AMSTERDAM () -- French oil and gas junior Maurel & Prom's [Euronext:MAU] figures, based on revenues of EUR580.5 million ($762.8 million), in comparison to EUR407.7 million ($575.7 million) in 2005, have been above company expectations. The main reason behind the success is an overall increase of production (22%) reaching 45,452 barrels per day (bpd) in 2006, in comparison to 37,265 bpd in 2005. At the same time, M&P's crude oil sale price levels also increased by 25%.
Maurel & Prom is a France-based company engaged in the exploration of oil and gas, holding assets and operations in Congo, Cuba, Gabon, Peru, Senegal, Tanzania, Italy, Hungary, Colombia and Venezuela.
Main assets are its Congo based 48% stake in the M'Boundi deposit, a 65% interest in the Kouilou deposit, a 49% share in the La Noumbi deposit and a 50% share in Kouakouala. In Gabon, M&P holds a 95% share and a 50% share, respectively, of the Ofoubou Ankani and Banio onshore permits, as well as 100% of Nyanga-Mayombe, Omoueyi and AET Kari. Other concessions are held in Senegal, Cuba, Colombia and several others.
As the report indicated, M&P's decision to increase its exposure in Latin America has been positive, showing group oil sales in the region of 47%, instead of the 30% in 2005. African oil sales however still are the main income source, showing however a decline of 8% to 53% in 2006. The sales figures are partly backed up by reported oil production in the respective regions; 61% in Congo (compared with 66% in 2005); 36% in Colombia (compared with 29% in 2005) and 3% in Venezuela (compared with 5% in 2005).
As indicated by M&P's management, Congo sales have decreased partly due to the transfer of 10% of the M'Boundi rights to SNPC (Congolese national oil company) in exchange for an extension of the rights on this permit from 2017 to 2030 reducing the company's share of production. This transfer represents a reduction of approximately 3,030 bpd in 2006. The latter, however, has been compensated by a 30% increase of the average selling price to $62.7 per barrel for Congo crude (N'Kossa quality blend price). Total production on the M'Boundi permit has increased by 26% to 56,113 bpd during 2006.
Latin American operations show a mixed picture, as in Colombia several changes took place effecting sales and production alike. M&P reported that the change in Colombia sales is the result of the inclusion of Hocol in Latin America for the full year 2006 compared with 149 days in 2005, while at the same time production was affected by the retrocession of the Tello concession on 14 February 2006 (9,000 bpd). Total effects of the two issues have been a 58% increase in sales volumes, with a 17% increase at the same time of average selling price ($58.4 per barrel).
In Venezuela, problems continue to negatively affect operations, as long as the company and the Venezuelan government continue their discussions to determine Maurel & Prom's percentage in the new mixed economy company. For reasons of prudence, no production has been booked since 1 April 2006.
At the same time that M&P reported on FY2006, the company has made several discoveries, such as a Colombian oil discovery made by its Hocol subsidiary at the San Jacinto/Rio Paez site. The reserves could be around 83 million barrels and Hocol holds around 37% of equity on the field.
In the same week, Tanzanian government officials reported that the gas field which M&P discovered in Tanzania has reserves of about 5 trillion cubic feet of gas. The junior has not yet commented on this.
Maurel & Prom said last month that test wells at the Mkuranga-1 project, in which it has a 60% share, has found gas at a depth of 2,030 metres with a stable flow of around 19.2 million cubic metres per day.
Conclusion
For investors it is time to reassess their options with the French oil and gas minnow. Based on current portfolio and production developments, taking into account its wide spread of assets in highly prospective petroleum regions, it seems to be a good bet to be made.
A small oil and gas minnow's stock is very well equipped to react to high value discoveries. Additionally, M&P's portfolio could perfectly fit into larger independents strategies, such as Woodside, Marathon, Vanco or Tullow.
Taking into account already existing production sites, reserve potential and upcoming new projects, more will be heard from the French operator soon. Time to go for a French meal maybe for the Anglo-Saxon crowd?
