Highlights
Financial Highlights |
||||
12 months ended 31 December |
||||
HK$ '000 |
2021 |
2020 |
Change |
|
Revenue |
11,167,076 |
5,034,518 |
121.8% |
|
Gross Profit |
90,658 |
23,499 |
285.8% |
|
Profit (loss) for the year |
329,403 |
(79,494) |
- |
|
Basic earnings (loss) per share (HK cents) |
3.76 |
(0.91) |
- |
|
HONG KONG, March 30, 2022 /PRNewswire/ -- New Times Energy Corporate Limited ("the Company" or "New Times Energy", together with its subsidiaries, the "Group", HKSE stock code: 166) announced its annual results for the 12-months ended 31 December 2021. In 2021, the Group recorded total revenue of HK$11,167.1 million (2020: HK$5,034.5 million), representing a growth of 121.8% year-on-year, and recorded a profit of HK$329.4 million (2020: loss of HK$79.5 million). The turnaround in the Group's profitability and its subsequent operation profit was primarily attributable to the Group's acquisition of a private Canadian oil and gas company as well as the concurrent global recovery in commodity prices.
During the year, earnings per share were HK3.76 cents (2020: loss of HK0.91 cents per share).
BUSINESS REVIEW
CANADA
The Group on 21 September 2021 completed the acquisition of a private Canadian oil and gas company headquartered in Calgary, Alberta, with a focus on exploration and production in the Western Canadian Sedimentary Basin. The said private Canadian oil and gas company was renamed to NTE Energy Canada Ltd. ("NTEC") effective from 1 January 2022. NTEC's oil and gas assets are situated in four locations in Western Canada, and in total are estimated to contain Proved (1P) reserves of 30.2 million barrels of oil equivalent ("boe") and Proved plus Probable (2P) reserves of 40.0 million boe, attributable to the Group. The Group also owns and operates a 1,200 acres (4.9 km2) multi-use industrial site ("Discovery Park") at Campbell River, British Colombia, providing industrial land parcels, buildings and warehouses for businesses to lease. Existing site infrastructure features an electrical substation that is connected to two 138 kV transmission lines, providing over 200MW of 100% renewable hydro energy power supply from BC Hydro sourced from a dam approximately 6 km away from the site with a rate as low as C$0.06/kWh. Additional facilities include a solid industrial waste landfill to handle hazardous substance disposal needs, a complimentary waste water treatment facility, fresh water supply, and 2 deep water piers for dock usage and direct ocean water access.
Operations Update
Greater Sierra Area, Horn River Basin, Wapiti and Willesden Green
During the period from 22 September 2021 to 31 December 2021 ("Post-Acquisition Period"), the Group has re-organized its newly acquired Canadian subsidiary to maximize its financial, tax and operational efficiencies. New procedures and departments have been put in place to strengthen management internal controls. With average daily oil and gas production of approximately 12,300 boe per day during the Post-Acquisition Period, NTEC remapped the gathering system connecting all the wells and facilities in the Greater Sierra Area and also prepared an optimization program of replacing old equipment, swabbing wells, and adjusting operational calibrations to improve underperforming wells. At the same time, shut-in wells are being restarted with the improved economics associated with higher natural gas prices. An elaborate computer modelling of the reservoir/production system has been undertaken to assist in the optimization process. This program was initiated in the fourth quarter of 2021 with a material increase in production expected in the first quarter of 2022.
Due to a rebound in demand for energy products in 2021, and winter seasonal effects further pushing commodity prices up, NTEC was able to generate a significant net cash flow and operating profits, which tangibly contributed towards for the Group's 2021 post-acquisition financial results.
NTEC's operating profit during the Post-Acqusition Period was C$8.2 million (approximately HK$49.7 million equivalent). Given the current price forecast for natural gas in Western Canada in 2022, NTEC is expected to generate net operating cash flow of at least C$3.0 million per month in 2022 for the Group (approximately HK$18.3 million equivalent per month) without taking into account additional cash flow from new drilling.
