Advance Energy pleased with progress since strategic review

Upstream-focussed Advance Energy updated the market on its operations on Monday, following the award of working interests in two blocks to its wholly-owned subsidiary Resolute Oil & Gas UK and Holywell Resources, a company in which it has a 25% interest.

The AIM-traded firm said the two companies have each been awarded, subject to documentation, a 50% working interest in block 43/25 and part-blocks 43/29, 43/30, 48/4 and 48/5 in the Oil and Gas Authority's 32nd Offshore Licensing Round.

It said block 43/25 holds part of the Opal gas discovery with a 2C resource of the order of 100 billion standard cubic feet.

The part-blocks 43/29, 43/30, 48/4 and 48/5 contain the well-established undrilled Badger gas prospect, with all five blocks located in the Southern North Sea, with Holywell as the operator.

As a result, Advance Energy will hold a non-operated, indirect 62.5% interest in the blocks.

The company said it would, while waiting for the formal documentation from the Oil and Gas Authority confirming the licence awards, review the technical information available on the blocks and seek to agree the next steps with Holywell.

In the Wessex Basin, Advance’s wholly-owned subsidiary Resolute holds an 8% non-operated working interest in the P1918 Licence.

It said on Monday that, further to the completion of an appraisal drilling programme in 2019 the operator of the licence, Corallian Energy, has completed an evaluation of the P1918 Licence and recently recommended to the joint venture that the licence not be renewed when the second term expires on 31 January 2021 based on the conclusion that the Colter South discovery could not be commercially developed.

Advance Energy said it agreed with the operator's recommendation.

Resolute also holds an 8% non-operated interest in the PEDL 330 and 345 licences, where the operator Corallian was awaiting receipt of third party 3D in order to assist with the evaluation of the prospectivity of them.

The first term of the PEDL 330 and 345 licences expires on 20 July 2021, unless the joint venture commits to drilling a well by that date.

In Indonesia, Advance Energy noted that it had entered into an operating services and option agreement with PT Petroenim Betun-Selo, the operator of the Betun-Selo KSO in Sumatra, in 2015.

The company said it had met its obligations under the agreement.

During 2020, production from Betun-Selo had been above 70 barrels of oil per day from January to April, before slipping to 25 barrels per day in May and 30 barrels per day in June.

The board said the production performance of the four worked-over wells after April meant that it did not realise any incremental production from the service agreement beyond that date.

It said it viewed the Betun-Selo KSO as non-core, and not in line with its forward strategy, and thus it was considering its forward options in relation to the service agreement.

The Betun-Selo KSO and P1918 Licence are capitalised on the firm’s balance sheet at $0.6m and $0.27m respectively, as at the last balance sheet date on 31 October.

Looking at its new ventures, Advance Energy said that further to its relaunch and completion of its strategic review in March, it was continuing to progress a number of new venture opportunities.

The board said that while it was yet to agree commercial terms in respect of such opportunities, it was “encouraged” by its initial due diligence and the multiple, positive funding discussions it had initiated.

That, it said, was in line with its focus on leveraging the “deep” industry experience and network of the management team to identify and unlock hidden value in discovered upstream projects that meet with its required acquisition or farm-in criteria, and build a portfolio of non-operated positions generating at least 20,000 barrels of oil equivalent per day net production by mid-decade, or earlier.

“As Advance Energy continues its transition underpinned by the strategic pillars identified earlier this year, we continue to manage our existing portfolio appropriately,” said chief executive officer Leslie Peterkin.

“The recent licence awards in the Southern North Sea resulted from an application made prior to the inception of Advance Energy, and we will fully review their potential in order to maximise value for our shareholders.

“Importantly, on other fronts, we continue to actively screen a number of investment opportunities that are fully consistent with our strategy and are most encouraged by the progress we are making in that regard.”

At 0859 BST, shares in Advance Energy were flat at 0.18p.