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Austral Pacific says reports misleading

Austral Pacific says reports misleading

April 8, 2008

Austral Pacific says reports that it is in financial difficulty are misleading, and although the company has, as acknowledged in its financial statements, short term liquidity issues, it is executing a plan to manage the cash flow challenge and to unlock the significant value in its Cheal asset, which holds some US$72 million (NZ$91 million) of proven and probable reserves [1].

Commenting on recent media reports, Austral Pacific chief executive officer, Thom Jewell, said: "We have a programme to address the company’s short term issues and we’re very excited about working toward realizing the full potential of our Cheal asset in the immediate term.

“Concerns have arisen from the fact that the Cheal field has taken longer than expected – and cost more than expected – and has not produced at the production levels anticipated.”

As a result, Austral has been unable to meet certain completion clauses and covenant ratios specified in its agreements with its bankers. Technically, therefore, the company has had to account for the debt as a current liability.

This was a major component in sparking the ‘going concern’ comment.

The company has been working closely with its bankers to restructure the debt, given future plans.

Jewell said: “We have been very fortunate to have such a supportive banker who is working with us to ensure our short and long term success.

“But, while the directors cited this caution, they also expressed confidence that the company will be able to continue in operation for the foreseeable future, and will be able to realize its assets and discharge its liabilities in the normal course of business,” Jewell said.

Commenting further on the development of Cheal, he said: “We’re on track this quarter to drill another two wells that we expect to boost Cheal production from its current level of about 600bopd to over 1000bopd.

“Once we’ve delivered this phase of the Cheal project, which remains our priority, we can get on with the rest of our long term strategy including ‘Greater Cheal’, Kahili and Cardiff.

“We expect this to start later this year, by drilling Kahili-2 and recommissioning the Kahili field, for which we already have gas sales contracts in place. The field is capable of delivering 8-10mmscf/day and 250 barrels of condensate per day.

“We will be investing in developing those resources, which we have confidence will add future value to the company.”

Jewell said that while he could understand how the media speculation arose, it was unfortunate that the full picture was not presented.

“Let’s hope we get the same level of coverage and interest when we announce our next good news!”


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