Discovery Park
With respect to Discovery Park, the multi-use site is currently leased to tenants in industries including but not limited to green data centres, modular construction, marine services, and steel fabrication. The Group has already engaged the services of a world-renowned consulting group, Stantec Inc., to provide a master plan for a complete redevelopment of Discovery Park into a green-tech hub to attract new tenants that align with the Group's ESG mandate. The site is an ideal candidate for aquaculture as well as green hydrogen, given the low cost electricity on site and ample supply of ocean and fresh water. The Group is actively exploring ways to bring such projects to fruition through support and cooperation from local and federal government.
Additionally, the Group is in the process of setting up vertical farming operations at Discovery Park by partnering with well-known and established ag-tech companies both in Canada and globally to provide efficient, localized food supply solutions. Using indoor farming technologies, Discovery Park will contribute to redefining the way traditional agriculture is being carried out for certain food groups, by eliminating wasteful long supply chain agriculture into local chains that benefit the Western Canadian people, resources, and economy.
2022 Capital Program and Future Development
Following the Group's recent Canadian acquisition, focus is now on integrating and developing the new business. NTEC is currently applying for 3 well licenses from the Alberta Energy Regulator and finalizing a drilling and completion program which consists of drilling two-mile-long laterals for each well to be initiated in the third quarter of 2022. The 3 wells will be drilled and completed back to back using a single rig for a total expected capital expenditure of approximately C$10.5 million (approximately HK$67.2 million) net to NTEC's working interests, and is expected to be brought on production in the third quarter of 2022 so to take advantage of strong oil and gas prices over the winter months. Each of these 3 wells will average approximately 400 boe per day of production (45% light oil and natural gas liquids) net to NTEC in the first year, achieve payback of the initial capital expenditure within 5 months and generate a ROI of 160% over three years using GLJ Ltd.'s commodity price forecast as at 1 January 2022. NTEC is also planning to drill an additional 3 wells in Willesden Green, Alberta with one-mile-long laterals immediately after the aforementioned 3 wells can be successfully completed, provided that oil prices can be maintained at recent high levels. The cost of the latter 3 wells will carry a total cost of approximately C$7.2 million net to NTEC's working interests and achieve payback of the initial capital expenditure within 6 months. The 2022 capital program will be fully funded through NTEC's cash on hand. Any improvements in the oil and gas price outlook in 2022 and 2023 will allow NTEC to generate stronger cash flow and quicker returns from the 6 drilled wells that can be reinvested into the Group's ESG initiatives.
The Group believes natural gas will serve as the bridge fuel towards a low carbon economy, as the world in its attempt to satisfy commitments set forth in the Paris Agreement, transitions from high CO2 emission energy sources such as coal and oil, towards renewables and zero emission sources. Alberta's phasing out of coal-fired electricity, projected to take effect by the end of 2023 (6 years ahead of the federally mandated 2029 deadline), provides long term price support and demand for natural gas.
The Group is currently in the process of reviewing the economic feasibility of initiating CCUS at Greater Sierra Area by engaging relevant professional engineering and geoscience service providers who have extensive Energy Transition experience in North America. The Group expects the government of Canada to release an updated carbon policy in the second quarter of 2022 that will provide guidance and direction for CCUS initiatives that NTEC will be relying upon.
ARGENTINA
Operations Update
Los Blancos
Operated by High Luck Group Limited ("High Luck"), the Group's indirect, wholly-owned Argentinian subsidiary, the Los Blancos Concession ("Los Blancos") covers a surface area of approximately 95 km2 in the Province of Salta in Northern Argentina. Granted by the provincial authorities of Salta in October 2020, the Group is entitled to produce crude oil in Los Blancos for the next 25 years.
With the exception of January 2021, when production was temporarily halted by High Luck to enable routine testing of the oil well, production for the year was relatively unhindered, except for minor labour union disruptions. Light crude oil continues to flow unaided under a stable and high wellhead pressure, with an API index of approximately 37º and zero water content, free of sulphur and other contaminants.
