Mubadala Petroleum has reduced by $14 million its work programme and budget for the Manora oilfield development off Thailand in the wake of the coronavirus pandemic.

Joint venture partner Tap Oil confirmed Friday the Manora partners had agreed to cancel a planned exploration well, saving a gross $3 million.

A further $7.3 million is expected to be saved through operational expenditure reductions and the cancellation of a planned workover campaign, while a further $2.8 million in brownfield capital expenditure has also been deferred until 2021.

The joint venture are also reviewing a planned three-well development plan at Manora, considering the economics, along with cost and production optimisation plus risk mitigation opportunities before making a final investment decision “in the near future”.

Tap confirmed it had already carried out extensive technical analysis and engaged with Mubaldala’s team on the planned campaign, adding both it and the operator were aligned technically on the choice of wells, drilling locations, volumes and risks.

Covid-19 response

The Australian junior also revealed Friday that Mubadala had put in place a number of protocols at the oilfield to reduce the risk of Covid-19 spreading.

This includes plans for business continuity, infection control, pandemic response, infectious disease outbreak management, logistics and aviation.

The operator has also extended rotating crew changes at the Manora facilities by two weeks in order for the crew to undergo a 14-day quarantine period before going offshore.

Tap also confirmed that all of its Australia-based staff and contractors were currently working remotely from home, while Mubadala’s corporate staff in Bangkok, Thailand, are also working remotely during the pandemic.

“The demand side economic shock resulting from the Covid-19 pandemic and the supply side shock of an oil price war has seen Brent oil prices decline to 25 year lows, while US prices, such as the benchmark West Texas Intermediate are at record lows,” Tap said in Friday’s statement.

“While the oil price war may have ceased, the global crude stock overhang, and storage constraints, is likely to impact crude oil markets for the rest of 2020. This will continue to have an adverse impact on Tap’s earnings and cashflow. 1H 2020 oil sales were partly protected by hedging however these hedges have now rolled off and there is no protection for future sales.”

It added that it would revisit hedging once an offtake profile for the second half of the year has been finalised, noting the lack of a firm offtake schedule in the second half impacted its ability to effectively hedge and could impact production.

Output at Manora at the end of March averaged 5536 barrels of oil per day, which Tap noted was at least 5% above Mubadala’s 2020 base plan.

It also highlighted the fact the Manora floating storage and offloading vessel had about 600,000 barrels of gross storage capacity which would be useful in optimising offtake during difficult demand conditions.

Weathering the storm

Tap claims that while it expects the Covid-19 pandemic to have an impact on its earnings, cash flow and financial metrics, it believes it is well placed to counter any negative financial impacts. As of 31 March, it had $28.9 million in the bank and no outstanding debt.

Its Manora cash operating costs are roughly$26.6 per barrel and $31.6 per barrel including royalty, insurance and marketing costs, while 37% of April liftings were hedged at $64.2 per barrel.

It also noted it received cash receipts from two liftings during the first quarter of 2020 of nearly $10.1 million at an average price of $65.78 per barrel.

The Manora oilfield lies in the G1/48 concession, where Mubadala holds a 70% operated stake and Tap holds the remaining 30% equity.

Coronavirus

Mubadala makes spending cuts at Thai oilfield amid Covid-19 crisis