United Oil & Gas provides an operational and corporate update to shareholders including the commencement of gas production at the Al Jahraa Field in the Company's 22%-owned Abu Sennan concession, onshore Egypt, and measures taken in response to the COVID-19 pandemic and ongoing oil-price volatility. 

Egypt Update

• Completion of low capital expenditure gas pipeline project at Al Jahraa 
• Production of gas and elimination of flaring increases gross production in Egypt to c. 8,400 boepd (c. 1,850 boepd net) - more than doubling the production compared to 12 months ago 
• All Egyptian production, including new gas supply, has positive operational cashflow, even at current low market prices 
• Low operating costs at Abu Sennan of around $6.5/bbl provide solid operating margins even at low price levels 
• The Company's pre-payment facility with BP provides downside price protection by effectively hedging 6,600 bbls of oil per month at $60/bbl for the next 30 months 
• c. 20% of United's net production is gas which is sold under a fixed contract that is relatively insensitive to oil-price changes  
• Drilling operations are continuing at the El Salmiyah 5 infill well within the El Salmiyah field

Response to Market Conditions

• Proactive measures taken by United and its partners to reduce near-term Capex commitments during current oil-price uncertainty and the impact of Covid-19  
• Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021 
• Deferral of Egyptian Capex reduces 2020 infill campaign from 4 to 2 wells, significantly reducing gross 2020 Capex estimates. Further optimisation of the Capex and Opex budgets is being considered. 
• Completion of post-Egyptian-acquisition licence review sees divestment plans for selected non-core assets in the Wessex Basin and a decision not to exercise the farm-in option in Benin 
• Substantial cut in administrative expenditure resulting in further cost savings 
• Measures taken to minimise the impact of oil-price uncertainty and Covid-19 will help safeguard the company during the current industry challenges, with the aim of putting it in a position to take advantage of future opportunities

Brian Larkin CEO, United Oil and Gas
"I am delighted that production in Egypt continues to rise, helping to compensate for the lower oil prices. Since the effective date of the acquisition, gross production at Abu Sennan has now more than doubled to c. 8,400boepd which, thanks to low operating costs, remains profitable at today's oil prices. The completion of the gas pipeline at Al Jahraa was achieved at low cost and based on current projections, will pay for itself within months. The associated reduction in flaring has also improved the environmental performance of the licence. We are currently drilling the El-Salmiya 5 infill well and we look forward to updating our shareholders on progress shortly.

"Post completion of the Egyptian acquisition, we indicated our intention to review our portfolio and to optimise our investment strategy. The economic and political uncertainty created by Covid-19 and the current low oil prices have created considerable challenges for our industry.  United's leadership team have reviewed our business in-depth and have mapped out what we believe is a sensible course through the months ahead. We are focussing on investment which we believe will deliver the most immediate return for our business. Where expenditure can be deferred with limited impact, we are doing so. Where expenditure or indeed where licences offer a more uncertain or marginal return, we are being prudent and stepping away. 

"United's goal is to focus expenditure where it can deliver immediate benefit, maintain cashflow and emerge from this period of uncertainty in a position of strength, relative to the industry. We believe that this strategy can achieve that. We will continue to keep shareholders briefed on developments as they happen." 

Link to United Oil and Gas Egypt country profile

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