Maha Energy AB
STO:MAHA A
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Maha Energy AB
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[Foreign Language] So let's see if we are connected here. Jonas, Andrés, can you hear me?
We can indeed.
Loud and clear.
Excellent. I can hear you and I can see you. Well, Jonas, today, Maha delivered a Q1 or a quarter that is, on a couple of metrics, a record, I would say. Please take us through the report and give us an outlook. Is this as good as it gets? Jonas, over to you.
Thanks, Kaarlo. Yes, I want to say that before I hand over to Andrés here, of course, we -- it's been a stellar quarter for us. And that's thanks to obviously the high oil price that we are seeing at the moment. But also, it helps when we have a fantastic producer like Tie-4 that came online in February of this year, so that really helped our quarter tremendously.
I'm not going to spend a lot of time during the introduction here to talk because I'm going to let the figures speak for themselves and let Andrés walk us through them. But I do want to spend some time today after we go through the operational update. There are some macroeconomics that affects us all, I think. I want to spend a little bit of time talking about our commodity industry at the end.
I also want to remind you that you can post questions like Kaarlo said. [Operator Instructions] So without further ado, I want to hand over to Andrés and let you walk us through this stellar quarter.
Sounds good. Thanks, Jonas. Good day, everyone, and welcome to another webcast. I'm very pleased to present to you our quarterly results.
So jumping right to it. On this slide, you'll see our -- some of our main highlights. And as you can see, this was indeed our record quarter for Maha. We had revenues this quarter just shy of $31 million. That was up 73% versus the most recent quarter, Q4, and up 95%, almost doubling with the quarter a year ago. Also EBITDA, $22 million record this quarter, that was up 41% versus the most recent quarter and more than doubled versus the quarter a year ago.
And lastly, our net result, just over $12 million, up 64% versus the most recent quarter and also more than doubling from a year ago. And this was mostly driven by a record production this quarter of almost 4,600 BOEPDs, which was up 22% versus the quarter a year ago and 48% versus the most recent quarter in the last Q4. This, combined with the higher price environment that we are experiencing where Brent averaged over $100 per barrel this quarter, which is up 65% versus the quarter a year ago and 27% versus the most recent quarter.
So these 2 factors had a huge contribution to our operating network netbacks, which were $57.90 per BOE this quarter. That's up 71% versus the comparable period a year ago and 37% from the most recent quarter. So really strong results. EBITDA, again, a record of $22.1 million. I don't get tired of repeating it. And also net results was $10 million, translating into EPS of USD 0.10 per share.
On the next slide, we present some balance sheet highlights. Our balance sheet, as you can see, remains increasingly strong and conservatively leveraged that we had -- we ended the quarter with a cash position of $29.4 million. And our total assets are also increasing as well as the shareholders' equity as a result of our strong results and the effect of certain currency translation items.
Also on working capital increased -- our surplus increased conservatively, resulting from the higher sales receivables from the higher sales and also some certain tax credits in Brazil that we were able -- that we will be able to use throughout the year. And this is after a high capital activity period during Q4 and Q1 of this year, plus a portion of the bank debt that is now presented as current. There are no dividend plans at the moment. Our net debt for the quarter was $26.5 million.
On our next slide, we focus on the 2 main drivers for this quarter, which was the daily -- our daily average production and oil prices. And as you can see in the chart, our production was up 48% versus the most recent quarter and 22% versus the quarter a year ago and mainly since the Tie-4 coming on production this quarter. That, combined with average Brent of over $100 per barrel this quarter, which was up -- that's up 27% versus Q4 and 65% versus a year ago, were the main contributors for this quarter.
