Canadian junior Candax Energy Tightens Its Belt Despite Rising Tunisian Production

By Martin Clark

Like many others, Canadian indie Candax Energy is keeping a close eye on costs these days as its plots its next step forward in the current challenging operating environment.

That includes looking at “strategic and financial alternatives” including the possible sale of the company, a refinancing, or joint ventures.The Toronto-listed group has a portfolio of mature assets in North Africa, including some reliable output from Tunisia, one of the region’s more stable economies.

It announced its year-end results at the end of March, in which production, net of royalties, averaged 502 barrels of oil per day (bopd) in 2014; that’s up from 437 bopd a year earlier.It follows a successful remedial workover campaign at Ezzaouia, resulting in all six producing wells being fully operational, and continued success of the gas cycling programme at El Bibane.

Revenue for the year reached US$US17.1 million compared to US$16.5 million in 2013, mainly from the increase in production. Yet despite this success on the ground – it’s the second consecutive year Candax has boosted production and generated cash from its operating activities – management are on the lookout for options to navigate the difficult new oil price climate.

Benoit Debray, chairman and chief executive, said the fall of oil prices, as well as the financial impact of the leak of one of its oil storage tanks, has “forced the company to identify and examine any strategic and financial alternatives available”.

Although production has provided stable cash flow for operations and some ongoing development work, it still reported a US$6.9 million loss for the year. That’s way down on the US$41 million loss in 2013, but significant especially given the US$40.6 million debt in place at the turn of the year, although some of that has now been wiped after working closely with majority shareholder and principal debt holder, Geofinance NV.

Progress is being made but these are tough times for many smaller independents.
Candax is now undertaking cost-cutting plans to continue its exploitation of mature fields like Ezzaouia and Robbana as it explores the alternatives.Unlike many of its peers though, at least it has a good wedge of production to keep things going as the high level talks continue in the boardroom.