By Amy McLellan
Shares in AIM-quoted Chariot Oil & Gas were up more than six per cent on Tuesday as the company revealed it was serious about preserving cash. The Atlantic-focused explorer, which is no stranger to the highs and lows of the oil and gas roller-coaster, has announced that it will cut the remuneration of all Board members by 50 per cent and that CFO Mark Reid will depart from the company. These changes will realise a net cash saving of around US$1.5 million over the next year, said the company.
The cost-cutting comes after an in-depth review of the corporate strategy in light of current market conditions: oil prices may have recovered in recent months but remain depressed and market outlook is nervous. As a result the £25 million company was keen to cut costs to help preserve its cash position and maintain financial flexibility as a “precautionary measure”.
This prudence was learned at cost: long-time shareholders well remember the punishing market response to the expensive dusters drilled off the coast of Namibia, including one drilled on a sole risk basis; new management have made it clear that farm-in deals to minimise exploration spend are the way forward for the new look Chariot.
The cost-cutting mood means CFO Mark Reid has stepped down to pursue other interests and will be replaced as acting CFO by current group financial controller, Julian Maurice-Williams. Company chairman George Canjar said Reid had been an “influential and highly valued member” of the executive team, who had been instrumental in securing funds through last year’s Placing, which raised US$15 million.
As a result, the Guernsey-based company is debt free, ended 2014 with a cash balance of US$53.5 million and, thanks to some useful farm-outs, including bringing in Woodside as a partner in Morocco, is fully funded for its current work commitments. Compared to many of its AIM peers, this is an enviable position – but it is clear from Tuesday’s announcement that Chariot is not complacent about the ongoing challenges of current market conditions.
As well as Morocco, where the company is seeking additional farm-in partners to fund drilling on the Rabat Deep licence in 2016/17, Chariot also has assets in Brazil, Namibia and Mauritania. In Mauritania, prospectivity has been boosted by recent discoveries by other operators: this is always heartening.
The company was recently granted a one year extension to the first exploration phase on the C-19 block, providing extra time to carry out additional studies to further de-risk prospects prior to drilling. Four drill-ready prospects have been identified, ranging from single targets with in excess of 430 million barrels each to giant multi-stacked prospects, with additional leads identified within the fairway.
Chariot has 55 per cent alongside partners Cairn with 35 per cent and state company SMHPM with 10 per cent. Again, the company is keen to reduce its exposure via a farm-out before proceeding with an exploration well.