Continuing with some metrics that we keep track of. On the next slide, we show firstly, our netbacks, which is basically what remains for each barrel we sell after we pay for royalties and operating costs. These were up 37% versus the most recent quarter and 71% versus the quarter a year ago and mostly driven by the higher oil prices, also benefiting from the lower royalty rate in Brazil, which started in February of this quarter. And also the lower OpEx per barrel that we can see in a bit more detail on the chart below, where OpEx per barrel of $11.15 this quarter per barrel, was down 13% from the most recent quarter, with some of the -- seeing some of those cost absorption effect from the higher volumes. Still higher from a year ago from well work, and we're also starting to see some cost increases this year, for example, transportation, where as we are all experiencing in -- at the pump, diesel prices have gone up considerably.
Last but not least, we keep a close look at our cash balances. This quarter, it was up to $29.4 million from our strong operating cash flows, and that's after our CapEx investments and interest payments. And last but not least, our net result or bottom line, very strong results this quarter, $12 million, up 64% from just the most recent quarter and more than doubling from the quarter a year ago. As we saw, strong netbacks driven by higher production and higher oil prices, combined with the competitive fiscal terms in Brazil, had a huge contribution to the results this quarter. For other key ratios, I invite you to see our Q1 report. And other than that, I'll hand it back to Jonas.
Thanks, Andrés. Thanks. If we can jump to the next slide there, Kaarlo, I appreciate that. So great financial figures for the quarter. We continue to go from strength to strength financially. It is underpinned by our Tie Field, which is slowly now maturing from sort of a development program to more of a harvest program. We are in the midst of drilling our first horizontal in the Tie Field. And once that gets drilled, we will follow that up with a couple of water injectors. We are behind in our water injection scheme. We're hoping to catch up.
To that extent, during the quarter, we converted Tie-3, which was drilled end of -- middle of last year. It was drilled on the western flank of the field to support the southwest part of the field in terms of the waterflood. That now has been converted. We lost some barrels of oil from that well because we initially completed that as an oil producer, once we were waiting on some equipment. That is now injecting water on the southwestern part of the field, contributing much needed pressure support in both our Grande and Sergi wells.
We delivered a record number of well -- of oil this quarter to over 300,000 barrels. We also sold and delivered over 330 million cubic feet of gas, so that contributed immensely to the quarter's strong financial performance. The royalty that we have been talking about was also -- they took effect in the month of February, so we are now enjoying 2.5% -- paying less to 2.5% of the royalty to the government. Then we obviously also assisted in the strong financial performance of the quarter.
We've already mentioned Tie-4. Tie-4 was completed at the end of last year and tested at the beginning of this year. It surprised all of us with the productivity of that well. I'm pleased to say that as of today, that well is close to being completely paid back, which speaks to the quality of these assets. The investment we made in that well, we've almost reached payout already. So really fantastic results on that.
On Tie-5, which was spudded on the 25th of January, we are currently about halfway to our horizontal. It has taken us quite a long time. We've had tremendous problems with surface equipment this time. The drilling rig, a lot of the safety valves that are required to drill the well safely has given us a lot of trouble that, in turn, is giving us a lot of flat time in terms of non-progression. We also had to rerun our 7-inch casing. We almost got it to bottom, had to run a clean-out trip in between and then rerun it successfully. We also experienced a twist-off recently BHA twisted off. We had to fish it out, all those things have contributed to some delays.
We are still on time with respect to completion and getting it on production as per our original schedule. However, these downtimes has obviously, we've lost a little bit of time on our schedule there. I do want to flag that the GTE-3, GTE-4, 2 wells to the -- 1 is to the north and 1 is in the middle of the field, have been down for quite a while because of tubing leaks. We are experiencing some delays in getting equipment. GTE-3 is planned to be placed on production later in June. We should be getting the last pieces of equipment to convert that well to an ESP sometime at the end of this month and before the 6 June.
And GTE-4 -- right now, the drilling rig is preventing us access to GTE-4. So as soon as the drilling rig leaves Tie-5, we can reactivate GTE-4 that is also experiencing some tubing leaks. So there's a lot of oil sitting behind pipe waiting to get on production. And for various reasons, those will come in the near future. I'm particularly excited about GTE-3. That well has produced a lot of oil through its lifetime, I think, almost over 2 million barrels. And we are excited to put that on an ESP, which will give greater drawdown. And the idea, of course, is greater production from GTE-3.
