Annual Results 2013
London, 4th April 2014: Gulfsands Petroleum plc (“Gulfsands”, the “Group” or the “Company” – AIM: GPX), the oil and gas production, exploration and development company with activities in Syria, Morocco, Tunisia, Colombia and the U.S.A. announces its annual results for the twelve months ended 31 December 2013.
- Assumed operatorship in Morocco, Tunisia and Colombia
- Audited Group 2P working interest reserves of 75.8 mmboe and unrisked, best estimate working interest prospective reserves increased to 526 mmboe as at 31 December 2013
- Conducted 2D and 3D seismic programmes and commenced drilling in Morocco
- Total bank and cash resources of $53 million at year-end inclusive of $33.8 million of cash and cash equivalents and $19 million in restricted cash
- Significant reduction in general and administrative expenses
- Syrian assets remain shut-in and secure during continuation of sanctions
- Drilling planned for Morocco
- Seismic programmes planned in Morocco for 2014 and Colombia and Tunisia in 2014/15
- Upgrade existing resource base to reserves status
- Continue to pursue new business opportunities in existing countries of operation
- Secure industry and strategic investor relationships to support development of business
Commenting on the Annual Results, Andrew West, Chairman of Gulfsands, said:
“The past year has been one of steady but considerable progress and consolidation. We have both diversified and rationalised our portfolio with entry into two new countries and now have operatorship of all our licences which represents an important milestone for Gulfsands given our proven status and reputation as a quality Operator. We have moved swiftly to commence operations in Morocco and Colombia and have successfully laid the foundations for future growth in both of these exciting regions. Importantly, we have significantly reduced our overheads and will continue to focus on ensuring we operate as efficiently and effectively as possible.
The year ahead will see increased operational activity across our portfolio with seismic activity in Morocco, Colombia and Tunisia and a multi-well programme in Morocco which will be drilled with the benefit of the newly acquired 3D seismic. The Board remains confident in the opportunities before us and in the Company’s ability to bring those opportunities to fruition.”
The Chairman’s and Chief Executive Officer’s Statements are reproduced in full below. The full text of the 2013 Annual Report, incorporating the 2013 Audited Financial Statements, is available in pdf format on the Company’s website at www.gulfsands.com and may be found here.
For further information, please refer to the Company’s website www.gulfsands.com or contact:
+44 (0)20 7024 2130
Mahdi Sajjad, Chief Executive Officer
Kenneth Judge, Commercial Director
+44 (0)20 7466 5000
RBC Capital Markets
+44 (0)20 7653 4000
+44(0)20 7448 0200
The past year, insofar as the Company has been concerned, has been one of steady but considerable progress and consolidation rather than one of dramatic events. Notwithstanding the absence of early exploration success in Morocco, progress with re-building a viable business and a credible vehicle for long term value creation has been tangible and enhanced our reputation as efficient operators.
I would like to highlight several principal areas of achievement.
Firstly, following the restructuring of our Tunisian interests, the Company now has operatorship of all its exploration licences. Control of our own destiny in this regard was the key to our success in Syria and will be equally crucial to repeating that success elsewhere.
Secondly, we have extensively restructured our senior management team and our staffing, resulting in both a more effective organisation to meet the challenges of capturing and developing new business opportunities and a significantly reduced cost base.
Thirdly, we have moved swiftly and effectively to commence operations in Morocco and Colombia and, in the latter case, to farm down our interest. The credibility and goodwill this has bought us with, in particular, the authorities in Morocco is incalculable and will be of great benefit as we move into a more serious exploration phase.
These themes are discussed in greater detail in the Chief Executive’s Review and the Operations Review.
Although we continue to husband our cash we have not yet generated cash flow from these new business initiatives. Your Board is acutely aware of the imperative to do so and of the need to ensure the continuing availability of adequate financial resources until the point at which the Company is once again self-sustaining. This is an important reason for having structured our affairs and interests as we have. Although the institutional appetite for investment in E&P companies at the corporate level remains tepid at best, from ongoing discussions with potential investors, debt providers and industry partners, it is evident that we have a range of options open to us to fund our operations at the asset or field level. You may be assured that your Board is evaluating and pursuing those opportunities with vigour. Further assessment of the Company’s going concern status is made on page 13.
There is little of substance to be said about the situation in Syria beyond what you read daily in the media. A tragic situation shows, all too sadly, very little discernible sign of near-term improvement. The Company remains in strict compliance with all relevant sanctions while at the same time taking all possible steps to preserve the value of our Syrian assets, including retaining a modest level of staffing in country. We continue to believe that the Company will in due course return to active operations in Syria but we do not pretend to have any special insights into timing.
Your Board remains confident in the opportunities before us and in the Company’s ability to bring those opportunities to fruition. The task of rebuilding is neither an easy nor a swift one but we never anticipated that it would be. The important thing is to build the foundations thoroughly, as we are doing, and to maintain our focus.
As ever, I would like to express my personal gratitude and that of the Board to all our shareholders, employees and commercial partners, the staunchness of whose support is the bedrock upon which we build.
Chief Executive’s Review
2013 represented the beginning of a new era in the Company’s history as we became a recognised Operator in two more countries in the MENA region and established our credentials as a recognised Operator in Colombia, made significant changes to the shape of our business and meaningfully reduced our overheads and general costs of operating.
Our objective over the past two years has been to secure new opportunities to grow our Company and create shareholder wealth in countries outside of Syria where the continuing unrest and economic sanctions mean that our oil and gas production capability remains idle and unavailable to generate revenues for the benefit of our stakeholders.
