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CAMAC Energy (CAK)
Q4 2012 Earnings Call
April 12, 2013 11:00 am ET
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Earl W. McNiel - Chief Financial Officer and Senior Vice President
Peter Cardillo - Rockwell Global Capital LLC
Good day, everyone, and welcome to CAMAC Energy's Fourth Quarter and Year-end 2012 Earnings and Operations Conference Call. Just as a reminder, today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Jason Lee, Corporate Finance Manager for CAMAC Energy. Please go ahead, sir.
Thank you very much. Before we get started, I want to highlight that this conference call includes forward-looking statements and estimates of future performance. There are numerous risks associated with forward-looking statements and forward estimates, and there can be no assurance that the statements and estimates will be realized. A listing of the many risk factors you should consider as part of the material discussed in this conference call has been outlined in our earnings release and in CAMAC Energy’s SEC filings, and we incorporate these materials by reference for all discussion in this call.
All statements in this conference call relating to oil and gas resources, prospects and potential are not references to proved reserves as defined in the applicable SEC regulations and are not permitted in CAMAC Energy’s filings with the SEC.
At this time, for opening remarks and introductions, I would like to turn the call over to our Chairman and Chief Executive Officer, Dr. Kase Lawal. Please go ahead, Dr. Lawal.
Kase Lukman Lawal
Thank you, Jason. Good morning, everyone. Thank you for joining us today for CAMAC Energy's Fourth Quarter and Year-end 2012 Earnings Conference Call. I'm joined today by CAMAC Energy's Chief Financial Officer, Earl McNiel.
On the call today, I will provide a review of the company's progress during the 2012 fiscal year and provide an outlook for the next 12 months. Next, Earl will provide a financial and operational review of the quarter and fiscal year as well as an overview of the company's market strategy moving forward. After these remarks, we will open the line for questions.
In 2012, CAMAC Energy executed several strategic initiatives that put the company on an accelerated growth trajectory over the next 12 months and beyond. In order to truly appreciate the year's accomplishments, it is important to remember where we started at the beginning of this year.
At the end of 2011, we announced that our affiliated company, Allied Energy Plc, had entered into a definitive agreement to acquire Eni's 40% working interest in our Nigeria OMLs 120/121, subject to closing. In the fourth quarter of 2012, we announced the company had been awarded 5 new exploration blocks, 2 offshore Gambia and 3 onshore Kenya, subject to the negotiation and signing of production sharing contracts with their respective governments. At roughly the same time, we also disclosed that we were engaged in preliminary negotiations to divest our Chinese coalbed methane gas exploration assets with Leyshon. Each one of these transactions represented an essential step to unlocking immense value for shareholders over the coming months and years. And therefore, our entire organization entered 2012 fully committed to bringing each one to a successful conclusion. I'm pleased to say that we were able to do just that.
First, in May, we announced that we had signed production sharing contracts in both the Gambia and the Republic of Kenya. In the Gambia, we acquired 100% operating interest in 2 offshore deepwater blocks, A2 and A5, covering a combined 2,666 square kilometers. If you'll recall, our Gambia blocks are immediately adjacent to Blocks A1 and A4 operated by African Petroleum. You may also remember that Chevron drilled the Jammah-1 well in our own block, A2, in 1979 with gas shows. And both A2 and A5 are covered in 2D seismic. Once we signed the production sharing contracts, our technical team went to work, reviewed the existing data and designing the work program for each block. In September 2012, our proposed work programs permitting us to conducting surveys, acquiring 3D seismic data and drilling one exploration well on each block by the end of 2016 were approved by the Ministry of Petroleum in Gambia.
In Kenya, we actually signed 4 production sharing contracts instead of 3 that we had previously announced. We acquired 100% operating interest in 2 onshore Lamu Basin blocks, L1B and L16, and 2 offshore deepwater blocks, L27 and L28, for a combined net acreage position of 36,919 square kilometers, representing one of the largest of any pure play Africa-focused independent in Kenya. Just like in the Gambia, once we signed the production sharing contracts in Kenya, our technical team went to work, analyzing existing data, reviewing regional geological trends and designing a work program for the first initial exploration period in each block.
In September, we received the ministry approval for our Kenya work program, permitting us to conducting surveys, acquiring seismic by the end of 2014 on our onshore blocks and the end of 2015 on our offshore blocks.
After closing our exploration acquisitions, at the end of June we announced that Allied had closed its transaction to acquire Eni's interest in OMLs 120 and 121. On day 1, Allied announced its intention to fully fund the drilling of the Oyo #7 well as soon as a rig is available to both increase the oil production from the producing Pliocene reservoir and pair [ph] the exploration potential of the deeper Miocene, the source for all -- of all major production in the Gulf of Guinea. Through a technical services agreement with Allied, CAMAC Energy personnel took over day-to-day operation of the OMLs and began working to stabilize the production decline in Oyo. They were successful in doing so, and we have had remarkable stabilization period. At the same time, working alongside Allied, our team also began contracting critical services, ordering necessary long lead items for both drilling and completion of Oyo well #7.