So I think we will see a little bit of activity interruptions in our Tie Field over the last -- the next month or 2. But the second half of the year, we should be all ready to receive all that oil that's behind pipe.
If we go to the next slide, please. I want to mention a few things about Tartaruga. Tartaruga is sitting 300 kilometers to the northeast of the Tie Field, still onshore Brazil. We are back to pre-workover volumes from those 2 wells. Tartaruga-2 is experiencing quite a lot of water cut, and the idea is to drill a new sidetrack from one of the wells in Tartaruga towards the end of the year. We are waiting drilling rig for that. As soon as we get a drilling rig, we will embark on doing a horizontal in the Penedo-1 there towards the end of the year. That should significantly boost production at the Tartaruga field.
Also worth mentioning, the royalty took effect -- royalty reduction took effect in February, so we are enjoying lower royalty payments in Tartaruga as well. A quick word about the Petrobras divestment. Petrobras owns 25% working interest in this field. They ran a divestment process last year. It was pulled at the last minute and it was -- it has just been restarted again, and we are registered to participate in that process as it unfolds. I do not expect to have any update on that for at least another 3 or 4 months, and we'll see how the process rolls out with Petrobras.
Next slide, please. Yes, Oman. I want to spend a little bit of time here because this is really moving now into a very exciting phase for us. We have been working behind the scenes in Oman for almost 1.5 years now. COVID impacted us quite hard there. They closed the borders between February and September of 2021. But as of September, we have a full working team there. We are now ready to start drilling. We have contracted a drilling rig to drill initially 6 wells on the Mafraq Field, and provided we get all the civil works done in time, the idea is to start drilling there before the end of June.
Like I said, the drilling rig has been contracted. They are firing it up. It's located in Muscat. It's about 300 kilometers from the location, and we are very excited to see that rig being reactivated and being moved to location here sometime in June. So the 6 wells on the picture on the right, you see a structural map. You can see there on the north side, the white fault that extends from west to east, that's the fault that bounds the structure. There are 2 current wells on the structure, Mafraq-5 and Mafraq-6, those you can see there in black lines. One, Mafraq-5 is going west to east in strike direction and the Mafraq-6 is in the dip direction.
So these wells have delineated the field already. We know that the field will produce oil. And our program entails first drilling Mafraq-7, which will be drilled to try and prove up the oil water contact on the field. That is important to us because we want to know how big this structure is. In our terminology, we have what's called oil down to that means that a well has penetrated the oil down to a certain depth, but we don't know exactly how high or how deep, I should say, the oil extends.
The blue line that you see on that map is where we believe the oil water contact to be. So everything north of that blue line would be oil, everything south of that blue line is water. So Mafraq-7 will drill on that blue line to prove up the oil water contact. Mafraq-8 will then be followed up, that will be drilled on the crest of the structure. And we will penetrate deeper formations there primarily to see if we can find water injection or water disposal zones that we can safely dispose of our produced water.
Once we've done that, we will drill Mafraq-9, 10, 11 and 12, and they will be trilateral wells going in the strike direction, meaning from west to east on that map. And they will be then tied into an extended well test facility that will test the reservoir for productivity over an extended period of time, which will hopefully give us that baseline we need in order to determine if the -- I should say, when the field development plan can be put together and hopefully then be submitted to the government of Oman for full field development.
Like I said, this will take more and more priority. This is a great asset that we obtained during the low oil prices of 2019 and 2020. So this is really a great opportunity for us to showcase the strategy that we want to add value through the drill bit and by adding barrels. So that will take more and more focus over the next 6 to 12 months. There will hopefully be a lot of good news coming out of Oman over the next 6 months.
