EuroBusinessMedia (EBM) : Addax Petroleum, one of the leading independent oil and gas companies in West Africa and also a company which is pioneering oil discovery currently in northern Iraq, just reported financial results for 2007. Jean-Claude Gandur, welcome. You are the President and CEO of Addax Petroleum. What are your comments on the company’s operational and financial performance in 2007?
Jean-Claude Gandur (JCG) : We had a very good second year as a public company. One of the highlights of this year was our secondary listing in London; and then, if you look at our different numbers that we have achieved this year, we have beaten everything, like production, we have an average of 126,000 barrels a day, which is an increase by 40% on last year; we have increased by 26% our reserves, up to 447 million barrels; our sales have increased considerably, to above $3.4 billion, which is a 68% increase from year to year; and, not the least, our cash flow has increased by 59% to more than $1.3 billion this year.
EBM : What would you say were the main highlights, or drivers, of your performance in 2007?
CB : One of the very new highlights that we have in the company is certainly the Gabon co-production which has increased from 8,000 barrels when we acquired to above 21,000 barrels a day. This is a big achievement, obviously. The second is that we have a very aggressive acquisition program. Last year we bought 40% interest in GDZ1 from Esso International, which gives us a leading position in the deep off-shore region between Nigeria and Sao Tome & Principe. We have an exploration program which is very aggressive. We have made significant discoveries on several of our properties like Ofrima North in OML 137, like Antan on OML 123, and also a large gas discovery on OML 137. This is going to add, obviously, a lot of results to our P2 and will lead to the growth of the company. The last point, which is also very important, is our aggressive drilling program in Kurdistan: we have completed our first phase of appraisal; we have seen a continuous flow from our various fields and we believe that Kurdistan will be also one of the big producers in our company in the next coming years.
EBM : Could you comment for us briefly on your exploration targets and ambitions for 2008?
JCG : We are going to work primarily on our main acreage, obviously. To start with Kurdistan, we have a second rig coming on location, which would be drilling by second half of this year; probably June - July we will be starting a new program in Kewa Chirmila, an exploration drill, and then we will move back the rig to Taq Taq to do our tenth appraisal just to know exactly what the extension of the fracture system on the acreage. Then we are going to shoot a 3-D seismic program on the deep, off-shore Gulf of Guinea, on the OPL 291, which we consider as one of the best acreages in the whole portfolio. And then also in Gabon we are going to increase our export facilities by building a pipeline which will go from our property down to the Rabi field which is operated by Shell; and this should be completed by the end of this year. And finally, we are under drilling right now in Ngosso in Cameroon, and we expect to have some results on our drill program by the end of April.
EBM : Turning to Iraq now, what is your update today on the status of the Federal Oil Law, as the central government of Iraq and the Kurdistan Regional Government don’t see eye to eye? What is your update on the status of discussions about alternative pipeline routes to get oil out of Iraq?
JCG : We recently signed the new PSE with the authorities of the Kurdistan region of Iraq to put it in conformity with the local law which was approved by the parliament and which is now also responding to any legislation which may come in the future in Baghdad. So we are confident than nothing could prohibit us now to export oil in the near future. And before we start building the new pipeline we are putting in place new surface facilities to allow us to start exporting some oil or at least selling some oil on the domestic market starting second half of this year. This should bring us some revenues and allow us to start amortizing our investment in that country.
EBM : How do you plan to finance the company’s growth?
JCG : Our budget for this year was previously set up at $1.5 billion for 2008. In view of the oil price, we have decided to increase that number already to 1.6, where the additional $100 million will go for exploration. First, growth of financing will come from the internal cash flow. We generate that amount of money every year now. Secondly, as you know, we have a debt facility of $1.3 billion and we have only used slightly above $950 million. Thirdly, we have put in place last year a convertible bond for $300 million. So we have a very healthy balance sheet – very strong – and we believe that with all this money available we can continue to do some acquisitions and we can continue to contemplate the possibility to accelerate some of our investments this year.
EBM : Addax Petroleum’s share price seems to reflect a discount due to the market’s perception of the geopolitical risks in the areas where you operate. What would you feel like telling investors today to get them to attribute higher multiples to your cash flows?
JCG : Addax Petroleum has a long tradition in working in difficult environments. Now it is more than ten years that we have been working successfully in various countries. We haven’t had, as all our investors know, any disruption of production; we didn’t have any civil unrest on any of our properties. We continue to have an extremely high level of HSE results. We have received last year, for example, the DuPont Safety Award, which is proof of recognition from the international community on the high level of good work that we do in the various countries where we operate. We have put in place a lot of programs with local host communities, like pavement of roads, like drilling water wells, etc. and it has been very successful. This has made good links between our people and the communities. I can also emphasize on the perception that the various governments that we deal with – not only the governments of today, but the government of yesterday and, I believe, the governments of tomorrow – the perception they have from Addax Petroleum is quite positive and they encourage us to continue on the path where we are today.
EBM : And finally, as the year 2008 begins, what is your outlook for the future?
JCG : Addax Petroleum is a very ambitious company. I am leading this company and I have my own ambitions for this company. One of them is to make Addax Petroleum one of the largest independent oil companies in the world. I think Addax should now start looking for new acreages in new countries. We will learn, like we learned in the countries where we are. We will learn how to go in new areas. Thirdly, we are very well served – the company is very well served – by a very skilled team, very dedicated people are delivering every year something new and bigger. Also, thanks to our communities, we enjoy those privileged relationships with our communities, which gives us a lot of hope for the future, that we can continue, that we are on the right track. And finally – and not the least – I would like also to thank our shareholders for their support, for everything they have been doing for us so far.
EBM : Jean-Claude Gandur, President & CEO of Addax Petroleum, thank you very much indeed.
JCG : Thank you.