second quarter 2005 Arawak's second quarter 2005 financial and operational report
Thursday August 25, 10:13 am ET
TSX VENTURE TRADING SYMBOL: ABG
ANGUILLA, British West Indies, Aug. 25 /CNW/ -
HIGHLIGHTS:
- Arawak increases quarterly production by 20% over the previous quarter
- On track to meet production capacity target of 9,000 barrels of oil
equivalent per day ("boepd") by year end 2005
- Net average production from Russia and Kazakhstan was over
5,700 barrels of oil per day ("bopd")
- Gas sales in Azerbaijan expected to commence on schedule in October
2005
- Four active drilling rigs in three countries at quarter end; first
horizontal well drilled by Arawak's Russian affiliate
FINANCIAL HIGHLIGHTS:
<<
(in thousands of US dollars, except 3 months ended 6 months ended
per share and share amounts) June 30th, 2005 June 30th, 2005
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Crude oil sales $13,756 $27,175
Net income $566 $1,460
Per share - basic $0.003 $0.009
Per share - diluted $0.003 $0.009
Cash flow from operations $3,092 $6,323
Per share - basic $0.018 $0.040
Per share - diluted $0.017 $0.038
Capital expenditures $4,138 $8,172
Net funding of associate $142 $2,978
Shareholders equity $100,871 $100,871
Shares outstanding - basic 172,375 172,375
Shares outstanding - diluted 178,750 178,750
Weighted average shares - basic 172,375 158,880
Weighted average shares - diluted 178,750 165,255
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OPERATIONAL HIGHLIGHTS:
3 months ended 6 months ended
June 30th, 2005 June 30th, 2005
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Production - barrels 521,472 952,974
Average daily production - barrels 5,730 5,265
Revenue and expenses per barrel sold
(US dollars)
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Crude oil sales $34.31 $32.63
Interest and other income $0.81 $0.65
Royalties and taxes ($10.19) ($8.57)
Production costs ($2.35) ($2.92)
Transportation and other selling costs ($3.26) ($3.54)
Net operating income $19.32 $18.25
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OPERATIONAL REVIEW:
Arawak Energy Corporation ("Arawak" or the "Company") has continued to make significant progress in Kazakhstan, Russia and Azerbaijan during the three months ended June 30th, 2005. Overall, average daily oil production increased by approximately 20% to 5,730 bopd in the second quarter of 2005 compared to the preceding quarter's average of 4,795 bopd, and the foundations have been laid for further production capacity increases in all three countries. The Company has continued to invest in seismic surveys, new wells and production facilities that are expected to result in production capacity increasing to 9,000 boepd by the end of 2005.
In Kazakhstan, average production in the second quarter of 2005 increased by 34% to 2,685 bopd from 2,000 bopd in the first quarter. This increase in the production rate was due both to the recommencement of development drilling operations in the Akzhar field and the end of adverse weather conditions, which disrupted production in the first quarter and in April. June production in Kazakhstan was approximately 3,350 bopd on average, reflecting the success of development wells in the Akzhar field. Development drilling is continuing in the Akzhar field. Average net operating income per barrel from operations in Kazakhstan increased from US $24.33 in the first quarter to US $26.37 in the second quarter reflecting the continued rise in crude oil prices. Because of inventory effects, this did not filter through to earnings netbacks though they are expected to improve further in the third quarter.
In Russia, where Arawak operates via its 50% owned affiliate ZAO PechoraNefteGas ("PNG"), production in the second quarter averaged 3,045 bopd net to Arawak compared to 2,795 bopd in the first quarter. Since the beginning of the year, four new development wells were successfully put on production. In August, PNG finished drilling its first horizontal well which has proved valuable in establishing the viability of such wells in the Sotcheymu - Talyu environment. This well will shortly be completed and is likely to be followed by further horizontal wells which should lead to higher production. Interpretation of a 3D seismic survey over the core fields has now also been completed and a new field model created which enables PNG to refine its development program and identify additional drilling locations. It is hoped that this will in turn lead to an increase in reserves. In the second quarter, net operating income per barrel from operations in Russia improved from US $10.51 to US $15.27 as a result of the rise in both international and Russian domestic oil prices.
In Azerbaijan, the Kyanizadag 101 well in the Coastal block of the South West Gobustan fields was drilled to a depth of 3,611 meters, compared to the target depth of 3,800 meters, when Arawak's non-operated associate, Gobustan Operating Company Limited encountered mechanical difficulties. The well has been successfully cased to 3,000 meters and encouraging hydrocarbon shows were encountered in the development sections of the well (above 3,000 meters) and in the exploration section of the well (below 3,000 meters). The rig has subsequently been moved to the Duvanny field in the Coastal block to drill a further gas well, Duvanny 108, which is now under way. Following the completion of this well, the rig will be moved back to Kyanizadag to sidetrack Kyanizadag 101 and to drill to target depth. Once this operation is complete, the well will be logged and tested, with results expected towards the end of 2005.
Arawak is pleased to report that the installation and commissioning of gas facilities in Azerbaijan is progressing to schedule and first gas is expected, as planned, in October 2005.
Pilot oil production continued in the second quarter from the South West Gobustan fields and, together with crude oil inventory at the beginning of the period, two sales totaling approximately 7,400 barrels were made via SOCAR's pipeline for export to Novorossiysk.