So let's go to the last slide, which is United States. I want to mention the LAK Ranch field. We shut that in at the end of -- beginning of 2020 because of the COVID and the low oil prices. We are doing some minor work at LAK right now. We are testing a few wells but we are most likely going to move to look at strategic alternatives for this field, meaning that we may solicit quotes to sell that off to interested parties here during '22.
Illinois Basin, it had the best quarter ever since we acquired it in March of 2020. It produced 39,000 barrels. Glaze 11-5, which we drilled at the beginning -- sorry, at the end of the quarter. That was really a record in terms of time. We spudded the well, I think, at the beginning of March, and it was on production showing oil before the end of March, and a lot of activities, we drilled to 4,000 feet. And then we stimulated a well hooked it up to the full lines. And the 30-day initial productivity, IP is 70 barrels of oil per day, which is on the high side in this area so we're very happy with that outcome.
Otherwise, Illinois Basin chugs away at these oil prices, it's very profitable for us. So that prompted us to sign a new lease, which is to the northeast of our existing acreage in that area. We paid $58,000 for about 460 acres, plus we have certain drilling commitments, which entails basically drilling at least 1 well in the next 3 years and then 1 well every year thereafter. That lease contains a total of 23 development locations, so we have quite a portfolio of drilling locations in IB.
And we are finishing off our evaluation or the subsurface evaluation of the results that we have obtained from the 2021 drilling program. We drilled a total of 12 wells there last -- towards the end of last summer. And those wells have given us a mixed bag of results, and we have tried to sort of make sense of all that. And we will most likely continue our development program there in the United States. I have to caution though that the industry is picking up. It's becoming more and more difficult to get drilling rigs personnel and crews. And of course, the cost of pipe and material has also increased so we have to weigh that as well into the equation.
So let's go to the next slide, which I want to spend a little bit of time here on the macro-economic situation that we're facing. What you see on this slide is 2 graphs. And I want to draw your attention to the bottom graph. There are 2 curves there dating back to 2013. And 1 is the S&P Index, which is the darker color, which you can see has progressed almost linearly until the pandemic where you have a dip, and then it really gathered momentum after that. On the bottom, though, is the S&P Energy Index. The Energy Index is contained to the U.S. There's about 21 energy companies in there. And obviously, Maha is not in that index but it gives you an indication of where the Energy Index has -- how it's performed compared to the general index.
If we go to the top graph, I've zoomed in on the Energy Index, that's the black line there. It started in -- when we listed in July of 2016, it was at about $500, and you can see that until about the end of 2021, the index was back at $500, so really nothing had happened in those 5 years. And you've seen some growth here over the next -- over the last 6 months. And the index that -- at the end of -- middle of May is just over $600. The blue line there is the Maha Energy share price development over time. And you can see a bit of a correlation there, especially towards the end of 2021 and the beginning of 2022.
Let's go to the next slide, please. And this is the one I really wanted to spend a little bit of time. And I think we've talked about this before in the quarterly report. I want to again start on the bottom. So the slide on the -- the graph on the bottom shows capital spending in oil and gas sector. So this is the global oil and gas sector upstream, the amount of investment that has been done since 2005. And the bar -- the column graph there, the blue graph shows how much has been invested in the industry.
So on the left-hand side, you'll see on the y-axis, USD billion, so if we go back to 2005, there's about just under $300 billion invested on an annual basis in the industry. And the black line on that graph is the oil price. So you can see that as oil prices increased from 2005 to 2013, '14, the capital investments sort of followed the oil price. Of course, we have the dip of the housing crisis in 2008, 2009, and there was a corresponding reduction in investment.
Then we move to 2014, and you can see that essentially capital investment dropped off a cliff. We were almost at $800 billion a year. That was reduced 25% in 2015 and then another 25% in 2016. And capital investment has been fairly steady around $400 billion per year over that period. Now if I take that average -- if I take the average capital spent per year and I divide it by the amount of barrels that we produce, I get basically $16 per barrel consumed between the years 2005 and 2014 was spent as investment in oil and gas industry.
