Circle Oil issues operational and financial update
Circle is pleased to announce that it, together with its partner Office National des Hydrocarbures et des Mines (“ONHYM”), has signed a Memorandum of Understanding (“MOU”) with a potential new gas customer in Morocco, SBS Porcher (“Porcher”). The MOU forms the basis for Circle to sell the gas discovered during the successful 2014/15 Sebou drilling campaign and all parties expect to sign binding documentation in the coming months.
As part of this arrangement, a new pipeline extension would be constructed linking the existing Circle-owned pipeline in the northern Kenitra region to the Porcher factory in the central Kenitra area.
The key terms of the MOU include:
- Porcher would pay for (and own) the required pipeline extension of approximately 15-18 km (estimated cost of $2.5m) to central Kenitra, with construction estimated to start in May 2016 and first gas anticipated to flow during Q4 2016
- Estimated gross offtake volume would be 10,000 cubic metres per day (approx. 0.35mmcf/d)1 with a price of MAD 4.25/cubic metre ($12/mcf).
- This additional offtake represents an increase of ~6% of production volumes compared to 2015
- The gas price would be fixed with no linkage to oil prices
- The contract duration is 5 years
This new contract when signed, will result in Circle achieving demonstrably higher gas prices. More importantly it also enables Circle to access a potential new customer base in central Kenitra.
The infill drilling campaign on the North West Gemsa field is continuing. The first of two production wells, well (AASE-23) has been drilled to TD, completed and tied in to the production infrastructure. On 6 February a well test commenced and the well flowed at a gross average rate of 4,081bbls/day2 and 2.715mmcf/d through a 48/64″ choke.
The well will be produced at a lower rate in order to best manage the long term field production.
The second production well (AASE-24) in this two well campaign spudded on 8 February 2016.
The farm-out process for the Company’s Mahdia permit is continuing. Despite the difficult market conditions, Circle remains engaged in discussions with a number of interested parties.
Further to the Company’s announcement on 14 December 2015, the Company remains in discussions with International Finance Corporation (‘IFC’) however, given the further fall and continued volatility in oil price both parties are continuing discussions on the redetermination and working together to find a solution to right-size the balance sheet.
In Egypt, dollar receipts from EGPC remain limited and unpredictable causing the Company to be more reliant on extracting funds from its profitable operations in Morocco. As a consequence, Circle’s cash flow and financial position remains under significant pressure.
Circle CEO, Mitch Flegg said
“We are very pleased with the gas pricing agreed with Porcher in Morocco. The realised price of around $12/mcf is more than 40% higher than the average price realised under our existing contracts and we look forward to signing binding documentation. We believe that this will set a benchmark for future gas sales contracts.
In Egypt, the AASE-23 well adds welcome additional production to the field and we look forward to announcing the results of the AASE-24 well when available.”
1 Circle Oil 75%, ONHYM 25%
2 Circle Oil 40%, NPIC 50%, SDX 10%
- Previous Lamudi secures $31.4m investment
- Next Millicom to sell its Democratic Republic of Congo business to Orange