Loss Deepens for Canadian Valeura Energy in Q3
Valeura Energy, the Calgary-based producer active in Turkey’s Thrace Basin, said its Q3 2020 net loss swelled to $2.15mn (C$2.83mn) from $1.9mn in the previous quarter, reflecting reduced realised gas prices and higher operating costs, partially offset by increased shallow gas production.
Natural gas production averaged 3.7mn ft3/day in Q3, up from 3.3mn ft3/day in the previous quarter and 3.1mn ft3/day a year ago, but on July 1, 2020, the Turkish government lowered the wholesale reference price for gas (the Botas price, expressed in Turkish lira) by 10%. Combined with a weaker lira, the price cut reduced Valeura’s average realised price to $5.43/’000 ft3 in the third quarter from $6.24/’000 ft3 in Q2 2020 and from $7.30/’000 ft3 in the third quarter last year.
Production costs in Q3 2020 increased to $936mn from $649mn in Q3 2019, largely due to production testing costs at its Devepinar-1 well, which were relatively high due to the use of rental equipment to conduct the tests.
At the same time, recoveries of overhead costs associated with its deep gas work were reduced when Equinor exited that joint venture earlier this year; total general and administrative expenses for the quarter, as a result, soared to $1.2mn from $375,000 in Q3 2019.
To strengthen its balance sheet, and to advance potential merger and/or acquisition opportunities, Valeura in October sold its conventional shallow gas assets in the Thrace Basin to a privately-held UK company for a cash consideration of $15.5mn plus royalty payments of $1.0mn to $2.5mn. The transaction is expected to close in Q1 2021.
It’s also seeking a new partner to help progress development of its deep gas assets – replacing Equinor – and has retained London-based Stellar Energy Advisors to manage that “farm-down” process, which is expected to continue at least through the end of this year.
On the basis of its recent drilling activity, Valeura has identified preferred locations for the next stage of appraisal drilling on the deep basin lands, and has submitted those to the Turkish government for approval so that “final selection of firm locations and drilling may commence quickly once a new partner is selected.”