Circle Oil PLC Financial and Operational Update (6907E)

TIDMCOP

RNS Number : 6907E

Circle Oil PLC

12 February 2015

12 February 2015

Circle Oil Plc

("Circle" or the "Company")

Financial and Operating Update

Circle Oil Plc (AIM: COP), the Middle East and North Africa focused oil and gas exploration, development and production company, is pleased to provide an operating update for the Company.

The recent fall in oil prices has had a substantial impact on the sector and on market sentiment towards companies involved in exploration and production activity. While Circle is not immune to the impact of falling oil prices, the impact is somewhat moderated by gas production in Morocco, where the Company continues to benefit from stable pricing.

Financing Arrangements

Circle's existing financing arrangements include its Reserve Based Lending facility (of which US$45 million has been drawn down to date) and a US$30 million Convertible Loan ("Convertible Loan") due for redemption in July 2015. As at 31 December 2014, Circle had available cash of US$34 million. The Company continues to fund its operations from operational cashflow as well as leveraging its existing financing arrangements.

In advance of redemption of the Convertible Loan the Company has engaged in detailed discussions with KGL Investment Company ("KGL") and it is pleased to announce that Heads of Terms have now been agreed in regard to amending and extending the Convertible Loan. Further details are set out in a separate announcement due to be released today.

Approval of the proposed amendment and extension would extend maturity of the Convertible Loan until at least July 2017 and enhance Circle's overall operational and financial flexibility. In tandem with this refinancing and mindful of ongoing oil price volatility, Circle, is reviewing its cost base and capital commitments to ensure it is optimally placed to mitigate the impact of ongoing oil price volatility.

Egypt

Production in the Al Amir SE ("AASE") and Geyad fields continues in line with previous guidance at 9,100-9,200 bopd (gross) and approximately 10 MMscf/d of gas (gross).

The annual work programme is close to being finalised and is focussed on maintaining the current production levels throughout 2015. The programme includes the drilling of three wells during the second half of 2015. Two of these are planned as producers, one each in the AASE Field and Geyad field and an additional injector well in AASE aimed at providing further pressure support to the AASE reservoir.

The Company continues to receive regular payments from EGPC, in line with expectations. In addition the recently announced payment of US$15 million has significantly reduced overall receivables. This was a welcome result in line with the published Egyptian Government intention to pay down its oil and gas related debts as a precursor to encouraging further investment in the Egyptian energy industry.

Morocco

Following the successful testing and completion of the KSR-12 well, Circle is pleased to confirm that it has spudded the KAB-1bis well in the Sebou Permit, onshore Morocco, the fourth well in the twelve well campaign.

As previously indicated heavy rains have prevented access to part of Circle's northerly permit of Lalla Mimouna, so as to avoid delay, the rig was moved and set up to drill the KAB-1bis well on the Sebou Permit. Although further modifications to the drilling sequence may be required due to weather and ground conditions, the rig is scheduled to move to drill Circle's first wells on the Lalla Mimouna permit, following completion of the KAB-1bis well.

This well is located downthrown to the NW-SE trending N'zala Fault in the north western area of the Sebou 3D survey. The KAB-1bis well is a redrill of the 2011 KAB-1 well, in which gas shows were observed but problematic swelling clays created borehole instability and the well could not be logged or tested. KAB-1 encountered good gas shows in the target Miocene top Guebbas sands. KAB-1bis has the same target with an adapted mud system to minimise drilling problems in a slightly more updip location. The primary target Guebbas sands are prognosed at a depth of 1,272 metres MD and the TD of the well at 1,360 metres MD. The Company regards this well as lower risk due to the fact that a specially adapted drilling mud to assist with the drilling is being used and the fact that good gas shows were encountered in the first drilling run.

Daily production from the Sebou permit continues at 6.5 - 7 MMscf/d (gross) in line with previous guidance.

With the continued success of the current drilling campaign, which has initially enabled the replacement of depleted reserves, Circle is now adding to its overall total reserve base. As the Morocco drilling campaign continues, the Company anticipates being able to increase its sales of gas incrementally to both existing and new customers over the next two years. Local demand for natural gas remains strong and the Company continues to benefit from good pricing, contract terms and the overall fiscal regime.

Tunisia

Mahdia Permit

The process is underway for Circle to renew its permit for a further three years.

Post drill studies on the Mahdia well have continued including full geological analysis. Data has been prepared and is being made ready for marketing with the intention to commence farm-out discussions with interested parties in the near future.

Ras Marmour Permit

Circle continues to await final confirmation of all approvals to drill the onshore Ras Marmour well. The prospect Sedouikech-1 is targeting a productive sand in the Early Cretaceous Meloussi sand formation which is the proven reservoir in the adjacent Robbana field.

