Ophir reports on 'challenging' year

Ophir Energy reported on an exceptionally challenging year on Thursday, with the FTSE 250 company posting revenues of $161m (£113.47m), or $211m on a full year pro-forma basis, up from nil revenue in 2014.

Its pre-tax operating loss was $376m, after pre-tax impairments of $169m due to the lower commodity price environment, and exploration write-offs of $149m. Ophir made a profit of $288m in the prior year.

The company had net cash at year-end of $355m, down from $1.17bn in 2014. Its pre-tax cash generated from operations was $122m, or $150m on a full-year pro-forma basis. 2014's cash outflow was $16.4m.

It had commitment capital expenditure of £87m at the balance sheet date, and production break-even at an oil price of $15 per barrel.

"2015 saw Ophir respond swiftly to an exceptionally challenging operating environment. We radically reduced our cost base, and delivered synergies ahead of forecast on the Salamander acquisition," said Ophir CEO Nick Cooper.

"In the period we delivered material progress on the Fortuna FLNG Project: signing gas fiscal terms with the host government, securing Golar as midstream provider, commencing FEED, shortlisting binding offtake offers and signing a heads of agreement with Schlumberger to participate in the project," he added.

Cooper said through those steps, the forward funding requirements of the project would be met.

"In parallel through 2015, we also high-graded our exploration portfolio at minimal cost and with negligible commitments; exiting five plays and entering seven new plays, two of which are post period, that are better suited to the new price environment."

Cooper believed the company's strong balance sheet and net cash position, combined with its low forward committed capex, provided Ophir with greater flexibility than it had enjoyed previously.

He said the firm could now confidently look forward four years, to first gas and revenues from the Fortuna FLNG Project, knowing it was fully funded. The company also further reduced its 2016 capex guidance to $150-200m as it continued to prioritise capital requirements.

"The upstream model of the past decade is clearly broken, yet Ophir's relatively strong financial position and quality asset base provide considerable optionality at this low point in the cycle," he explained.

"Exploration costs are approaching 30 year lows and quality opportunities for future growth are plentiful. Provided we continue to focus capital at assets that can deliver strong returns in the 'new normal' of lower oil and gas prices then we are confident of driving superior NAV growth."

Ophir said it would more transparently report its assessment of movements in NAV going forward, and would explicitly use the metric to align its organisational behaviour with shareholder interests.

"We are confident that our track record of financial prudence, low finding costs, repeated ability to monetise discoveries and innovation across our asset base will increasingly differentiate our performance for investors," Cooper concluded.