Quarterly Report - ASX · 2 Nido Petroleum Limited Quarterly Report Nido ended the quarter with...

Quarterly Report

Nido Petroleum Limited ABN 65 086 373 www.nido.com.au Aquila Centre, Level 3, 1 Preston St, Como WA 6152 Australia P: +61 8 9474 0000 F:+61 8 9474 0099

Unit 38B, 38th Floor, Philamlife Tower, 8767, Paseo de Roxas St, Makati City 1226, Philippines P: +63 2 856 5910 F: +63 2 856 5494

2014 Activities Report

HIGHLIGHTS

On 1 October 2014, Mr Vichien Usanachote and Mr Chaiwat Kovavisarach were appointed to the Board of Nido with Dr Michael Ollis and Mr Eduardo Maňalac retiring as Non-Executive Directors

The off-market takeover offer by BCP Energy International Pte Ltd (‘BCPE’) closed on 3 October 2014 with BCPE having reached an 81.41% relevant interest in Nido

On 12 December 2014 Nido signed a Sale and Purchase Agreement with Otto Energy Limited to acquire Otto’s 33% working interest in the Galoc Oil field for a purchase price of $US 108 million

Nido’s net production from the Galoc oil field and Nido/Matinloc oil fields during the quarter was 141,100 bbls and 9,782 bbls respectively

The Lundin operated Gobi-1 well in the Gurita PSC was plugged and abandoned as a dry hole at a Total Depth (TD) of 2,404 metres

Nido ended the quarter with A$10.9 million cash on hand

For the period ending 31 December 2014

Q4

I provide to you the following summary of the Company’s ac-tivities for Q4 2014.

At a corporate level, the negotiation and finalisation of the Sale and Purchase Agreement (‘SPA’) with Otto Energy Lim-ited for its 33% stake in the Galoc oil field was the highlight of the quarter.

Under the SPA Nido will acquire all of Otto’s shares in the Galoc Production Company WLL (‘GPC’) for a purchase price of $US 108 million based on the value of GPC as at 1 July 2014.

Nido will fund the acquisition through a combination of cash reserves and debt and Nido’s ultimate shareholder, The Bangchak Petroleum Public Company Limited (’Bangchak’) has provided Nido with a revolving loan facility for up to $US 120 million. Nido expects the transaction to close in the next two weeks upon satisfaction of the remaining conditions.

Bangchak has stated that it intends to use Nido as a vehicle to aggregate production and exploration opportunities in the region and so it is expected that this will be the first of many opportunities that Nido will capture as it builds its production base.

In this context the Company continued to actively evaluate new exploration, development and production opportunities in the region.

At an operational level the Gobi-1 well in the Gurita PSC was plugged and abandoned as a dry hole during the quarter. Whilst disappointed with the result the Joint Venture remains positive about the potential of the Gurita PSC and is continu-ing to examine other prospects in the contract area.

In relation to the West Linapacan A re-development the Joint Venture continued to consider the phased development solu-tion for the project during the quarter.

Despite the current oil price, and the impact it will have on production revenues and asset carrying values in 2015, I re-main optimistic about opportunities that are likely to material-ise in the near future and look forward to 2015 with great an-ticipation.

PHILIP BYRNE MANAGING DIRECTOR AND CEO

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Nido Petroleum Limited Quarterly Report

Nido ended the quarter with cash on hand of A$10.9 million* and debt outstanding of A$12.9 million.

Inflows

Galoc production was steady and cash inflows from crude oil sales totalled A$21.1 million with receipts from 2 cargoes as well as cash inflows from the Nido/Matinloc oil fields.

Outflows

Cash outflows from production operations at the Galoc oil field and the Nido/Matinloc oil fields amounted to A$10.6 million, higher than Q3 2014 due to timing of payments of Government share relating to cargoes lifted.

Cash outflows for exploration activities of A$2.9 million relate mainly to activities in the Gurita PSC in Indonesia, new venture exploration expenses, SC 63 (Baragatan-1A drilling activities) and SC 14C2 (West Linapacan).

Cash outflow of A$13.2 million (US$ 10.8 million) relate to the deposit paid to Otto Energy Limited to acquire Otto’s 33% work-ing interest in the Galoc Oil field.

