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    Neptune earnings hold firm in Q1 despite output loss


The company saw production losses across Indonesia, Norway, the UK and North Africa.

by: Joseph Murphy

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Neptune earnings hold firm in Q1 despite output loss

Neptune Energy's core earnings were stable in the first quarter thanks to higher prices, despite a steep fall in production and higher operating costs.

The privately owned company, which operates primarily offshore northwest Europe, reported $323.2mn in Ebitdax for the three-month period, up slightly from $322.9mn a year earlier. Average production fell to 125,700 barrels of oil equivalent/day from 162,100 boe/d, owing partly to the planned shutdown of the Jangkrik FPU in Indonesia in January, as part of the Merakes development programme. The company's output rates were also down in Norway, the UK and North Africa, offset by modest growth in Germany and the Netherlands.

Neptune's operating costs also grew to $10.1/boe from $8.9, but this was more than offset by a growth in average realised prices to $60.8/b for oil, versus $47.1 a year earlier, and $6.1/'000 ft3 for gas, up from $4.1. Post-tax cash flow from operations fell to $314.1mn from $355.2mn a year before, but free cash flow surged to $93.6mn from $54.5mn.

Neptune's leverage increased, with net debt reaching $1.96bn at the end of March, up from $1.46bn a year earlier, while its net debt to Ebitdax ratio rose to 2.11 from 0.99.

CEO Jim House pointed to the February launch of the Gjoa P1 redevelopment in Norway as one of the company's key operational successes during the period, as well as the Blasto oil discovery and a good result at the Dugong appraisal well. The Eni-operated Merakes project in Indonesia also came online and exports were restarted from the Touat gas facility in Algeria.

"We remain on track to deliver material production growth, while generating strong cash flows that will support further long-term portfolio development," House said.