Overview of 2015
2015 continued to be a challenging year for the oil and gas industry, and for New Times Energy, it was no exception. International oil and gas prices maintained its downward trend in 2015, reaching recent record lows and resulting in significant impairment losses on certain of the Group’s oil and gas related assets. Uncertainties over how long these depressed prices will persist and when a significant and sustained recovery will occur remains a concern for the Company.
Faced with this economic reality, the Company has remained focused and committed to maximising shareholder value. During the year, the Group took a number of decisive measures to mitigate the impacts of the declining international oil price and focus on projects that provide value in the current landscape and upward profitability in the event that the international oil price recovers.
Significant strategic highlights in 2015
During 2015, New Times Energy made a number of key decisions in relation to its strategic and geographic focus. The broad objectives of the Group compromised of:
New Times Energy began its full exit from the downstream oil and gas sector in late 2014 by entering into agreements to dispose of Shine Great Investments Limited (“Shine Great”), a wholly-owned subsidiary of the Company principally involved in the natural gas distribution business, for approximately HK$230 million. In February 2015, New Times Energy completed the first part (i.e., 51% equity interest of Shine Great) of a two stage disposal and recognised a profit of HK$18.16 million for the year. The second part (i.e., the remaining 49% equity interest of Shine Great), when completed, will finalise the Group’s strategy to exit the downstream sector and concentrate activity in the upstream oil and gas sector going forward.
Despite a significant deterioration in the international crude oil price, government policies of Argentina ensured that the domestic oil price remained around US$70 per barrel throughout 2015. In April 2015, New Times Energy capitalised on investment opportunities and strengthened its presence and commitment in Argentina by farming into a 50% participating interest in the Chirete Concession, which covers a surface area of approximately 1,793 km2 in the Northwest Basin and has a net estimated Prospective Resources of 7.1 MMBBL. The addition of the Chirete Concession builds on the Company’s existing business portfolio in Argentina, namely the Tartagal Oriental and the Morillo (“T&M”) Concessions and Palmar Largo Concession, and enlarges the Company’s position in the Northwest Basin.
In November 2015, New Times Energy drilled an exploration well, i.e. Los Blancos x-1002 well, to the target depth of 2,910 meters in the Chirete Concession. The well logs and data from the testing are at present being analysed to determine the economic viability of the prospect.
Significant impairment against the Group’s oil and gas assets
The slump in international oil and gas prices in 2015 resulted in a further decline in the price of oil in Argentina, and with the low oil price expected to persist in 2016, New Times Energy, like the majority of exploration and production companies in the world, recorded significant impairment losses on certain of its oil and gas assets for the year ended 31 December 2015. The impairment losses recognised are one-off and non-cash in nature and has an insignificant impact on the cash flow and operations of the Group.
New Times Energy continues to proactively manage and structure its business to best serve the interests of our shareholders. The Group is committed to maximising shareholder value by exploring and developing oil and gas prospects in a safe, environmentally and socially responsible manner.
The Group believes that oil and gas still remains the most desirable and important natural resource in the world. Despite the recent turmoil in the industry, the Group is well positioned to maximise shareholders’ value.
New Times Energy enters 2016 focused on the upstream oil and gas sector. The Group has strengthened its commitment in Argentina, where the combination of the newly elected government’s political and economic reforms and the continuation of locally managed oil and gas prices, currently above its international equivalent, creates a positive environment in which to do business.
2016 may prove to be a pivotal year in the history of New Times Energy. With the prospect of an economically viable oil discovery from the recent drill in the Chirete Concession and an exciting three parts exploratory drilling campaign commencing in the T&M Concessions, the Group is on track towards a potential step change in its path to future profitability. The Group may, when necessary, consider raising funds from different sources to finance the exploratory drilling campaign in the T&M Concessions and to develop the Chirete Concession when an economically viable oil discovery is confirmed. Under the stewardship of the Board, we are confident and optimistic that our business will continue to develop and grow healthily and sustainably.
Once again, I would like to take this opportunity to express my sincere 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 the shareholders, investors, business partners, bankers, customers and suppliers for their support.