Post 2014, between 2015 and '21, that investment per barrel consumed on a global basis was reduced by almost 30% -- 33% at $12 per barrel. It may not seem like a lot, but if you multiply that by 35 billion barrels per year for 7 years, that's a huge underinvestment into our industry. And I believe that, that is starting to show now in the global scene as we come out of COVID.
There's just not enough oil in the system. The industry has been severely underinvested for many reasons. ESG is one but also the oil price volatility is another one. If we go up on the left-hand side, I show essentially the column graph there, the top left-hand graph, shows consumption, the columns show consumption per year. So you can go back to 2005 and basically follow that growth. In 2020, you see a dip, and that's, of course, COVID. And 2021, we're starting to come back to pre-COVID levels. And I believe that 2022, we will definitely be back at 2019 levels of over 100 million barrels of oil consumed per day. The black line shows, quite markedly, the reduction in capital expenditure over the same time. And on the right-hand side, you see essentially the same graph but with oil price being the black line there per barrel.
So I want to end this one by saying a few things. One is that we believe that the oil industry has suffered severely during the past 7 years. I believe that we are about to enter another super cycle of high commodity prices, and this time, driven primarily by lack of supply, which is going to be a real problem for the global -- as we try to recover COVID here on the global basis. I think I'll leave it at that, Kaarlo.
Before we go to questions, I just want to remind everyone that we have our Annual General Meeting coming up on the 31st of May. I encourage everyone to attend. This will be live in-person event in Stockholm. So if you haven't registered, please go ahead and register. Our Q2 report is due at the middle of August. And if you want to get more information, more detailed analysis of our company, I encourage you to visit some of our analysts that cover us ABG, Arctic, Erik Penser, Pareto and Sberbank1.
So with that, I think we should go to questions, and I know that I've run over my time tremendously, but I thought it would be important to cover some of the macro events. And I'm sure, Kaarlo, you may have a few questions regarding how this beginning of our inflationary period that is affecting us.
Well. Yes, absolutely. I would just kick off with -- well, I would assume it's a balance sheet question. With the current oil price and improved profitability, do you expect to phase out your loan already during 2022?
The quick answer to that is probably no. And the reason for that is that the loan, there's really no economic incentive in terms of the loan for us to do so early. Do you want to elaborate on that a little bit, maybe Andrés?
Well, it's -- we would have to -- it's not just a stand-alone decision. It would have to be tied to what use will we give to those funds, so those funds that we would be freeing. So at the moment, we are well capitalized. We're well -- we have cash in the bank. So that's why the presently, the incentive would not be fully there.
Yes. And then you touched upon it so I'll just mention one other question. That was the 25% of Tartaruga and you gave us -- well, you didn't give us a time line but you gave us sort of a time line. But basically, if that is executed, then obviously, you will have even more cash, so that may push forward any decisions on loan repayments, right?
I think the way you have to view it is, first off, the loan conditions are that you basically, you have the ability to pay it off early but there's really no incentive, i.e. you would have to pay out the full amount of interest that you were to pay under a full 4 years, so from that perspective. But Andrés brings up a very good point, which is we have to weigh that against the capital efficiency of the capital that we have in our -- the cash that we have. Can we put that to use in better ways that generates better return than what we pay on interest?
And jumping into the oil fields here, and you may already, in some sort of way, have answered this question. It's looking forward to the appraisal campaign at Mafraq in the second half of '22. Any indication on whether these wells will be drilled over new or preexisting well pads at Mafraq?
There are existing well pads. We will be using those well pads, but it's -- I don't know what the question would -- what benefit we will get from using those existing well pads to drill from. But there is a plan to reuse at least 2 of those well pads.
Right. And then let's jump into the -- I'm conscious of time here, but on the inflation here. And are you actively placing additional risk orders on equipment materials, giving the extended lead times and risk for further inflation related to, well, any capital plans beyond 2022? So basically, there will be bottlenecks and how do you deal with those?