Beni Khalled Permit

Tenders are currently being evaluated in respect of the 3D seismic for Beni Khalled. Management are studying these in the context of both existing agreements and pricing to ascertain whether there is advantage in postponing the award of the tender to obtain better pricing. However any course of action undertaken will be designed to have minimal impact on the overall timetable of the project.

Oman

Oman Block 49 -Exploration Well Shisr-1

Circle is pleased to also announce the start-up for drilling of the well Shisr-1 in Block 49, onshore Southern Oman.

The Shisr-1well is located in the south east area of Block 49 onshore in the Dhofar Province of southern Oman. It lies on the northwestern dipslope of the north east trending Ghudun High and updip of the Dauka-1 well in the central area of the Block 49 3D survey.

The proposed well targets two vertically coincident seismic anomalies. Both targets are potentially oil-bearing Haima Group sands of Ordovician age. The prospective trap is a combination of stratigraphic pinchout onto the Ghudun high and downdip structural closure. The primary target Hasirah sands are prognosed at a depth of 1,890 metres MD and the secondary target Ghudun sands are prognosed at a depth of 2,420 metres MD, with the TD of the well prognosed at 2,550 metres MD. The well has an expected drilling duration of six to eight weeks to reach TD without including any allowance for possible testing. The completion of the well fulfils Circle's obligations in respect of this block. As has been stated previously, management views this as a high risk commitment well with a low possibility of success.

Oman Block 52 and other

The Company continues to seek a farm-in partner for the offshore Oman Block 52 The downturn in world oil prices is providing an added challenge to achieving its objective.

As previously noted the Company has bid for an exploration block in the previous Omani bid round and updates will be provided in due course.

Management Changes

In tandem with these operational developments, the Company's Board has continued to evolve with a focus on broadening experience and expertise.

Key recent changes have included the appointment of Susan Prior as Group Finance Director in January 2015. In addition, the appointments of David MacFarlane and Antony Maris as Non-Executive Directors have provided additional sector experience to the Board.

The search for a new Chief Executive Officer to replace Professor Chris Green is well underway and will be the final step in completing the new Board.

Chairman Steve Jenkins commented,

"Circle continues to perform well in what is a challenging environment for oil and gas companies. This has been partially mitigated by favourable, stable gas pricing for our Moroccan gas production and the improved payment schedule in Egypt. Steady progress is being made on all our licence areas which includes a continuous, exploration drilling campaign in Morocco and development drilling in Egypt. Corporately, we are taking the steps needed to ensure the future growth of the business, widening and strengthening the skill set of the board and ensuring we have sufficient financial resources to allow the company to grow to its full potential".

 
Glossary 
bopd Barrels of oil per day 
MD Measured Depth 
MMscf/d Million standard cubic feet of gas per day 
TD         Total Depth 
 

For further information contact:

Circle Oil Plc ([phone])

Steve Jenkins, Chairman

Investec ([phone])

Chris Sim

George Price

James Rudd

Liberum Capital Limited ([phone])

Clayton Bush

Citigate Dewe Rogerson ([phone])

Martin Jackson

Shabnam Bashir

Murray Consultants ([phone])

Joe Heron

Pat Walsh

In accordance with the guidelines of the AIM Market of the London Stock Exchange, Dr Stuart Harker, VP Geology, with over 40 years experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement. Dr. Harker holds a BSc (Hons) in Geology from the University of London (UK) and an MSc and PhD from the University of Saskatchewan, Canada. He is also a Fellow of the Geological Society of London and a Chartered Geologist. Dr Harker has relied on primary information supplied by the operator in carrying out his review.

Notes to Editors

Circle Oil Plc (AIM: COP) is an international oil & gas exploration, development and production Company holding a portfolio of assets in Morocco, Tunisia, Oman, and Egypt with a combination of low-risk, near-term production, and significant upside exploration potential. The Company listed on AIM in October 2004.

Internationally, the Company has continued to expand its portfolio over the past years and now has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Mahdia Permit offshore Tunisia, and the Zeit Bay area of Egypt. Circle also has the largest licensed acreage of any company in Oman. In addition to its prospective Block 52 offshore, Circle has an ongoing exploration programme in Block 49 onshore.

Circle's strategy is to locate and secure additional licences in prospective hydrocarbon provinces and, through targeted investment programmes, monetise the value in those assets for the benefit of shareholders. This could be achieved through farm-outs to selected partners who would then invest in and continue the development of the asset into production, or Circle may opt to use its own expertise to appraise reserves and bring assets into production, generating sustained cash flow for further investment.

Further information on Circle is available on its website at www.circleoil.net.

This information is provided by RNS

The company news service from the London Stock Exchange

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