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Tuesday, March 3, 2015
Sea Dragon Energy Inc. completed the farm out of the South Disouq block in Egypt’s Nile Delta to IPR Energy Resources. Under the Deed of Assignment, issued in January, Sea Dragon received the $1 .9 million proceeds of the signature bonus recovery. In addition, IPR replaced $6 million in work program guarantees originally posted by Sea Dragon. As a result, the company debt will decrease by $6 million. Under the agreement Sea Dragon will be carried on the cost of the first phase commitment well when it is drilled after seismic acquisition and interpretation is completed.
Post farm-out completion, Sea Dragon Energy remains the operator and retains a 55% working interest in the concession.
Sea Dragon also commented on the state of its business given the current oil market conditions. As previously communicated it has been actively engaged in reducing its overall cost base and has achieved a number of key objectives, including improving operating cash flow generation and reducing its general and administrative cost by 30% year on year. It also relinquished its high fixed cost and loss making Shukheir Marine asset. An agreement was signed with EGPC on February 26 and is effective from January 31. The company is also deferring selected exploration expenditures and using the receivables from the South Disouq farm out to reduce debt.
The company says that Egypt continues to provide a positive business environment for Sea Dragon, operationally and financially, with no outstanding receivables. Looking ahead, the company expects production for 2015 to average 10,000 boepd from North West Gemsa, of which 1,000 boepd will be net to Sea Dragon.
Commenting, Paul Welch, CEO of Sea Dragon, said:“The past few months has seen a significant review of Sea Dragon’s activities, with continued focus on improving the efficiency of the business in the current oil price environment. Given the challenges the E&P sector is facing, relinquishing Shukheir Marine, which was a high operating cost block, was a positive strategic decision in reducing our cost base and improving further our operating cash flow generation. We are now well placed to drive the 2015 work program, particularly following the completion of the South Disouq farm out. Through the reduction of both debt and operating costs, against the backdrop of improved business environment in Egypt we are well placed to unlock the potential across the portfolio. I look forward to providing an update following publication of the 2014 Full Year Results by the end of March 2015.”
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