The quick answer is yes. In fact, just 2 weeks ago, we placed orders for 4 more wells in Mafraq in anticipation.
All right. And can I just have follow-up questions there because you made a habit of purchasing oil fields at, in your estimates, at a discount. And with the current oil price and the apparently oil squeeze, you're not really looking to buy anything at these levels, are you?
No. I think this is very cyclical in the industry. And of course, I've been around since 1986 in this industry, so it's not the first time I've seen this. But put very simply, right now, it's going to be very difficult to purchase or acquire producing assets. They will fetch full price. I mean, after all, if you're a seller, why would you sell at a discount if you don't have to when the alternative is to continue producing?
So what we are seeing is acquiring existing producing assets. It's going to fetch full price, which is what I refer to it as you're trading dollars for dollars. I pay you $100 today to get that $100 back over the next 3 or 4 years. So that's one thing. What we are looking at is what I would call appraisal opportunities. For example, if there is a situation where a seller or a company has made some investments in determining that there is oil there, but they are unsure of the extraction technology and extraction techniques and they want to spread the risk a little bit, those opportunities are still available and they are still at ground floor prices, and that's what we are looking at. It carries a little bit more risk.
But let me tell you, in terms of a payoff for something like that, it's a lot, lot better than going to acquire existing oil fields. Before I give it back to you, I mean, that is why we spent so much time and effort acquiring these quality assets in the last 3 years. The Tie Field, when you look back now, at $100 a barrel, that was a bargain. We got that out of song , Tartaruga is the same. I mean we paid, I think, $4.5 million for Tartaruga. IB is another one. We paid $4.25 million for that about almost 2 years ago.
Mafraq is -- again, I mean, the value that could potentially be in Mafraq compared to the acquisition price of $10 million is extraordinary. So our strategy is really starting to pay off in terms of timing with the oil price.
So if we rephrase it, would you be a seller?
Everything is always for sale, given the right price, of course. But we are an oil company. We are an extraction exploitation company. I'm an engineer by background. I love to build things. It is not in my nature to sell things. But you always have to keep -- I want to build, I want to grow things, I want to make them bigger. We want to make them better. That's in my genes.
But having said that, of course, I'm also -- I've been around, like I said, I've been in the industry since 1986. I've seen these things. I've seen these booms and busts 3 or 4 times in my career. So you have to be smart and astute. So we'll see, but I do anticipate oil prices to remain high. And I want to remind everybody that with all the talk of inflation, we did see 4 to 5 months of continuous oil prices over $100 per barrel back in early 2010 to 2014, and we didn't see any inflation at that point.
So I think the world, the global economy can stand these oil prices. Now if we end up in a situation where oil prices goes to $200 per barrel because the supply squeeze, that's a different story. But I think the world can handle the $100 barrel at oil prices.
Yes. We've certainly been there before. So I will just round up here and conclude that, is this as good as it gets? Well, probably not. So my final question here will be, why not updating the guidance? And when will be the next time for your forecast and updates?
Well, I think like I said and I also flagged this already in the Q4 presentation, we do have some workover requirements on the Tie Field, and that's a scheduling issue more than anything else. We are converting GTE-3 to an ESP. We are reactivating GTE-4 and we are bringing on Tie-5. So all these things are sort of happening at the same time. So -- and there are conflicts in our schedule of moving equipment around and accessibility to these wells, which unfortunately is impacting our production.
So I would say in the second half of this year, we should be -- with all that work behind us, we should be in a true harvest phase for Tie and we can focus on Oman.
Excellent. And I think that, that will be the final word. So Andrés and Jonas, it truly was a pleasure. And congratulations to a record result. And remember, records are there to be broken. Some very famous Swedish tennis player said when he was about to be broken at Wimbledon. So with that, I'll thank you. Excellent.
Thanks for having us on.
[Foreign Language]