Pretax losses more than halve at Petroceltic, revenues decline

Pretax losses more than halved at Irish oil and gas exploration firm Petroceltic in the six months to the end of June with production slightly stronger than anticipated.

The group recorded a first-half pretax loss of $27.1 million in what it described as a “challenging period.” This compares to a pretax loss of €57.4 million for the same period a year earlier.

Petroceltic, which left its full-year guidance unchanged at 14 -15 million barrels of oil equivalent per day (mboepd), said first-half production was approximately 15.7 mboepd (7.7 mboepd on a net entitlement basis).

Revenues totalled $38 million as against first-half revenues of $96 million for the same period last year. The company attributed the decline in revenues to lower production levels and pricing. First-half revenues from the group’s Egyptian assets totalled £29 million while Bulgarian revenues came in at $9 million, Petroceltic said.

Capital expenditure during the first-half totalled $29 million, down from $68 million. Net debt totalled $184 million, up from $153 million at the end of last year.

The explorer, which is focused on North Africa, the Mediterranean and the Black Sea regions, announced significant progress in Algeria during the first six months of the year with a rig contract awarded, development drilling to commence shortly and invitation to tender for engineering, procurement and construction (EPC) services at the Ain Tsila development launched.

“The company has remained focused on delivery from its core assets, despite a challenging sector and market environment. The Ain Tsila gas development in Algeria remains on track for first gas in 2018 and continues to be de-risked following the award of the rig contract and the invitation to tender for the EPC,” said chief executive Brian O’Cathain.

“Maintaining production levels in Egypt and Bulgaria remains a key objective and we are naturally encouraged by Eni’s recent discovery directly adjacent to our offshore acreage in Egypt,” he added.

London broker BMO Research said the financials were largely in line but the reduced cash position of $14 million highlighted the need to an urgent resolution to the near-term funding pressures.

“Petroceltic’s low cost and comparatively low leverage to the oil price has the potential to drive relative outperformance in this volatile market; however, moving Ain Tsila up the value curve remains reliant on financing, whilst the public struggle with Worldview clouds the investment case, leading us to remain neutral on the shares,” the broker said.

Davy forecast a full-year pretax loss of $64 million for the group, including a $20million exploration write-down.

“Petroceltic’s results maintain a theme that the group has stated for some time involving a full focus on delivering core assets and sustaining production. In the context of difficult background markets and a cash-hungry flagship project, this is clearly the best strategy. We see upside in some areas that might surprise (Italy and Egypt) but expect that progress of its Algerian operation, including certainty of funding, is the most likely route to upside in the short term,” said Davy analyst Job Langbroek.