Payment of principal, interest and other financing costs of A$5.9 million relate to the senior secured debt facility for the Galoc Phase II development project.

General administration expenditure totalled A$3.1 million for the quarter.

Foreign exchange & other movements for the quarter totalled A$2.0 million.

* Cash on hand includes AUD$8.0 million in funds held in accounts with Credit Suisse. Usage of these funds is governed by the terms and conditions of the senior secured facility

FINANCIAL AND CORPORATE

PRELIMINARY (UNAUDITED) 2014 FINANCIAL INFORMATION

Nido is required to provide draft 2014 financial information to BCPE for their annual reporting process, and this information is summarised below. Nido’s full 2014 Annual Financial Report is anticipated to be finalised and lodged with the ASX in early March 2015, and the re-sults noted below are preliminary and subject to change.

The preliminary full year 2014 net loss of $6.6 million includes of note net production revenues in line with expectations despite the fall in oil price, the impairments of the non-commercial wells drilled in 2014 in Indonesia and also the Philippines, an impairment of the carrying value of the Galoc oil field asset (current 22.8% working interest) to reflect the fall in oil price levels in late 2014, offset by foreign ex-change gains.

The summarised preliminary consolidated 2014 financial result (unaudited) is set out in the following table:

Statement of Comprehensive Income (A$ ‘000) Revenue from sale of crude oil 81,310

Gross profit 37,350 Net (loss) for the full-year after tax (6,627) Balance Sheet (A$ ‘000) Current Assets 38,304 Non-current Assets 97,011 Current Liabilities 17,676 Non-current Liabilities 21,639 Net Assets 96,000 Statement of Cash Flows (A$ ‘000) Net cash from operating activities 40,615 Net cash (used in) investing activities (37,895) Net cash (used in) financing activities (19,507)

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Production post Galoc Phase II remains in line with pre-start up expectations. Production tests continued during the quarter to opti-mise production settings in the field.

Gross Production from the Galoc oil field during the quarter was 616,708 bbls (141,100 bbls net to Nido) with a gross average pro-duction rate of 6,703 bopd (1,534 bopd net to Nido).

Cargo 42 was lifted on 5 November 2014 with 340,629 bbls (77,934 bbls net to Nido) sold at US$ 88.53 per bbl.

Cargo 43 was delayed due to weather in the field and was lifted on 6 January 2015 with 341,158 bbls delivered. Both liftings were sold to Thai refineries.

The Galoc Joint Venture is also continuing to evaluate further ex-

ploration, appraisal and incremental development opportunities at the Galoc oil field and in the SC 14C1 Contract Area.

Nido is also in the process of finalising a transition plan in order to ready itself for transitioning to operator of the Galoc oil field upon the acquisition by Nido of Otto’s shares in the Galoc Production Company WLL.

At year-end, Nido has assessed the carrying value of the Galoc oil field asset for impairment due to the significant decline in oil prices in late 2014. An impairment has been made and is reflected in the preliminary (unaudited) full year 2014 net loss after tax (refer page 2).

SERVICE CONTRACT 14C1 - GALOC OIL FIELD

Location:

Area: 16,000 hectares Operator: GPC

Nido’s Interest: 22.88% Activity: Galoc Production

Palawan Basin, Philippines

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PRODUCTION AND DEVELOPMENT—Philippines

Galoc Phase II produc on

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SERVICE CONTRACT 14C2 - WEST LINAPACAN A

Location:

Area: 18,000 hectares Operator: RMA (West Linapacan) Pte Limited

Nido’s Interest: 22.28% Activity: Re-development of the West Linapacan ‘A’ field


SERVICE CONTRACT 14A & 14B - NIDO & MATINLOC OIL FIELDS

Location:

Area: 68,000 hectares Operator: Philodrill

Nido’s Interest: Block A 22.49%

Block B 28.28%

Activity: Production


PRODUCTION AND DEVELOPMENT—Philippines

The Nido and Matinloc oil fields continued to produce oil on a cyclical basis during the quarter. Oil production from these fields totalled 38,619 bbls (9,782 bbls net to Nido). A total of 53,150 bbls (13,447 bbls net to Nido) was lifted and sold during the quarter, with proceeds from sales of approximately A$0.5 million received.