Average daily production achieved by HLG's 50% participating interest in Los Blancos during the year was approximately 342 bbl per day, excluding non-producing time. In Northern Argentina, where HLG's production facility is situated, and where the domestic market is denominated by one major refinery (Refinor), average sales price per bbl of oil for 2021 was US$56.02, compared to US$70.68 per bbl for Brent's 2021 average. In an effort to counteract Refinor's almost monopolistic status, the Group endeavours to market to other refineries willing to pay better price.
With HLG expecting to secure an export licence imminently, the Group is optimistic that oil sales from Los Blancos can be redirected to nearby refineries across the border in Bolivia and Paraguay, where prices offered are potentially higher and more aligned to Brent. The ability to export oil from Los Blancos to neighbouring countries of Argentina could dramatically change the outlook of the Group's business in Argentina.
Argentina challenges and outlook
During 2021, the Argentine Pesos ("ARS") further devalued, an the country also continues to be gripped by hyperinflation. With domestic oil price on average being approximately US$57.00 per bbl, which is substantially lower than international prices, and other difficulties including the politics, sporadic labour union and social unrest, Argentina continues to be a difficult place to conduct business. Furthermore, the country's capital controls also restrict the Group's and foreign investors' ability to repatriate ARS cash surplu ses, with the exception of the prohibitively costly "Blue Dollar Rate" option. The challenges posed by Argentina are likely to persist at least in the near future. The Group's exposure in Argentina is relatively low at HK$107.3 million i.e. less than 10% of the Group's net assets. On a positive note, Argentina has recently recorded its highest monthly oil production in over a decade, which can only bode well for the possibility of a further rebound in domestic oil prices in the coming year, as the economy and demand for oil further strengthens.
COMMODITIES TRADING
The Group's physical gold trade business is operated via an established and reputable intermediary, with a long history and presence in Hong Kong. To ensure the Group is not financially exposed to the day-to-day fluctuations of gold prices, all physical gold trades, and physical gold inventories held by the Group are hedged with financial hedging instruments.
During 2021, the Group's physical gold and silver trade business managed a total trading volume of HK$10,824.7 million. Average margins per trade in 2021 experienced marginal erosion, which was in part due to higher external refining and handling costs.
Due to the progress made by the Group, since it entered the physical gold trading business in June 2021, the Group took the decision to vertically expand, by establishing its own precious metals refinery. The aim is to grow the Group's gold and silver trade volumes, as well as restoring and improving the trading margins by bringing in-house this process. Additionally, refining will be a new service offering which the Group is hopeful it can build a meaningful market share.
Construction works of the specialised refinery plant and the installation of equipment at the site situated in Hong Kong are proceeding. However due to global supply chain disruptions, the Group's new precious metals refinery target commencement date is delayed to the third quarter of 2022.
Looking ahead, Mr. CHENG, Kam Chiu Stewart Chairman of the Group said, "2021 was a transformational year for the Group with its entry into Canada and the concurrent recovery in global commodity prices. We believe that recent global events have demonstrated the necessity for stable energy sources like oil and gas while the world transitions to renewables. NTEC is on track to drill a minimum of at least 3 wells in Alberta in 2022 and will also continue to optimize our existing wells in B.C. Both aforementioned programs will have positive effects on the Group's profitability of our oil & gas segment in the coming years. With a strong financial position and positive cash flow expected from across all of the Group's operations in Canada and Argentina for 2022, the Group is prepared and excited about its ability to create long term value for shareholders."
About New Times Energy Corporation Limited
New Times Energy Corporation Limited (HKSE stock code: 166), headquartered in Hong Kong, is mainly engaged in exploration, development, production and sales of natural resources, as well as commodity trading. The Group's activities are located in Canada, Hong Kong, Argentina, USA, and PRC. The Group will continue to enrich its oil and gas portfolio through exploration, and strategic acquisitions to broaden the Group's income streams, aiming to deliver significant growth in cash flows and reserves to its shareholders. Meanwhile, the Group is setting up a Gold Refinery Plant in Hong Kong to expand physical gold and precious metals trading business.
