Overview of 2016
2016 proved to be another challenging year for the oil and gas industry, and this was no exception for New Times Energy. The low international and domestic Argentine oil and gas price environment continued to provide the backdrop to a financially difficult year.
Operationally, the Group continued its disposition of unprofitable business interests, and while the Group did have an oil discovery in February 2016 in the Chirete Concession, protracted negotiations with our UTE partner on the future development strategy, hindered our ability to materialize the prospect. The Group’s 2016 exploration ambitions in Argentina also encountered a number of setbacks, including but limited to, local labor union disruptions, delayed receipt of drilling permits from local authorities, lengthy customs clearance of our imported rig, and inclimate weather conditions.
Despite these financial and operational challenges, the Group is grateful to its investors, who have injected over HK$540 million cash, through two major subscriptions of shares. The additional cash will tremendously improve the Group’s ability to seek synergetic investment opportunities in the energy sector over a wider geographical expanse.
Significant strategic highlights in 2016
During 2016, New Times Energy concluded on a number of financial and operational restructuring activities to better position the Company to execute its future strategic plans, and manage its business risks. These strategic restructuring highlights in the year included:
In July 2016, New Times Energy concluded its full exit from the downstream oil and gas sector, when it completed the second part of its two-stage disposal of Shine Great Investments Limited (“Shine Great”), a subsidiary principally involved in the natural gas distribution business in the People’s Republic of China. The disposal of the remaining 49% equity interest in Shine Great was effectuated for approximately HK$132.5 million.
As part of a strategic plan contemplated in 2015, New Times Energy successfully carved out and disposed of its loss making Utah operations in the United States for approximately HK$83.4 million in December 2016. The disposal was represented a good opportunity for the Group to realize the value of this business, whilst also providing funding for future investment or working capital needs. Operationally, it enabled the Group to fully focus its attention and efforts on its key Argentina oil and gas assets.
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.
During the year, New Times Energy raised additional funds via two share subscriptions. The first completed in July 2016, was a subscription agreement with Max Sun Enterprises Limited, a substantial shareholder of the Group, for the issuance of 2,910,000,000 new shares, raising net proceeds of approximately HK$447.2 million. This was followed by the issuance of 500,000,000 new shares in November 2016, to Elberta Holdings Limited, an independent third party to the Group, generating approximately a further HK$110.0 million in net proceeds for 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 maximizing shareholder value by exploring and developing oil and gas prospects in a safe, environmentally and socially responsible matter.
Though mindful of the small, but increasing influence and appetite for renewable energy, particularly in the highly developed economies, the Group believes that oil and gas still remains the most desirable and important natural resource in the world.
With no immediate prospect for a significant rebound in both the international and domestic Argentine oil and gas price, the business outlook in Argentina for the energy sector in 2017 will continue to be challenging.
On a positive note, going into 2017, the Group is well funded, to enable its continued search for suitable investment opportunities in the energy sector, and diversify its geographic coverage. Furthermore, New Times Energy in 2017 shall finally be embarking on its exploratory drill in Tartagal Oriental & Morillo Concessions, whereby the Group sincerely hopes to be able to deliver some positive news in due course.
Once again and in closing, I would like 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 our shareholders, investors, business partners, bankers, customers and suppliers for their support.