During the quarter the Joint Venture continued to assess a phased development solution for the re-development project including an ex-pandable Early Production System (EPS) through a drilling rig and offtake tanker.

Subsequent to quarter end the Company has been advised that Pitkin Petroleum Plc (‘Pitkin’) has been issued with a default and termi-nation notice under its farm-in agreement with the Filipino parties to the Service Contract.

Pitkin is considering its position with respect to this matter and any default by Pitkin and subsequent termination of its interest has the potential to similarly impact RMA (West Linapacan) Pte Ltd’s interest in the Service Contract given that RMA’s interest is dependent on Pitkin’s interest.

In this context, Nido is currently working with the Filipino parties to continue feasibility studies in relation to the West Linapacan-A re-development.

Further, at year-end Nido has assessed the carrying value of the West Linapacan development for impairment given the fall in oil prices. No impairment was required.

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During the 3rd quarter of 2014 the Company was granted a 3 year moratorium with respect to Service Contract 54. The moratorium period extends from 5 August 2014 to 5 August 2017 and provides both the Block A and Block B Joint Ventures sufficient time to study the presently sub-commercial areas and other areas of interest within these Blocks.

SERVICE CONTRACT 54A

Location:

Area: 88,000 hectares Operator: Nido

Nido’s Interest: 42.4% Opportunity: Multiple small field development opportu-nities


No further technical work was undertaken during the 4th quarter. As noted above the Company was granted a 3 year moratorium with re-spect to Service Contract 54 and this provides the Block B Joint Venture time to study presently sub-commercial areas and other areas of interest.

SERVICE CONTRACT 54B

Location:

Area: 316,000 hectares Operator: Nido

Nido’s Interest: 60% Opportunity: Pawikan lead (exploration)


The block contains the East Cadlao prospect, a possible extension of the Cadlao oil field, located in the adjacent SC 6 block (which Nido is not a participant in). The SC 6B Joint Venture has agreed to undertake a work program which will include a re-interpretation of the existing seismic data within the block. The review is ongoing and the results of the review are expected to provide an assessment of the resource potential which could lead to further activity depending on the relevant findings.

SERVICE CONTRACT 6B - BONITA

Location:

Area: 55,000 hectares Operator: Philodrill

Nido’s Interest: 7.81% Opportunity: Exploration


* Technical Operator during Farm-in. Nido interest subject to completion of drilling farm-in commitment well.

Nido has sought approval from the DOE to place the Service Contract into a period of suspension pending the outcome of arbitration pro-ceedings between the Philippines and the Peoples Republic of China over ownership of the West Philippine Sea in which SC 58 is locat-ed. At the end of the year, DOE’s approval of this request was pending.

During the quarter the Company also sought a further extension of the election to drill decision required under the Company’s farm-out agreement with PNOC EC. The Company is awaiting a decision from PNOC-EC with respect to this request.

SERVICE CONTRACT 58

Location:

Area: 1,349,000 hectares Operator: Nido*

Nido’s Interest: 50% (Subject to completing farm-in

obligation)

Opportunity: Multiple prospects (exploration)


EXPLORATION AND APPRAISAL—Philippines

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During the quarter the Department of Energy agreed to extend the current Sub-Phase 2 for a period of 12 months from 24 November 2014 to 24 November 2015 so as to enable the SC 63 Joint Venture to complete post well evaluation of the Baragatan-1A exploration well.

SERVICE CONTRACT 63 - BARAGATAN PROSPECT

Location:

Area: 1,067,000 hectares Operator: PNOC-EC*

Nido’s Interest: 20% Activity: Evaluating Baragatan exploration well results


* PNOC-EC agreed to transfer Technical Operatorship to Nido for the duration of the drilling of the commitment well.

EXPLORATION AND APPRAISAL— Philippines

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EXPLORATION AND APPRAISAL — Philippines

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BARONANG PRODUCTION SHARING CONTRACT

Location:

Area: 282,500 hectares Operator: Lundin Petroleum

Nido’s Interest: 10.00% (15%*) Action: Withdrawal from PSC

West Natuna Basin, Indonesia

Location:


Nido’s Interest: 10.00% Action: Withdrawal from PSC

West Natuna Basin, Indonesia

EXPLORATION AND APPRAISAL — Indonesia

Lundin Cakalang BV (Lundin) is in the process of withdrawing from the Cakalang PSC at the expiration of the current work period which ex-pires on 13 November 2014.

