29 September 2016
Oilex Corporate Update
· Planning on vertical well in the Cambay PSC at an advanced stage
· Discussions underway with GSPC to finalise proposed Oilex sole funding for the well
· Additional material cost reduction initiatives being implemented
Oilex Ltd (the Company) is in the final stages of planning a vertical well in the Cambay PSC, located onshore Gujarat State India. The well has been designed to achieve the following objectives:
1) To obtain core samples for the EP-IV zone reservoir which are needed for future drilling, completions and stimulation optimisation
2) Subject to core analysis results, undertake well stimulation of the EP-IV zone
3) To test the shallower OS-II zone for production and to prepare an OS-II Field Development Plan for submission to the Government of India to meet the PSC extension requirements, which are required two years prior to the end of the PSC term, in September 2019.
The Company will, subject to an agreement with our joint venture partner Gujarat State Petroleum Corporation (GSPC), "sole fund/sole reward" the well, with GSPC to provide its ongoing local support for the project. It is anticipated that the agreement will be finalised in the coming weeks. In anticipation of this agreement being concluded shortly, detailed technical analysis and planning to determine an optimum well location is being finalised.
Drilling of the proposed well remains subject to final cost estimates and necessary funding, however it is anticipated that drilling operations will occur in 1H 2017 with EP-IV stimulation to follow some months later.
Cost Reduction Initiatives
Reflecting a proposed reduced activity level for 2017 and the requirement to direct cash resources to the planned vertical well, significant additional cost reductions are being undertaken in both Perth and India. The planned changes include:
· 30% overall reduction in the number of personnel;
· 14% average reduction in salaries and wages for existing personnel;
· review of commercial operations at Cambay and Bhandut Fields;
· careful management of planned drilling and project costs; and
· deferral of all non-essential expenditure.
The personnel related cost reductions are being led by senior Oilex personnel. We note that this is the second decrease in salary for personnel during the 2016 calendar year. Pursuant to the restructure, the Managing Director and Head of India have accepted salary reductions of 22.3% and 18% respectively. Chairman and Non-Executive Director fees are also being reduced by 10%. These changes are effective from 1 October 2016.
Given the marginal financial performance of the existing production from the Cambay and Bhandut fields, these operations remain subject to ongoing review.
Commenting on the restructure, Managing Director Jonathan Salomon said, "The current downturn in our industry and specific requirements of the Company have made these cuts necessary and it is with great regret that we lose some staff and see those retained with reduced compensation.
The future of any company is its people, and we recognise the contribution that all staff are making and have made for the Company, and record our sincere gratitude for the loyalty and effort that all staff have exhibited. This action is being undertaken as it provides the Company with the best opportunity to achieve its next objective of drilling the proposed vertical well to progress the EP-IV project in the Cambay Project. I look forward to updating shareholders on progress in due course."
For and on behalf of the Board
For further information, please contact:
Tel: +61 8 9485 3200
Strand Hanson Limited
Rory Murphy/Ritchie Balmer
Tel: +44 20 7409 3494
Media Enquires (UK)
Patrick d'Ancona/Chris McMahon
Tel: +44 20 7830 9700
Media Enquiries (Aus)
Tel: +618 6160 4900
This information is provided by RNS