Neptune Energy, the global independent oil and gas exploration and production company, has announced its financial results for the period ended 31 December 2019.

Resilience plan in place to manage impacts of COVID-19 pandemic and weaker oil price environment

• Implemented pandemic emergency plan and working with authorities, partners and global health providers to ensure the health and safety of our people and those we work with
• Assuring operational continuity by altering shift patterns, reducing non-critical activities and increasing screening capability
• Putting in place mitigation plans for critical path activities for project developments
• Total cost reductions of $300- 400 million identified for 2020 across operating costs, G&A and capex
• RBL upsized to around $2.7 billion. No cash dividend to be paid in 2020.

Strong balance sheet, robust cash flow and healthy liquidity levels

• Robust operating cash flow of $1.3 billion for 2019, despite lower commodity prices and production
• Low cost base of $10.3/boe in 2019, to be broadly unchanged in 2020
• Strong balance sheet, total available headroom of $1.3 billion at the end of the period to fund development projects and inorganic growth strategy; Net debt to EBITDAX of 0.93x at 31 December 2019
• Active three-year rolling hedging programme to protect operating cash flow

Strategic progress in 2019, with acquisitions adding material reserves and resources in key geographies

• Acquisitions in Indonesia, the UK and Norway add attractive growth projects and strengthen our acreage position around core areas
• Solid 90% reserves replacement ratio in 2019, 2P reserves of 633 mmboe and 1P reserves of 405 mmboe at year end, increased 2P reserves life by one year to 12 years
• Potential acquisition of the UK and Norway assets from Energean Oil & Gas, provides material additional growth in reserves and resources
• Strong conversion of contingent resources into reserves; 2C resources of 302 mmboe provides material future growth potential

Fully-funded organic development plans, providing mid- and long-term growth opportunities

• Remain on course to achieve 200 kboepd milestone; production guidance of 145-160 kboepd for 2020
• Reduced development capex to $750- 850 million in 2020; reflecting lower commodity price environment
• Important progress expected across our ~110 kboepd project pipeline
• Important discoveries at the Echino South, Sigrun East and Isabella wells; exploration programme for 2020 under review as a result of lower commodity prices

Committed to the highest HSE standards, industry-leading environmental targets and socio-economic development

• Material improvements in safety performance; LTIF down to 0.66 and TRIR down to 2.1
• Carbon intensity target of 6kg CO2/boe by 2030 from managed production annually
• Targeting net zero methane emissions by 2030 from managed production
• European activities supported 11,500 jobs and contributed an estimated $2.8bn gross value added in 2019

Neptune’s Executive Chairman, Sam Laidlaw said: 
“The coronavirus pandemic poses many challenges for society and global economies. Our primary responsibility is to our people, keeping them all safe and well. We have reacted with speed, decisiveness and care to make sure we have the right measures in place to ensure our people’s health, while also maintaining our operational capability.

“We have also seen a rapid deterioration in oil prices in 2020, which presents the energy sector with further challenges. While the pricing outlook is unclear, we are prepared for prices to be lower for longer. We have built Neptune to be a resilient business, with a low-cost base, relatively low leverage, a robust balance sheet and a fully-funded development programme. While we have been quick to identify further cost and capital reductions across the business, we will not do so at the expense of long-term value.

“Two years on from the company’s formation, we are a stronger business: one that is more geographically diverse, with a longer reserve life, a lower cost base and a lower carbon production profile that is heavily weighted towards gas. The result is that Neptune is resilient enough to meet the challenges of today and uniquely placed to make a positive contribution to meeting society’s energy needs tomorrow.”

Neptune’s Chief Executive Officer, Jim House said: 
“Neptune made significant progress in 2019, positioning the business well for long-term growth. The acquisitions we announced add low-cost projects, material reserves and resources and additional production around our key operational hubs.

“We made progress developing our projects and remain on course to achieve a 200 kboepd milestone. We have also demonstrated good exploration success, with discoveries at Echino South and Sigrun East in Norway and Isabella in the UK, which provide us with longer-term development options.

“As we have moved into 2020, commodity prices have softened materially, while the full impact of the coronavirus pandemic on demand is yet to be seen. Our objective remains to structure Neptune to be resilient at whatever stage of the commodity price cycle.”

Link to Neptune Energy UK country profile