Following discussions with the relevant Indonesian authorities Nido has been unable to secure suitable terms and conditions to justify retain-ing the PSC on a 100% basis and in this context Nido has also decided to withdraw from the Production Sharing Contract.

GURITA PRODUCTION SHARING CONTRACT

Location:


Nido’s Interest: 10.00% Action: Evaluating Gobi-1 well results

Penyu Sub-Basin, Indonesia

During the quarter the Joint Venture drilled the Gobi-1 exploration well. The well was drilled to a Total Depth of 2,404 metres (TD) and Measured Depth of 2,373 metres TVD subsea. The well was drilled through the Miocene to the Oligocene primary and secondary reservoir objectives and reached basement as planned. Gobi-1 encountered well developed sandstone reservoirs, but no hydrocarbon shows were encountered and the well was plugged and abandoned as a dry hole. The Joint Venture is in the process of integrating the well results into its understanding of the PSC and continues to remain positive about the potential of the contract area.

Lundin Baronang BV (Lundin) is in the process of withdrawing from the Baronang PSC at the expiration of the current work period which ex-pired on 13 November 2014.

Following discussions with the relevant Indonesian authorities Nido has been unable to secure suitable terms and conditions to justify retain-ing the PSC on a 100% basis and in this context Nido has also decided to withdraw from the Production Sharing Contract

*Nido exercised its right to acquire an additional 5% working interest but this transfer of interest is yet to receive regulatory approval.

CAKALANG PRODUCTION SHARING CONTRACT

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EXPLORATION AND APPRAISAL — Indonesia

* 5% remains subject to Government regulatory approvals

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Appendix 5B Mining exploration entity quarterly report

+ See chapter 19 for defined terms. 14/01/2013 Appendix 5B Page 1

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

NIDO PETROLEUM LIMITED

ABN Quarter ended (“current quarter”)

65 086 630 373 31 December 2014

Consolidated statement of cash flows

Cash flows related to operating activities

Current quarter $A’000

Year to date (12 months ending 31 December 2014)

$A’000 1.1 Receipts from product sales and related debtors

21,129 83,914

1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration

(2,938) -

(10,623) (3,091)

(24,598) (1,954)

(31,273) (9,555)

1.3 Dividends received - -1.4 Interest and other items of a similar nature

received 6 16

1.5 Interest and other costs of finance paid (386) (1,983)1.6 Income taxes paid - (503)1.7(a)

Other - insurance proceeds

- -

Net Operating Cash Flows 4,097 14,064

Cash flows related to investing activities

1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets

- (13,242)

(45)

- (13,242)

(73)1.9 Net Proceeds from sale of: (a) prospects

(b) equity investments (c) other fixed assets

- - -

1,970 - 1

1.10 Loans to other entities - -1.11 Loans repaid by other entities - -1.12 Other (provide details if material) - -

Net investing cash flows (13,287) (11,344)

1.13 Total operating and investing cash flows (carried forward)

(9,190) 2,720

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+ See chapter 19 for defined terms. Appendix 5B Page 2 14/01/2013

1.13 Total operating and investing cash flows (brought forward)

(9,190) 2,720

Cash flows related to financing activities

1.14 Proceeds from issues of shares, options, etc (net of costs).

- -

1.15 Proceeds from sale of forfeited shares - - 1.16 Proceeds from borrowings - - 1.17(a) Repayment of borrowings (5,520) (19,135) 1.17(b) Payment for financing costs (2) (371) 1.18 Dividends paid - - 1.19 Other (provide details if material) - -

Net financing cash flows (5,522) (19,506)

Net increase (decrease) in cash held

(14,712)

(16,786)

1.20 Cash at beginning of quarter/year to date 23,583 25,354 1.21 Exchange rate adjustments to item 1.20 2,055 2,358

1.22 Cash at end of quarter 10,926 10,926

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Current quarter $A'000

1.23

Aggregate amount of payments to the parties included in item 1.2

248

1.24

Aggregate amount of loans to the parties included in item 1.10

Nil

1.25

Explanation necessary for an understanding of the transactions

Represents fees paid to Directors, including the Managing Director salary.

