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Porto Energy Corp., has announced its financial results for the quarter ended November 30, 2013.
All amounts are stated in US dollars unless otherwise noted by C$ for Canadian dollars or € for Euros.
Highlights
During the first fiscal quarter ended November 30, 2013 the Company:
- Launched a non-brokered private placement of up to 150 Units of the Company at a price of CDN$10,000 per Unit to raise gross proceeds of up to CDN$1,500,000 on a reasonable commercial best efforts basis.
Subsequent to quarter end, the Company announced:
- Agreement to terms under an arrangement with Norway-based TGS-NOPEC Geophysical Company ASA for the licensing and marketing of four sets of survey data including one 3D offshore survey spanning approximately 1,100 square kilometers, two 3D onshore surveys totaling 358 square kilometers, and one 24,000 square kilometer aeromagnetic survey which could bring in up to $1.5 million net to Porto.
Joseph Ash, President and CEO of Porto Energy Corp said:"We are optimistic that future seismic data sales as a result of the pending TGS-NOPEC agreement will provide us with sufficient working capital in the near term to continue our marketing efforts with interested parties that we are currently in discussions with.
We are actively working to conserve capital in an effort to provide enough time to bring these current investment opportunities to a successful conclusion."
Operational Review and Outlook
Although Porto has continued to refine its data models over the basin, it has not drilled a well since the ALC-1 which was declared non-economic during the second fiscal quarter ended February 28, 2013. In June 2013 the Company received approval of its original 2013 work program from Divisão para a Pesquisa e Explorao de Petr磳leo which constituted the fulfillment of the Company's 2012 work program commitments by the Portuguese government. However, as of the date of this filing, the Company continues to work with DPEP to renegotiate the original work to be performed under its initial 2013 work program commitments as well as to extend the due date of those commitments to the end of 2014. See "2014 Work Program" section below.
TGS Seismic Data Sales Contract
In January 2014, the Company agreed to terms under an arrangement with Norway-based TGS-NOPEC Geophysical Company ASA for the licensing and marketing of four sets of survey data including one 3D offshore survey spanning approximately 1,100 square kilometers, two 3D onshore surveys totaling 358 square kilometers, and one 24,000 square kilometer aeromagnetic survey. Each single license for the entire data set has the potential to bring in up to $1.5 million net to Porto, which would provide enough funding for the Company to meet its working capital obligations for 12 months or more while it continues to market its assets to interested parties. A draft agreement is currently being reviewed by the Portugese Ministério da Economia e da Inovao Direc磧ão Geral de Energia e Geologia. Once approved by DGEG, Porto anticipates signing the final agreement shortly thereafter.
$1.5 Million Non-brokered Private Placement
In November 2013, the Company launched a non-brokered private placement of up to 150 Units of the Company at a price of CDN$10,000 per Unit to raise gross proceeds of up to CDN$1,500,000 on a reasonable commercial best efforts basis. As of the date of this filing, the Company continues to market the Offering. Porto anticipates completing its marketing by the end of the first calendar quarter of 2014.
Drilling Operations
Porto has suspended ground operations in Portugal to help conserve capital. As a result, it has not drilled a well since the ALC-1 well mentioned above.
Drilling Outlook
2014 Work Program
Porto is in discussions with the DPEP to amend the original 2013 work program commitments to concentrate on environmental studies necessary before the Company begins its Lias development plan and to extend the completion deadline to the end of 2014. The original 2013 well program, consisted of drilling one deep well (terminal depth greater than 3,000 metres) and possibly one horizontal well, contingent upon the results of the deep well, both within the Lias interval; drilling up to seven stratigraphic wells to advance the exploration and development of the Lias stratigraphic interval; the acquisition of 150 km2 of 2-D seismic data on shore that may also partially benefit the offshore prospects; and further acquisition and analysis of geologic data to expand the Company's understanding of the basin in general. The original 2013 work program was approved by DPEP in June 2013, successfully concluding the Company's 2012 drilling program requirements. Based on the working interests of the Company and the obligations of its joint venture partner as set out in the farm-out agreement and governed by the joint operating agreement, the Company anticipated its portion of the costs to be between $7.1 million and $11.2 million depending on the results of the initial Presalt well and whether or not the drilling of a horizontal well is warranted.
As of the date of this filing, the Company continues to negotiate the details of the amended work program going forward with DPEP and expects a successful conclusion to these discussions during the second calendar quarter 2014. The amended work program is expected to significantly reduce the Company's capital commitments in 2014. Until financing is sourced, it will allow the Company to continue to carry out operational activities that fulfill its future work program commitments with limited funding. The amended program is expected to be funded through seismic data sales, joint venturing efforts or private debt and/or equity.