Wentworth, the independent, East Africa-focused oil & gas company, is today providing an update to shareholders.
Gas demand for the Company's producing reserves continued to grow in the final quarter of 2018, resulting from combined demand from the Kinyerezi-1, Kinyerezi-2 and Ubungo II power stations, and the burgeoning demand growth from industrial customers including Dangote Cement and Goodwill Ceramics. This demand from off-takers collectively resulted in an average daily production in Q4 2018 of 87.3 MMscf/d and for the month of December 2018 of 92.5 MMscf/d.
The average production for the full year 2018 was 83.2 MMscf/d; above the Company's 2018 production guidance range of 65 - 75 MMscf/d and greater than the Daily Committed Quotient ("DCQ") of 80.0 MMscf/d, which the Joint Venture Partners are required to supply under the Gas Sales Agreement with TPDC and for the TANESCO-owned, Mtwara Power Station (ca.2.5 MMscf/d).
The Company reports that monthly payments for November and December 2018 (post allocation of the Tanzania Petroleum Development Corporation ("TPDC") receivable, adjusted to reflect the Ziwani-1 exploration well and associated 3D seismic costs as previously announced) for gas sales generated from the Mnazi Bay Concession of $3.0 million net to Wentworth, have been received. Payments were received from both TPDC and Tanzania Electric Supply Company Limited ("TANESCO"). The Company is pleased to report that due arrears from TPDC and TANESCO, have steadily reduced over the course of 2018 and now stand at three months for both off-takers.
As a result of the continued demand and sustainable payment landscape, the Company has continued to meet and pay-down its debt commitments from free cash-flow in 2018 and expects to be substantially debt free within the next twelve months, with the final payment on its single outstanding loan facility falling due in January 2020. As at 31 December 2018, outstanding debt was $8.3 million (excluding $2.5 million corporate overdraft facility), with cash of $11.8 million.
2019 Production Guidance and Outlook
Discussions continue with TPDC with regards reducing the Madimba gas receiving facility export pressure from the current 92.5barg to ca.75barg. This will allow for a sustained overall production rate and/or plateau period from the current well stock, prior to installation of compression facilities. As communicated by the Company on 3 October 2018, this is technically and operationally feasible, has the potential to extend the production plateau by c.18 months on a standalone basis and c.42 months including slickline and chokes upgrade work; and would be immediately accretive to asset value.
As of 7 January 2019, the field was delivering ca.89.6 MMscf/d: 86.8MMscf/d to TPDC with an additional 2.8 MMscf/d to TANESCO. Current demand for Mnazi Bay gas is estimated by the Joint Venture Operator to be in excess of 95 MMscf/d.
For 2019, the Company anticipates further growth in gas demand with the extension to the Kinyerezi-1 power plant which is expected to come online in Q4 2019. This facility will initially require 5 MMscf/d and will build up approximately 30 MMscf/d of gas requirement when fully commissioned over a six-month period. Continued gas demand growth in 2019 is also expected, primarily from the Dangote Cement Plant and other smaller industrial consumers; adding an additional 10-15 MMscf/d to national demand needs by Q2 2019.
Wentworth's operational activities in 2019 will include working with TPDC to determine the optimal operating transnational pipeline inlet pressure for the system and ensuring the maintenance of the current production plateau using existing wells and infrastructure. The Mnazi Bay Joint Venture anticipates conducting slickline and choke upgrade activities and will perform regular pressure build up tests to further reduce uncertainty with respect to in-place and recoverable gas volumes over the forthcoming year. These activities will help to ensure that forecast production meets the Daily Committed Quotient ("DCQ") of 80.0 MMscf/d, which the Mnazi Bay Joint Venture is required to supply under the Gas Sales Agreement with TPDC and for the TANESCO-owned, Mtwara Power Station (ca.2.5 MMscf/d), without risking a shortfall in 2019 and beyond.
For 2019, full year average daily production, is expected by the Company to be in the range of 75 to 85 MMscf/d in order to sustain the current plateau rate from the existing five producing well stock. The Company will continue to update the market as new sources of demand materialise, in addition to operational updates on the asset.
Further to its announcement dated 17 December 2018, the Company is in the process of relinquishing the Tembo Appraisal License with a planned effective exit date of 30 April 2019. The Company continues to assess suitable upstream opportunities in country, through its strong relationships with ENH and INP.
Eskil Jersing, CEO, commented:
"We are pleased that the Mnazi Bay asset has successfully ramped up to deliver sustainable and material production rates, with minimal downtime in 2018. The Mnazi Bay Joint Venture continues to work with all stakeholders on the four key value catalysts, referred to in the 3 October 2018 RNS, to ensure that we derive the maximum possible production value from the Mnazi Bay field. We look forward to updating the market on our progress in 2019, in a rapidly developing demand-led landscape. With the intended relinquishment of the Tembo appraisal licence in Q2 2019, our efforts this year will be primarily focused on maintaining efficient operations at our Mnazi Bay asset, strengthening our financial position and executing on our M&A led growth mandate."
Link to KeyFacts Energy Wentworth Resources Tanzania country profile