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Revus Energy (OSL:REVUS) Revus Energy Group reported a net profit of NOK 49.0 million (USD 9.1 million) in the second quarter 2008, compared to a loss of NOK 7.5 million in the same quarter in 2007. A significant oil discovery on the Jordbær prospect marked a very successful exploration drilling campaign in the second quarter.
Second quarter operating income was NOK 172.9 million, compared with an operating loss of NOK 21.6 million in the second quarter 2007. The improvement was largely a result of a significant increase in revenues due to production from the Broom field and an increased interest in the Murchison Unit. The higher revenues in the second quarter also reflect an overlift position of 145 579 barrels at the end of the quarter, versus an underlift position of 268 173 barrels at the end of the first quarter. The revenues also reflect a loss related to hedging approximately a third of the Broom production at USD 95.43/bbl as part of the financing of the Palace acquisition. Including financial items, the second quarter 2008 gave a net income before tax of NOK 143.0 million, compared to a loss of NOK 34.4 million in the second quarter of 2007. The net loss of NOK 29.9 million in net financial items is caused mainly by increased interest expenses following debt raised in connection with the Palace acquisition.
Production expenses in the quarter were NOK 235.4 million. These expenses include cost of oil sold. When accounting for the Palace acquisition on 27th February, the underlift position on Broom of 243 778 barrels was recognised at fair value in the balance sheet. Revus Energy has sold this Broom oil inventory in the second quarter 2008 and NOK 121 million of the production expenses relates to this inventory. Exploration costs in the second quarter were NOK 77.5 million.
Exploration costs were mainly related to expensed drilling costs on PL 369 (Trow well) and PL 037C (Anning well), seismic acquisition costs and technical work performed on the Company's many exploration licenses. Drilling costs associated with the successful Jordbær, Torphins and Ipswich exploration wells have been capitalised. Drilling operations on the Torphins wells have been completed and the results are currently undergoing further evaluation. A decision to write off this discovery or keep it on the balance sheet will be made after this evaluation, most likely in the third quarter. Operations on the Jordbær and Ipswich wells are ongoing.
The second quarter and the first month of the third quarter has been a very active exploration period for Revus Energy. The Company has participated in four exploration wells of which operations are still ongoing on two of these wells, Jordbær and Ipswich.
Two out of the four wells have been reported as discoveries, and indications of hydrocarbons have been reported on Ipswich. Revus Energy believes Jordbær in particular is a major exploration success of great importance to the Company.
Revus Energy's production for the third quarter of 2008 is estimated to be 7 000 boepd against actual production of 5 468 boepd in the second quarter, which was largely influenced by planned and unplanned shut downs on the Heather and Broom fields. The annual estimated production is forecasted to be 6 400 boepd.
The recent exploration success and several potentially high impact wells in the coming quarters provide an excellent basis for continued growth and value creation in Revus Energy. Further to this, a sound balance sheet and financial position offers flexibility in pursuing the Company's M&A ambitions.
A full interim report and press release is attached.
