metres per day. Following the commissioning of the condensate separator
at Sillaro in July 2013, average daily production across the combined
fields is currently 77,000 cubic metres per day.
As previously announced, the Castello gas field experienced increased
water production in May and production was reduced by approximately
two-thirds to around 5,000 cubic metres per day to avoid the risk of
further water intrusion. While production appears to have stabilised at
this new, low level, the prospective future returns from the well are
uncertain pending completion of well testing and analysis scheduled in
second half 2013. Accordingly, the Board has decided to write-down the
value of the well and associated production plant substantially,
reducing its value to a nominal amount. Meanwhile, we will continue to
monitor the well with a view to maximising its ability to continue
producing, albeit at a reduced level.
Despite a number of challenges faced by Po Valley in the first half of
2013, the Company achieved some important milestones which lay the
ground for improved results in the second half of 2013 and beyond.
- Installation of the three phase condensate separator at the Sillaro gas field.
- A new € 20 million Reserve Based Lending facility (RBL) with NedBank
providing the Company with the financial capacity to continue to
progress its future work programme.
- Progressing towards the final production concession of the Bezzecca
gas field. Commencing development of the field is a key priority for
the next 12 months. Final award is expected towards the end of calendar
2013. The Company then plans to start field development including the
construction of a 7km pipeline to connect Bezzecca with the Castello
- Preparatory work for the development plan for the offshore gas discovery Teodorico,
a critical step in obtaining the production concession. The Competent
Person Report (CPR) finalized in May doubled the Teodorico best estimate
Contingent Resources to 47.3 bcf of gas and resulted in a material
increase in the Company’s Contingent Resources.
- Preparation for drilling the exploration well Gradizza-1 in
August. The Company farmed out a 25% working interest in this well,
reducing its financial exposure while maintaining operatorship. This
exploration prospect is estimated to have a 27% chance of success and
its best estimate of Prospective Resources is 9 bcf of gas.
- Significant progress was made by our technical team with respect to
several G&G projects, among others the award of an exploration
licence for a new high-potential exploration asset, Tozzona, a drilling application lodged for the new low risk Selva Stratigraphic prospects and progress toward the preliminary production concession award for the Sant’Alberto gas field.
The Board and Management share the disappointment of shareholders in the
reduced financial results for the half-year compared to prior periods.
The Company is undertaking a review of its cost structure and
organisation with the aim to reduce fixed and overhead costs. The
Company expects to report improved results in upcoming months in light
of the increase in production from the Sillaro field, stronger forecast
gas prices in the Italian market and careful management of operating
CEO & MD
Po Valley Energy
+39 06 4201 62 75
About Po Valley Energy
The Po Valley region is the main gas production zone in Italy. Po Valley
Energy (ASX: PVE) is an oil and gas producer and exploration company
listed on the Australian Stock Exchange. It has an expanding portfolio
of hydrocarbon assets in northern Italy. Po Valley holds 12 license
areas, encompassing 2,000 square kilometres and owns and operates two
gas treatment plants, Sillaro and Castello which provide the Company
with steady cash flow.
For more information please visit: http://www.povalley.com
Competent Person’s Statement
Information in this report that relates to Hydrocarbon Reserves and or
Resources is based on information compiled by Mr. Giovanni Catalano, MD
& CEO of Po Valley Energy who have consented to the inclusion of
that information in the form and context in which it appears. Mr
Catalano has over 30 years experience in Exploration and Development in
the Oil and Gas Industry. He is a member of SEAPEX and AAPG and holds a
master degree in Geology from the University of Ferrara, Italy.
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