At its meeting of 20 March 2019, chaired by Aussie B. Gautama, the Board of Directors of the Maurel & Prom Group approved the financial statements for the period ended 31 December 2018.

Commenting on these results, Michel Hochard, Maurel & Prom’s Chief Executive Officer, said:
“The resumption of development drilling in Gabon and new projects in Angola and Venezuela are part of our growth strategy and underline Maurel & Prom’s successful transformation into the development platform of the Pertamina group.

Against a backdrop of rising Brent prices in 2018, the Group posted net income of US$62 million and a 30% improvement in EBITDA to US$245 million despite pipeline issues encountered during the year in Gabon.

In 2019, we will maintain our organic growth objectives for Gabon, with development drilling of high potential wells on the Ezanga permit and exploration drilling in the south of the country which, we hope, will increase value creation of our the Gabonese asset base in the medium term. Finally, we will naturally continue to review any growth opportunities that may help further develop our business.”

The continuing increase in oil prices in 2018, with the average sale price of oil at US$68.8/bbl in 2018 compared with US$53.0/bbl over the 2017 fiscal year, helped generate sales of US$440 million in 2018, a year-on-year increase of 10%.

This favourable economic environment thus offset the fall in oil production volumes in Gabon due to evacuation issues on the pipeline connecting the Ezanga facilities to the Cap Lopez export terminal (20,342 bopd for working interest in 2018 versus 24,963 bopd in 2017).

In addition to its oil production in Gabon, the Group posted a major increase in its gas production in Tanzania to 83.2 MMcfpd at 100% in 2018, a 69% increase over the previous year.

Finance

EBITDA was up 30% at US$245 million thanks to the control of operating expenses and the improved performance from Tanzania which contributed markedly. Operating income stood at US$126 million.

Financial expenses in 2018 (-US$27 million) were mainly linked to the net cost of debt which totalled -US$24 million. The Group’s refinancing in US dollars at the end of 2017 led to a significant reduction in its exposure to foreign exchange risk. Foreign exchange losses stood at US$2.5 million in 2018 versus US$32.7 million in 2017.

The Group’s share in income from equity associates was US$31 million compared with US$56 million in 2017, despite an improvement in Seplat’s operating performance (20.46% M&P) in 2018. Seplat’s net income was particularly high in 2017 due to the recognition of deferred tax income.

After taking into account all of the above factors, net income increased sharply to US$62 million.

The Group’s cash flow from operating activities in 2018 was US$192 million. The majority of these funds were reinvested in existing assets (US$93 million) and external growth projects (US$60 million).

At 31 December 2018, the Group’s cash position stood at US$280 million, an increase of US$20 million.

The Group’s consolidated gross debt at 31 December 2018 amounted to US$698 million, i.e. net debt of US$418 million.

Significant events

In October 2018, the Group signed an agreement to acquire AJOCO’s 20% interest in two production and development blocks (Block 3/05 and Block 3/05A) in shallow waters off the shores of Angola. A deposit of $2 million was paid prior to the effective closing of this acquisition, which will take place upon publication of administrative authorisations.

In December 2018, the Group completed the acquisition of the 40% interest held by Shell Exploration and Production Investments B.V. (“Shell”) in Petroregional del Lago (the “PRDL Mixed Company”), which operates the Urdaneta West field located at Lake Maracaibo, Venezuela. The total consideration for the acquisition of Shell’s shares in the Mixed Company was €70 million, funded from Maurel & Prom’s existing cash resources and composed as follows:

• €47 million which were paid at the closing of the acquisition, and
• €23 million payable in December 2019, on the anniversary date of the closing of the acquisition.

In October 2018, the Group bought from Rockover commitments related to the purchase of Gabon assets in 2005. The Group entered Gabon in February 2005 by purchasing assets from the Rockover and Masasa groups. During this acquisition, the Group committed to making deferred payments based on future production.

In 2018, the Group bought back these commitments from Rockover for a consideration price of US$43 million:

• 25% of the Consideration was paid in cash (US$10.75 million);
• 75% of the Consideration (US$32.25 million) was paid through the issuance of new Maurel & Prom shares as compensation.

Outlook for 2019

Gabon
The 2018 development drilling programme helped restore the operating capacity of M&P’s wholly owned drilling subsidiary Caroil. Activity will increase in the 2019 programme, focusing on more complex wells with greater potential.

2019/2020 exploration programme
Maurel & Prom will conduct a sustained exploration programme in 2019/2020:

• In Gabon, drilling of exploration wells on the Kari and Nyanga-Mayombé permits, located in southern Gabon, will take place in the second half of 2019.
• In Namibia, current exploration studies on the PEL-44 offshore permit are promising. A decision to go next exploration phase will be made in the second semester of 2019; next phase will include drilling of an exploration well.
• In France, drilling of the CDN-2 delineation well on the Mios permit began on 20 February 2019.
• In Sicily, the acquisition of seismic data on the Fiume Tellaro permit is scheduled for summer 2019.

New projects
In Angola, the period for possible pre-emptions on the acquisition of the 20% interest held by AJOCO in offshore Blocks 3/05 and 3/05A came to an end in December 2018. The completion of this acquisition is now dependent on the receipt of administrative authorisations from the Angolan Ministry of Petroleum and concession holder Sonangol EP.

On 3 December 2018, Maurel & Prom Venezuela, S.L.U. acquired 40% of the capital of Petroregional del Lago, S.A. held by Shell Exploration and Investments, B.V.. Maurel & Prom has obtained approval from the Ministry of Petroleum for the transfer of the 40% interest in Petroregional del Lago, in accordance with applicable regulations for the transfer of shares in mixed companies between private investors. This transaction was completed on 20 December 2018.