Drilling Programme Imminent
An exploration and appraisal drilling programme featuring up to seven wells is on schedule to commence in May 2009 on four highly prospective areas within the Isarene permit in Algeria. Extensive new 3D seismic acquired in 2008 has highlighted several potentially exciting reservoirs and helped optimize the company drilling and well testing locations.
A key objective of the Algerian drilling programme will be to appraise the commercialization of existing discoveries. A potential gas resource in the range of one to six trillion cubic feet of gas equivalent is being targeted, in addition to a number of new plays, some of which may contain both oil and gas. Substantial oil and gas discoveries in adjoining blocks have considerably enhanced the potential for both commodities on the permit.
Petroceltic’s Mediterranean basin activities will be further expanded in 2010/2011 with a drilling programme expected on its Italian prospects. A portfolio of exploration assets with strong hydrocarbon leads in proven fairways is currently being high-graded for drilling. The portfolio includes permits in the Po Valley, Central Adriatic and the Sicily channel.
A detailed assessment of the Italian prospects is well advanced and drilling locations will be selected in the second half of this year. The first of these wells should be ready for drilling in 2010, subject to permitting and rig availability. Italy is one of Europe’s leading oil producers and offers the opportunity for Petroceltic to develop hydrocarbon assets within the European Union.
Robust Financial Position
Petroceltic is making excellent progress in further strengthening its financial position. The board believes that this differentiates the company within the small market capitalization Exploration & Production sector and greatly expands its operational capability. The $55 million placing completed in 2008 considerably strengthened the balance sheet and provides funds for the Algerian programme. Cash and cash equivalents were US$43.4 million at year end and the company had no debt.
Additionally, $5.6 million of the 2009 drilling costs were pre-paid in 2008 and the Company received an advance option consideration payment of $7.3 million in February 2009 from Iberdrola, in respect of the financing option announced on June 30, 2008. In a separate announcement, the company announced today that it has successfully raised GBP27.5 million ($40m) through a conditional placing with existing and new shareholders.
Current revenue comes from royalty income from the Kinsale gas fields in Ireland. Revenue increased to $962k in 2008 (2007: $549k). The increase is mainly due to higher gas prices during the period. The company’s operating loss for 2008 increased to US$3.7 million (2007: US$2.5 million). This increase is a reflection of higher administrative expenses as the team expands prior to the forthcoming drilling programme and US / Euro currency movements on administrative expenses.
Strategic Alliance
Petroceltic’s business model is focused on the acquisition of good quality acreage in areas of proven oil and gas, the development of drillable prospects through the application of the company’s exploration skills and the addition of step-change value through the drill bit in exploration and appraisal. The company seek to mitigate risk by taking partners from the industry or through strategic alliances where appropriate.
We are pleased to have found a partner of the strength and quality of Iberdrola to help us to develop the company portfolio. As a significant player in the Algerian downstream gas and power industries, Iberdrola has a sophisticated understanding of the economic potential of delivering North African energy supplies into European markets. Iberdrola’s good standing and the depth of its prior relationships in Algeria also compliment those of Petroceltic.
