Nido Petroleum incurs $28.3-million loss

MANILA, Philippines - Australia-based oil and gas exploration firm Nido Petroleum Ltd. incurred a net loss of $28.3 million in 2009, from a $7.2-million income in 2008, due to higher costs in its Philippine operations.

In a statement, Nido said cost of sales more than doubled to $27.9 million from $11.5 million the previous year due to operations at the Galoc oil field, which started on October 2008.

Nido has a 22.3-percent economic interest in the Galoc oil field. Galoc Production Co. (GPC), co-owned by European trade group Vitol (68.6 percent) and Otto Energy Ltd. (31.4 percent) is the field’s lead operator with a 59.84-percent stake. The balance is held by Oriental Petroleum & Minerals Corp./Linapacan Oil Gas & Power Corp. (7.79 percent), The Philodrill Corp. (7.21 percent) and Forum Energy Philippines Corp. (2.28 percent).

The Galoc oil field has been estimated to contain 10 million barrels of oil, and is currently producing between 12,000 to 14,000 barrels per day from two sub-sea wells.

Nido said it likewise incurred $24.1 million in net foreign currency loss due to the strengthening of the Australian dollar, which had a negative impact on net US dollar balances.

The company said the loss came despite an improvement in revenues from the Galoc oil field, the company’s core income driver, which increased to $46.2 million last year from only $7.2 million in 2008.

Revenues from the sale of crude oil also increased to $47.8 million last year from $10.3 million in 2008 due to its Galoc operations.

Jose Victor A. de Dios, Nido president and CEO, however, stressed that the losses will not in any way affect further developments in the Galoc field.

“The Galoc joint venture continues to assess further facility and subsurface development for the field and Nido continues to pursue its independent review of developed reserves, undeveloped reserves and any other remaining potential in the field,” De Dios said.

Production at the Galoc field averaged 7,529 barrels of oil per day, with 2.7 million barrels of oil (mmbbl) produced for the whole year, with total since startup at 3.58 mmbbl.

Nido sells portion of its oil produce to Petron Corp., the country’s largest oil refiner. It also supplies oil to Korea, Japan and Thailand.

The second phase of the Galoc field development, which involves the drilling of two additional wells, has yet to start. The second stage of the development is expected to tap an additional reserve of five mmbbl and around 4,000 barrels to the field’s daily production.

Crude oil from Galoc is expected to generate foreign exchange savings for the country worth over a billion dollars during its lifetime.The oil field’s production is equivalent to six percent of the country’s total daily demand of 300,000 barrels.