Niko cuts production, capex outlook

by on October 19, 2012 7:39 pm BST

Shares of the company fell 15% to C$11.73 on the Toronto Stock Exchange in morning trade, Reuters reported. The stock was one of the top percentage losers on the exchange.

Niko abandoned a deep-water exploration well off the coast of Indonesia last month after it came up dry, and it is also facing declining gas output at one of its blocks in India.

The company forecast production to be 168 million cubic feet equivalent per day for the full-year ending 31 March 2013, lower than 175 MMcfe/d it forecast earlier.

The fall in production, due to mechanical issues at its Block 9 in Bangladesh, will reduce full-year oil and gas revenue by about $2 million, the company said.

Niko holds 60% interest in the 6,880-sq-km onshore block that includes Bangladesh’s capital Dhaka. Production from the field began in May 2006 and accounted for 21% of the company’s oil and gas revenue in the first quarter.

The company — which also operates in the Kurdistan region of Iraq, Trinidad, Pakistan and Madagascar — cut its capital expenditure for the full year to $170 million from $210 million it had earlier announced.

Niko said it intends to prepay a part of its convertible debentures maturing in December. The company will bring down the amount to C$220 million from C$310 million using cash on hand and advances under its credit facility.

“Probably the reason for the weaker share price relates to the market being concerned about a definitive plan to restructure the debt that is maturing in December,” Haywood Securities analyst Alan Knowles told the news wire.

Niko now expects second-quarter average sales volume of 173 MMcfe/d, down 9% from 189 MMcfe/d in the first quarter.

The company attributed the lower average sales volumes to anticipated natural declines in its D6 block in the Krishna Godavari (KG) basin off India’s east coast.

The D6 Block accounted for 72% of the company’s oil and gas revenue in the first quarter.

Output at the D1 and D3 fields in the KG D6 block has dropped to 26 million metric standard cubic metres per day from 60 mmscmd in 2010.

Production at the block is projected to fall further to 20 mmscmd in 2014-15. The block has never managed to reach the forecast peak flow of 80 mmscmd.

Niko owns 10% of the block, while India’s Reliance Industries holds 60% and BP the rest.

Reliance and BP are the operators of the block.

“(Niko) had in their budget plans to spend money on D1 and D3 that would have been development capital. Reliance and BP have submitted plans for development but the definitive timeline hasn’t been fixed yet,” Knowles said.

“It’s more a deferral of those development activities.”

Shares of Calgary-based Niko, which has a market value of C$724.5 million, were down 13% at C$12.18 in afternoon trade. They have fallen about 72% since the beginning of the year to Thursday close.