Overview of 2017
I am pleased to report that the financial strength of the Company has strengthened significantly in 2017, benefiting from the generous support of our investors through an open offer that raised HK$736.40 million.
The Company’s operational environment in Argentina continues to be difficult with increasing political, labour union, currency and of course exploratory risks. In Q4 2017, the Group completed the drilling of the EP.x-2001 exploratory well, having been delayed by approximately 12 months, due to successive unforeseen complications beyond its control. Though, evidence of hydrocarbons were encountered during the drill, the post analysis of petrophysical logs, sadly concluded the EP.x-2001 well was incapable of being commercially viable for future development and production by the Group.
On a positive note, the EP.x-2001 exploratory drill was the Group’s first ever campaign using its own rig and own set of rig crews. The EP.x-2001 well was successfully drilled with no non-productive downtime attributable to any health and safety incidents, nor mechanical failure of the rig itself. It enabled the Group to reduce its drilling cost, as well as provide it with greater flexibility for future drilling and workover campaigns.
Significant strategic highlights in 2017
During 2017, New Times Energy continued to deliver on a number of financial and operational initiatives to better position the Company to execute its future strategic plans, and manage its business risks according to its latest outlook. The key strategic highlights in the year included:
In April 2017, New Times Energy raised net proceeds of approximately HK$736.40 million, following an open offer of 2,955,160,996 offer shares, on the basis of one offer share for every two shares held. A total 84.36% of the available offer shares was subscribed, whilst the remainder 15.64% unsubscribed shares was underwritten by Max Sun Enterprises Limited, a substantial shareholder of the Group. The HK$736.40 million raised further supplements the HK$557.23 million monies previously raised by the Group in 2016 following the issue of subscription shares.
The Group took the strategic decision to acquire an imported rig from China for own use, after it had been in custody with Argentina Customs for 18 months. The potentially significant savings that can be achieved in drilling costs, plus the added flexibility and control for the Group over its scheduling was considered compelling for this key asset addition.
Looking ahead, the Group plans to deploy the rig for its next joint venture exploratory drill in the Chirete Concession, as well as for future workover campaigns beyond that. The imported rig has provided the Group the opportunity to reduce its drilling cost, added flexibility in its drilling campaigns, as well as a potential new source of revenue stream from the provision of rig leasing services, or packaged drilling services to third parties.
In August 2017, New Times Energy re-entered into the business of commodities trading with the aim to broaden its revenue and profit base. The Group was previously engaged in commodities trading pre-2008, where it acquired invaluable knowledge and experience, as well as business partners.
Throughout 2017, the Group has continued to look for cost rationalization opportunities. Initiatives have included bringing inhouse certain contracted services in order to reduce middleman margins, as well as the consolidation of certain roles and responsibilities for certain job positions, where practicable in order to reduce the Group’s overall headcount. Though never easy, the Group believes that such measures are necessary during the current fragile business climate.
New Times Energy continues to proactively manage and structure its business to best serve the interests of its shareholders. The Group is committed to maximizing shareholder value by exploring and developing oil and gas prospects in a safe, environmentally, socially and ethically responsible manner.
Looking ahead in 2018, New Times Energy shall be continuing with its committed exploration plan in Northern Argentina.The Group is well aware of the importance to continually reassess and diversify its current business and geographical portfolio to better position itself for the future. Thanks to the financial support of its investors, following the recent 2016 subscription share issue and 2017 open offer, the Group is well funded to enable it weather through these difficult trading conditions in Argentina, diversify into the business of commodities trading, as well as more importantly, to seek and capture suitable investment opportunities in the energy sector, wherever that may be in the world.
Once again and in closing, I would like to express my sincerest gratitude to the Board, the management team, and all staff members for their efforts and dedication during the year. I am also much obliged to our shareholders, investors, business partners, bankers, customers and suppliers for their continued support.