Nautical Petroleum, which focuses on the development of heavy-oil assets in the UK and Europe, said yesterday it was not too concerned about falling oil prices, although heavy oil was typically more expensive to produce than conventional resources.
Commercial director Paul Jennings said: “Heavy oil costs 20-25% more to lift, counting both capital expenditure and operating expenditure, at around $25 a barrel. Costs are also increasing and it is a slight concern that Brent crude prices are now below $70 a barrel, but we would still be comfortable at anything above $40.”
Mr Jennings was speaking after Nautical posted results for the year to June 30 and announced that it had increased its best estimate of its contingent resources – oil known to be in place but not yet produced – to 94million barrels from 56million in June last year.
The increase is primarily based on Nautical’s core assets of Kraken, where it is operator with a 35% stake, and Statoil-operated Mariner, where it holds 26.67%.
Chief executive Steve Jenkins said: “Nautical’s progress over the past 12 months has resulted in the creation of a solid asset platform from which production and revenue are now firmly in sight for our shareholders.
“Following the successful discovery of Kraken at the end of 2007, and work carried out on Mariner, the company has reserves of 23million barrels and resources of a further 94million barrels, in addition to £20million of cash in the bank.
“We look forward to the future with a high level of confidence.”
Nautical said Kraken and Mariner, both south-east of Shetland, were on track for field-development plan submissions in late 2009 and mid-2010 and it had sufficient cash resources to take it through to the submissions for the two fields.
Chairman Ian Williams said the “prospectivity” of the company’s licence portfolio was endorsed by a series of farm-in deals on terms which clearly showed partner confidence in the quality of its assets.
Nautical has also announced the appointment of Will Mathers as chief financial officer and finance director to succeed Hemant Thanawala.
Mr Mathers, 32, was previously in finance posts with International Energy and Royal Dutch Shell.
The company, which has no income from production yet, reported pre-tax losses for the year of £4.52million, including a write-off for exploration costs of £3.2million, compared with an £863,000 deficit the year before.