Overall, we are pleased with the progress we made during 2013 to establish a presence in each of these countries and to begin operations that we believe provide our Group with the potential to create projects of significant value and generate revenues with which to build substantial business units that provide necessary diversity in our portfolio. That we have managed to deliver significant progress while continuing to carefully husband our financial resources is of itself a considerable achievement and one for which everyone in our organisation can deservedly be proud.
Following the late January completion of the acquisition of the Cabre Maroc portfolio of onshore permits in northern Morocco, we moved swiftly to commence two seismic programmes, a 3D seismic programme on the Rharb permits (100% interest pre-ONHYM participation) to assist in the planning and execution of a nine well, exploration programme and a 2D seismic programme to identify drillable prospects on a planned three well exploration programme on the Fes permit (66.6% interest pre-ONHYM participation).
These two seismic programmes began in late June 2013, with the 220 km² 3D seismic programme on the Rharb permits, being completed in October while the approximately 650 km 2D seismic programme on the Fes permit was concluded in February of this year.
With the benefit of being able to deploy to Morocco a number of our experienced employees from the technical team who contributed to great success in Syria, we were able to quickly evaluate a range of options to permit the commencement of exploration drilling on the Rharb Centre licence and this resulted in the importation to Morocco of a drill rig operated by Cofor, the drilling subsidiary of the Vinci group, one of France’s biggest companies and a group already well established in Morocco.
Each of the first three exploration wells drilled on the Rharb Centre permit in the first part of what is planned to be a nine well programme intersected gas bearing reservoirs but unfortunately these were not considered to be of sufficient magnitude as to be commercial with the consequence that each of the wells was plugged and abandoned. As we now have access to the higher quality 3D seismic data acquired in our contemporaneous data capture programme, we are hopeful that the subsequent wells to be drilled in this programme utilising this 3D data, will meet with greater success when drilling commences in the next month.
The initial 650 km portion of a 2D seismic programme that will eventually involve the capture of 1,000 km of data over the Fes licence area is now being processed by Spectrum and following interpretation later this year we expect to be in a position to start drilling the first well in a three exploration well programme on the Fes permit area.
Following award of the PUT 14 and LLA 50 blocks in the Ronda 2012 bid round, the Group has established itself in Bogota, Colombia with a team of experienced local professionals supplemented by assistance provided by our local partner Luna Energy
Late in the fourth quarter of the year we finalised joint venture farm out arrangements with Luna Energy on both of our blocks resulting in our Group retaining a 55% working interest partially carried by Luna Energy (45%) in each of these joint ventures.
Work is now underway to complete the environmental, community and security assessments that are a necessary preliminary to the commencement of exploration activities on each of our blocks with the end of this year targeted for the commencement of a programme of approximately 100 km of 2D seismic on the PUT 14 block area with a similarly sized programme anticipated to be undertaken on the LLA 50 block during the first half of 2015.
During 2013 we concluded arrangements with our former partners, which remain subject to final regulatory approval, to withdraw from our non-operated 40% interest in the Kerkouane licence offshore Tunisia and the adjacent Pantellaria permit in Italian waters while at the same time we increased our interest in the Chorbane onshore licence to 100% and assumed operatorship.Planning is currently underway for a 2D seismic programme of approximately 105 km to be carried out over two areas in the north east corner of this block nearby to existing producing oil fields on an adjacent licence. We plan to commence this programme once local licensing and other regulatory approvals are obtained with the intention of using the data obtained in the programme to locate at least one exploration well which is anticipated to be drilled next year.
While the situation in Syria remains unresolved and sanctions prevent our returning to active operatorship of the Khurbet East and Yousefieh oil fields held by the Block 26 joint venture in north east Syria (Gulfsands 50% and Operator with Sinochem 50%), we are fortunate to be able to confirm that our facilities remain intact with the two oil fields having remained closed in for almost the entire year save for some very small, intermittent production to provide energy to the local community. Security for our fields and facilities is provided by a combination of central government military personnel and trained volunteers from the local community and together these groups have ensured that these valuable assets remain safe and secure and in a condition to allow us to return the fields to full operation as soon as sanctions permit us to do so.
With our partner Sinochem’s unwavering support, we have been able to help our staff to remain safe and their families provided with financial support to help them through this difficult time. Our much reduced but fiercely loyal and dedicated staff in Damascus has enabled us to maintain a continuous local presence in Syria and for that I am and our Board and shareholders are enormously grateful.
Reshaping our Business
During the past twelve months our management has continued to evaluate and capture, where sensible to do so, a number of new business opportunities that have enabled us to diversify our portfolio of projects and, we believe, provide the Group with a bright future.
The pursuit of these opportunities has required the reshaping of our organisation and that has brought with it a number of changes to our management team including my appointment to the role of CEO, Alan Cutler’s appointment as Director: Finance & Administration and the addition of a number of highly motivated finance, administration and technical people who have either joined the organisation or been promoted from within. I am especially pleased to report that we have managed to effect all of these changes while at the same time making significant progress with our efforts to further reduce our overheads and general operating costs, a process that will continue during the remainder of this year.
We are acutely conscious of the need to manage carefully the financial resources we have available to help us in building upon these new business initiatives so we will continue to explore the approaches we regularly receive from energy sector participants and investors that might be utilised to finance our business development ambitions at the least possible cost to our existing stakeholders. Further assessment of the Company’s going concern status is made on page 13.
Finally, I would like to express my sincere appreciation for the tremendous effort made by our employees and members of the Board to position the Company to develop the new business units and projects that we now have underway in Morocco, Tunisia and Colombia.
Chief Executive Officer
3 April 2014
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