Canadian Valeura Takes Q4 Impairment on Turkish Play
Canada’s Valeura Energy, which operates primarily in Turkey’s Thrace Basin, reported its 2020 financial results March 25, including a US$13.4mn (C$16.9mn) fourth-quarter impairment on its basin-centred deep gas play.
The impairment was the major factor in a Q4 loss from operations of US$15.3mn, compared to a Q4 2019 operations loss of US$735,000 and a Q3 2020 loss from operations of US$2.15mn. In Q3 2020, Valeura transferred all of the property, plant and equipment (PPE) associated with its deep gas play to a wholly-owned subsidiary, Valeura Energy Netherlands BV. Combined with the pending sale of shallow conventional gas assets, Valeura was left at the end of 2020 with negligible proved and probable (P2) reserves. The impairment was registered against the deep gas assets, which had only those reserves associated with production tests on earlier wells.
A joint venture partnership with Norway’s Equinor helped Valeura in the early-stage development of the play, but Equinor left the partnership early last year. New appraisal well locations have been identified to advance the project, and Valeura has been looking for a new partner since Equinor left, but Covid-19 impacts have hampered the search, although Valeura hopes to continue the process this year.
“In 2021, the company will monitor the strengthening in the oil and gas industry and use this as an opportunity to identify a new partner,” Valeura said in its management discussion and analysis report for Q4. “Based on past experience, the new appraisal well locations are likely to be approved by the Turkish government in Q2 2021 which will create an opportunity for the company to quickly progress to drilling the next appraisal well should a new partner be identified.”
The company is also waiting to complete a previously-announced sale of its conventional shallow gas assets in the Thrace Basin. Although a share purchase agreement for US$15.5mn in cash plus royalty payments of US$1mn to US$2.5mn was announced in October 2020, the deal remains subject to regulatory approval nearly six months later.
“The sale of our conventional gas business is progressing and has now obtained all but one remaining government consent to complete the transaction,” Valeura CEO Sean Guest said. “Both Valeura and the buyer remain committed to the deal, with confidence on both sides stemming from a solid ongoing production performance which has delivered average full year volumes that are virtually unchanged from the prior year.”
Total production averaged 650 barrels of oil equivalent (boe)/day in 2020, down slight from the 2019 average of 660 boe/day. Natural gas production averaged 3.82mn ft3/day in 2020, down from 3.91mn ft3/day in 2019.