Otto Energy's Annual Reserves and Resources Statement - 30 June 2024
OTTO ENERGY LIMITED (OEL) Share Update July 2024 Wednesday 31st
Otto Energy Reports Significant Decline in Reserves
Otto Energy Limited (ASX:OEL) has released its annual reserves and resources statement for the year ending 30 June 2024, revealing significant declines in its proved, probable, and possible reserves.
Instant Summary:
- Net Proved Reserves (1P) of 2.0 MMboe, an 18% decline from the prior year.
- Proved Plus Probable Reserves (2P) of 3.3 MMboe, a 32% decline from the prior year.
- Proved Plus Probable Plus Possible Reserves (3P) of 6.0 MMboe, a 15% decline from the prior year.
- Contingent and Prospective Resources remain unchanged at 8.7 MMboe.
- Proved Reserves increase of 51 Mboe at Lightning and 84 Mboe at Mosquito Bay West due to strong field performance.
- Significant cash position of US$40.5 million as of 30 June 2024.
Annual Reserves Overview
Otto Energy Limited has reported a substantial decrease in its reserves for the year ending 30 June 2024. The net proved reserves (1P) now stand at 2.0 MMboe, marking an 18% decline from the previous year. This decrease is attributed primarily to production during the period, which totaled 500 Mboe.
The proved plus probable reserves (2P) have also seen a significant reduction, now totaling 3.3 MMboe, down 32% from the prior year's 4.8 MMboe. This decline is due to reclassifications and production, particularly at the Lightning and SM 71 fields.
Field Performance and Revisions
Despite the overall decline, some fields have shown positive performance. The Lightning field saw an increase in proved reserves by 51 Mboe, and the Mosquito Bay West field increased by 84 Mboe due to strong field performance. However, these gains were offset by downward revisions at the GC 21 and SM 71 fields, reflecting weaker than expected performance and operational issues.
Contingent and Prospective Resources
The contingent and prospective resources remain unchanged from the previous year, totaling 8.7 MMboe. These resources include 4.7 MMbbl of oil and 24.2 Bcf of gas. These estimates are based on the best estimate, unrisked, and require further exploration and appraisal to confirm their potential.
Financial Position
Otto Energy maintains a strong financial position with cash and cash equivalents totaling US$40.5 million as of 30 June 2024. This equates to A$0.0127 per share, based on a 0.6666 US$:A$ exchange rate. The company continues to produce steadily, with current monthly production averaging 1,690 boe/d, of which 52% are liquids.
The reported decline in reserves is likely to impact Otto Energy's stock price negatively as investors react to the reduced asset base. The significant drop in 2P and 3P reserves could lead to a reassessment of the company's future production potential and profitability. However, the strong cash position and steady production rates may provide some cushion against the negative sentiment.
Investor Reaction:
Analysts are expected to react cautiously to the news, highlighting the need for Otto Energy to address the performance issues at key fields like GC 21 and SM 71. The positive performance at Lightning and Mosquito Bay West may mitigate some concerns, but the overall decline in reserves will likely weigh on investor sentiment.
Conclusion:
Investors should closely monitor Otto Energy's operational updates and strategic plans to address the reserve declines. The company's ability to maintain steady production and leverage its strong cash position will be crucial in navigating this challenging period. Staying informed on Otto Energy's developments will be key for making informed investment decisions.