Erin Energy Corporation (NYSE MKT:ERN) (JSE:ERN) announced today financial and operational results for the quarter ended September 30, 2016. The Company also provided an update on its upstream operations in Africa.
Third Quarter 2016 Highlights:
- Realized revenues of $28.6 million;
- Achieved net average daily production of 6,100 barrels of oil per day (bbls/d);
- Lifted and sold 583,000 net barrels of oil.
Segun Omidele, Chief Executive Officer commented:
‘In the third quarter, our strategy remained focused on how restructuring our balance sheet and growing our production. We had success in lowering some of our outstanding AP balances and our effort to raise additional capital for our next drilling campaign is progressing well with the expectation that drilling activities will commence soon.’
In Nigeria, the Company continues to make progress in preparation for the next drilling campaign, which is planned to commence later this quarter or early 2017 depending on rig availability. Erin Energy has secured all required permits to drill and the operational planning process is currently being finalized.
A key part of the Company’s planned drilling campaign is the drilling of an additional development well, the Oyo-9 well, located within the central area of the Oyo field in Oil Mining Lease 120, offshore Nigeria. Oyo-9 is planned to be tied-back to the Oyo field production facility via planned new subsea infrastructure. This phase of development, expected to be completed in the second quarter of 2017, will increase field production by approximately 6,000 to 7,000 barrels of oil per day (bopd).
In July 2016, the Oyo-7 well was shut-in as a result of an emergency shut-in of the Oyo field production facility (FPSO). The well was unable to come back online naturally due to high water production and resulted in a temporary loss of approximately 1,400 bopd. The Company attempted an intermittent nitrogen lift gas injection from the facility to attempt to bring the well back on production, which was not fully implemented due to some operational constraints. Erin Energy is now looking at another nitrogen lift attempt and other technical options that can provide continuous lift assistance for well startup.In Ghana, the Company is conducting geotechnical subsurface studies of existing 2-D seismic data to further high-grade its prospect inventory on the Expanded Shallow Water Tano block. The key activity to high-grading the exploration prospects and firming up drilling locations will be a new 3-D marine seismic acquisition survey. The Company expects to issue a formal invitation to tender to marine seismic vendors shortly. Actual field operations await the resolution of the Ghana-Cote d’Ivoire maritime border dispute arbitration in mid-2017.
In The Gambia, Erin Energy completed an intensive study of existing 2-D data of its offshore A2 and A5 blocks and has continued to mature existing leads whilst awaiting the depth processing of 3-D seismic data recently acquired. The Company expects to have the processed data by the end of 2016.
In Kenya, the Company completed the interpretation of 2-D seismic data acquired on its onshore blocks L1B and L16, and identified a number of potential leads to pursue. Erin Energy continues to mature these leads and is currently designing additional targeted 2-D seismic to be acquired in 2017 on the two onshore blocks to provide a better understanding of the identified leads.
While examining ways to rationalize its exploration assets in Kenya, and focus on its most prospective of the Kenyan assets, Erin Energy has intensified efforts to identify and farm in partners in order to share exploration costs and risks in the ultra-deep water offshore blocks, L-27 and L-28. The Initial Exploration Period for the L-27 and L-28 blocks is set to expire in February 2017.
Erin Energy reported revenue for the third quarter was $28.6 million, compared with $23.2 million for the previous quarter and $28.7 million for the third quarter 2015. In the third quarter, the Company lifted and sold 583,000 net barrels of oil at an average price of $49.07 per barrel, compared to 571,000 net barrels at an average price of $50.20 during the same period 2015.
For the third quarter of 2016, the Company reported a net loss of $23.5 million, or $(0.11) per basic and diluted share, compared to a net loss of $58.7 million, or $(0.28) per basic and diluted share for the same period in 2015.
Average net daily production for the quarter was approximately 6,100 barrels of oil per day, compared to 10,200 net barrels of oil per day for the same period 2015. The period-over-period decline in production is due to a combination of the revised well management policy to prevent excessive gas production, temporary loss of Oyo-7 production and natural production decline.
Erin Energy has continued its efforts to strengthen its balance sheet. These efforts have thus far resulted in a successful restructuring of its term loan facility, modest reductions in its accounts payable balances and extensions to the maturity dates of some of its related-party debt. The Company will continue these efforts to make further progress on its outstanding accounts payable balance using various methods including payment plans and equity payments.
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