Interoil recorded an EBITDA of USD 7 million in Q2 2013 on operating revenues of USD 21 million. Adjusting for extraordinary one-off items, the underlying EBITDA amounted to USD 9 million, relative to USD 14 million in prior quarter. The reduction in underlying EBITDA mainly relates to a reduction in revenues, caused by lower production and oil prices, and higher costs due to increased operational and legal activities in Peru.
The drilling program in Colombia is progressing as planned, but had little effect on the Q2 figures. The first well was completed in mid-June and 6 wells have been reported so far. July showed a marked increase in production which should yield stronger results for Q3 and onwards. Another 6 wells are planned for 2013, before the second phase of the drilling program will commence in early 2014.
In Peru, production continued to decline in Q2, in-line with expectations. In mid-June, a 6-well work-over program was initiated, yielding an increase in production for July. Another 8 wells are targeted for work-overs in Q3, with the aim to stabilize production at above 2,650 bopd. In total, around USD 1,5 million will be spent on the 14-well work over program, with short payback times and strong profitability.
Recently, there has been considerable speculation in the Peruvian press regarding license extensions for various licenses, including those belonging to Interoil. Although it appears positive that a license extension has support from various Government bodies in Peru, it is also clear that this issue has become a highly political process with very conflicting views. Interoil will continue its force majeur proceedings as well as other strategic initiatives.
The overhead cost reduction program is on track, but as previously stated, only limited effects were achieved in Q2 due to restructuring expenses. The company expects a material reduction in overhead expenses from Q3.
Interoil has been through a phase of transition in the first half of 2013 and many strategic and operational initiatives were implemented. The effects of these initiatives will start to show results in Q3, through increased production in both Colombia and Peru, and a lower cost base in Oslo and through the liquidation of the technical office in Zurich.
Detailed information on the operational and financial activities of Interoil is presented in Interoil's Q2 2013 Report and the Q2 2013 Presentation enclosed.
Thomas J. Fjell
Mob: +47 958 15 300
Mob: +47 488 94 426
Interoil Exploration and Production ASA is a Norwegian based exploration and production company - listed on the Oslo Stock Exchange - with focus on Latin-America. The company is operator of several production and exploration assets in Peru and Colombia. Interoil is headquartered in Oslo