Stratic Energy changes strategy targeting Middle East and Africa to supplement North Sea oil assets.
Stratic Energy (TSX-V, AIM: SE) announced its new strategy in response to the challenging conditions facing the oil and gas company. Going forward Stratic now aims to generate maximum near term value from its asset base, sell or relinquish certain other assets and pursue a new growth strategy in selected lower cost overseas regions, in particular the Middle East and North Africa.
"I am pleased to report that we have made significant headway in both refocusing our strategy to reflect the current economic and operating environment and putting in place a sound financial platform on which to execute it?, Stratic chief executive Kevin Watts commented, ?Alongside our North Sea asset base we will be seeking to build up a portfolio of exploration and appraisal opportunities in lower cost areas?.
Over the last few years the company has focused on building a production-based business, primarily in the North Sea and Italy by accessing existing discoveries and advancing them through the appraisal and development phases to production. This capital intensive strategy has subsequently proved challenging and unsustainable over the last two years.
In respect of its current asset base, Stratic said it intends to continue investment in, and press for performance improvements on, its primary asset: the producing West Don oilfield. Work will include drilling of a third production well in 2010. The other principal North Sea exploration and appraisal projects, Bowmore and Cairngorm, will be completed but Stratic will not seek new opportunities beyond these existing licence areas.
Stratic has decided to sell two of its key undeveloped assets, Breagh in Scotland and Longanesi in Italy, to reduce associated development costs and to temper existing debt levels, arising from the development of West Don. As a consequence the company has effectively lowered its future production outlook.
Additionally in the company"s current non-core assets, Stratic is currently marketing its interests in Turkey, including the producing Ayazli and Akkaya fields and the West Ayazli and East Akkaya exploration projects. The company is targeting mid-2010 to complete the sale. In the Netherlands, Stratic has signed a Letter of Intent to farm-out its F Quad acreage, subsequently the company will have a carried interest through to the next phase of exploration. In Syria, the Al Tayr 101 well has been plugged and abandoned, Stratic and its partners are reviewing their position regarding block 17, which is shortly due to be extended or relinquished. Stratic said that the partnership remains encouraged by the prospectively identified in Syria and it will be evaluating further opportunities in the country over the coming months.
Stratic said its new growth strategy will utilise the company"s established office, operating capability and business network in Syria, primarily focusing on exploration and appraisal opportunities in the Middle East and North Africa. Moreover, the strategy targets predominately onshore plays in order to reduce costs. The strategy also intends to increase interest in the company through higher frequency drilling activity, Stratic is targeting 4 or 5 wells per year, starting mid-year 2010.
The company also provided an operational update on the company"s producing assets during the year ended 31 December 2009. Production from West Don totalled 1.89 million barrels (mmbbls) for 2009, which beat company expectations of 1.75mmbbls. The West Don field is operated by Petrofac, and Stratic owns a 17.25% interest in the asset. The company"s attributable, annualised production equated to 892 barrels of oil per day during 2009.
West Don"s previously encountered water injection issues were resolved and reservoir pressure is showing signs of recovery. Similarly the gas-lift stability improved and a tie-in to the Thistle/Brent pipeline system is on schedule for February 2010 completion. ?Operationally, we remain optimistic about future reservoir performance at West Don and we look forward to further efficiencies once offshore loading is discontinued?, Watts said.
Production in Turkey totalled 5.1 billion cubic feet (bcf) of gas in 2009, an average of 13.9 million cubic feet of gas per day (mmscf/d), of which 1.6mmscf/d is attributable net to Stratic. As previously stated, Stratic is currently in the process of selling these producing assets.