Staatsolie Annual Report 2017

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Confidence in Our Own Abilities 14 Financial and operational Performance 2017 Financials 2017 In 2017, the average posting price per barrel was US$ 47 compared to US$ 32 in 2016, an increase of 47%. Gross revenue was US$ 434 million compared to US$ 358 million in 2016. This is an increase of 21% compared to 2016 and includes net cash income from the participation with Newmont Merian Gold Mine of US$ 46 million. Profit before tax is US$ 94 million compared to the US$ 9 million loss in 2016. Contribution to the Government was US$ 129 million, compared to US$ 41 million in 2016. The breakdown of sales and revenue for 2017 was as follows: In this regard we have engaged with Ernst & Young, one of the big 4 international audit firms to audit our 2017 financial statements. The 2017 financial statements are the first we have prepared in accordance with International Financial Reporting Standards (IFRS). In preparing the 2017 financial statements together with the comparative 20161period data, Staatsolie’s opening statement financial position was prepared as per January 1, 2016, our date of transition to IFRS. Previously Staatsolie used US Generally Accepted Accounting Principles. In 2018 several improvements will be implemented to further strengthen our internal control 1 2017 2016 x 1000 Bbls in M$ x 1000 Bbls in M$ Fuel Oil & Crude 3,221 183 4,249 162 Diesel 1,986 152 1,416 123 Gasoline 593 49 358 32 Bitumen 24 2 36 2 Total 5,824 386 6,059 319 in MWh in M$ in MWh in M$ Electric Energy 30,478 48 26,896 39 Total revenues in US$ 434 358 In this improved context and considering the maturity of the 2015 syndicated bank loan in 2019, we refinanced and consolidated our outstanding debts, including the government loan, to improve the amortization profile and extend debt maturities. With the new bank loan, cash has been freed up for additional upstream investments. The refinancing also included the buyback of the 4.8% stake of the Government related to their financial contributions made in 2016 on Staatsolie’s behalf to the Limited Partnership Agreement with Newmont. We aim to maintain a healthy debt to EBITDA ratio of less than 2.5 and are preparing to diversify our funding sources through a capital market transaction planned for the first half of 2019. framework and finalizing our readiness to enter the international capital market. Over the next 3 years our capital investments will focus on sustaining production at 16,500 bopd, Enhanced/Improved Oil Recovery (EOR/IOR) and nearshore exploration. For 2018, capital expenditures (CAPEX) are forecasted to amount to US$ 216 million (2017: US$ 130 million) which includes US$ 112 million for nearshore exploration and EOR/IOR. The total estimated project budget for nearshore exploration is US$ 120 million. For 2019, we expect a CAPEX budget of around US$ 350 million including approximately US$ 140 million for nearshore exploration and EOR/IOR.
Annual Report 2017 15 Merian gold mine The Newmont Suriname operation currently includes the Merian 2 and the Maraba pit. Construction of the processing facility to process ore from Merian 2 began in August 2014 and commercial production started in October 2016. The Maraba pit was added to the production stream during the first quarter of 2018. Brownfield exploration and development for new reserves is ongoing. Merian’s gross property, plant and mine development at December 31, 2017 was US$ 786 million. Merian produced 513 thousand ounces of gold in 2017 and the partnership reported 5 million ounces of proven and probably gold reserves at December 31, 2017. Gold production in 2018 is projected at 511 thousand ounces as per the 2018 business plan. Operational performance Upstream Reserves At December 31, 2017, proven reserves stood at 86.7 million of stock tank barrels (MMSTB) compared to 84.2 MMSTB in 2016. Due to a number of step-out wells and appraisal wells, and the commitment to implement polymer flooding as a EOR technology, the proven reserves went up surpassing the goal of a Reserve Replacement Ratio of 1:1. Exploration To ensure that we can continue to meet production targets, our focus in 2017 was preparation for a renewed exploration drilling program in 2019. We also worked to improve our internal processes to fast-track the program. This included: • The installation of a project team to prepare for nearshore drilling in 2019. • Implementation of a clear process and a play based exploration workflow to deliver prospects in nearshore blocks A, B, C and D. • Presentation of a nearshore prospect portfolio, including economic assessments and a nearshore exploration venture plan. • Approval of the nearshore venture plan. • Adding additional personnel capacity to the exploration team. • Start exploration evaluation of the shallow offshore area together with the team from Petroleum Contracts. To support drilling target selection, nearshore seismic data was re-processed, with intermediate fast-tracked results received at year-end. We also improved our understanding of reservoir and seal qualities, and obtained additional data by using an external laboratory to further enhance our petrophysical model. In 2018, we plan to further improve the nearshore lead and prospect portfolio and venture plan, and work on the preparation for a drilling campaign of 10 exploration wells in 2019. A prospect portfolio in the shallow offshore should be established by end 2018. Crude production Due to the downturn of the oil price, our drilling program was limited in 2016. This influenced 2017 production, which declined from 17,000 bopd in 2015 to 16,300 bopd in 2017. The overall production goal was to halt the decrease and sustain production at or above 16,300 bopd in 2017, as well as to lay the foundations for recovery to 17,000 bopd. In 2017, there was a 5-rig Development Drilling Program. However, because of lack of availability of the fifth rig due to construction delays, 115 production wells were drilled against an initial target of 141. This is still a significant achievement. The average production of 16,300 bopd was achieved with close to 1,900 wells. To achieve this, 600 Staatsolie employees and more than 300 contractors were safely involved across an area larger than 250 km 2 . With careful cost management, the average production cost per barrel was US$ 8.60, which again pleasingly placed us in the lowest cost quartile. In 2017, many improvement projects were initiated that will benefit the organization in the coming years targeting to sustain the production, bring down operational costs and reduce the risk to harm employees, the environment and the community we work in. A comprehensive study was carried out to detect bottlenecks in operational and processing systems. The recommendations from the study are being incorporated into our plan to improve the overall production process. The main focus in 2018 is a crude production of 16,500 bopd average across the year. To guarantee production until 2024, when it is expected that 1
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