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

Nil

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the

reporting entity has an interest Nil

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Financing facilities available Add notes as necessary for an understanding of the position.

Amount available* $A’000

Amount used $A’000

3.1 Loan facilities

12,924

12,924

3.2 Credit standby arrangements

*Relates to the amount available and actual debt drawn under the Secured Debt Facility, which at 31 December 2014 was USD$10.5 million (AUD $12.9 million). The exchange rate used to convert the USD debt to AUD was 0.8156 at 31 December 2014.

Estimated cash outflows for next quarter

$A’000 4.1 Exploration and evaluation

(1,388)

4.2 Development

-

4.3 Production*

(7,046)

4.4 Administration

(1,484)

Total (9,918)

* Nido signed a sale and purchase agreement with Otto Energy to acquire all of the shares in Galoc Production Company WLL thereby acquiring a 33% working interest in the Galoc Oil field. OPEX is therefore expected to increase by 33% from Feb 2015 (upon satisfaction of final conditions precedent).

** Forecast cash inflows for the first quarter of 2015 include revenues from 2 liftings from the Galoc oil field.

Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Current quarter $A’000

Previous quarter $A’000

5.1 Cash on hand and at bank* 10,869 23,527

5.2 Deposits at call

57

56

5.3 Bank overdraft

5.4 Other (provide details)

Total: cash at end of quarter (item 1.22)

10,926

23,583

*Cash on hand includes AUD $8.0 million in funds held in accounts with Credit Suisse. Usage of these funds is governed by the terms and conditions of the senior secured facility agreement. F

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Changes in interests in mining tenements Tenement

reference Nature of interest (note (2))

Interest at beginning of quarter

Interest at end of quarter

6.1 Interests in mining tenements relinquished, reduced or lapsed

- - - -

6.2 Interests in mining tenements acquired or increased

SC 63 DOE approved the Transfer from PNOC-EC to Nido of the 10% Participating Interest in Service Contract 63, Offshore, the Philippines

10% 20%

Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.

Total number Number quoted Issue price per security (see note 3) (cents)

Amount paid up per security (see note 3) (cents)

7.1 Preference +securities (description)

- - - -

7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions

- - - -

7.3 +Ordinary securities

2,188,266,468 2,188,266,468 - Fully paid

7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs

7.5 +Convertible debt securities (description)

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7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted

- - - -

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7.7 Options (description and conversion factor) Future Grant of Shares (sign-on and retention bonus rights to ordinary shares pursuant to the employment contract between Mr Byrne and the Company. Performance Rights (performance rights issued pursuant to the terms of the Long Term Incentive Policy and Employee Performance Rights Plan) Managing Director Performance Rights (performance rights issued to the Managing Director with Shareholder approval – same terms and conditions as Employee Performance Rights Plan)

Nil Nil Nil

Nil Nil Nil

Exercise price Nil Nil Nil

Expiry date Nil Nil Nil

7.8 Issued during quarter

Nil

Nil

Nil

Nil

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7.9 Exercised during quarter Performance Rights (performance rights issued pursuant to the terms of the Long Term Incentive Policy and Employee Performance Rights Plan) Managing Director Performance Rights (performance rights issued to the Managing Director with Shareholder approval – same terms and conditions as Employee Performance Rights Plan)

Nil

Nil

Nil

Nil

Nil

Nil

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7.10 Expired during quarter Future Grant of Shares (sign-on and retention bonus rights to ordinary shares pursuant to the employment contract between Mr Byrne and the Company.

Nil

Nil

Nil

Nil -

7.11 Debentures (totals only)

7.12 Unsecured notes (totals only)

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Compliance statement 1 This statement has been prepared under accounting policies which comply with

accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

2 This statement does give a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: 23 January 2015

John Newman (Company secretary)

Notes 1 The quarterly report provides a basis for informing the market how the entity’s

activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in

mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in

items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of

Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International

Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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