Perth, Oct 29, 2008 AEST (ABN Newswire) - Sun Resources NL (ASX:SUR)(PINK:SNRDF) is delivering on its strategy of building significant cash flow in the USA Onshore Gulf Coast and applying this revenue to capture and participate in larger scale, high impact exploration projects, particularly in SE Asia, such as Sun's L20/50 Joint Venture with Carnarvon Petroleum in Thailand.
QUARTERLY REPORT FOR THE PERIOD
ENDING 30 SEPTEMBER 2008
HIGHLIGHTS
- Thailand - Planning of 2D seismic survey over L20/50 Concession commenced
- USA - The F1 exploration well in Project Margarita was successfully drilled and tested after the end of the quarter and is being completed as a gas producer This is expected to make a contribution to operational cashflow in the current quarter and beyond
- USA - The Meek Prospect exploration well currently expected to spud late in the December 2008 quarter
- Net revenue of US$627,135 received from US operations during the quarter
- Corporate - Completed A$4 million capital raising pursuant to the issue of convertible notes which in addition to Sun's cash at bank, US$2.1 million Thailand work bond and strong operating cashflow ensures Sun is well funded to progress its international oil and gas exploration programme
A OIL AND GAS EXPLORATION
1 THAILAND EXPLORATION
L20/50 Block, Onshore Phitsanulok Basin (Sun Resources - 50%)
Update
Ministerial approval for the planned aeromagnetic survey is still outstanding but planning for the 2D seismic programme had commenced at the end of the quarter. The Operator is now considering delaying the drilling a "twin well" to Nong Bua-1 until the seismic has been acquired in 2009.
Background
Sun Resources and Carnarvon Petroleum Ltd ("Carnarvon") accepted the L20/50 block award from the Thai Government at the official signing ceremony in Bangkok on 21 January 2008 and Carnarvon, as Operator, commenced exploration activities on the concession. The block is to the south of and adjacent to the largest onshore oil and gas accumulation in onshore Thailand, the Sirikit Field, which to date has produced ~180 million barrels of oil equivalent ("mmboe''). L20/50 has only been lightly explored with the last effort some 25 years ago, in a time of low oil prices. There is the possibility of near term production and cash flow on the block from a re-drill of an old shut in well (Nong Bua-1). This well was not brought on production because it required artificial lift to bring the oil to surface, and this higher cost production at the then time of prevailing low oil prices was not considered by the operator as it was fully committed to the development of the prolific Sirikit Field.
2 UNITED STATES OF AMERICA
A. OIL AND GAS DEVELOPMENT & PRODUCTION
The table below summarises Sun Resources' actual net working interest (WI%) production for the quarter and compares it with the previous quarter. The Company has benefited from a sustained period of high prices during the past two quarters. Oil and gas prices obtained for the September quarter were in the range US$122.64 to130.56 per barrel and US$10.31 to 14.50 per 1,000 cubic feet respectively. Revenue has dropped due largely to the main revenue source, the Lake Long #9 well being offline for repairs since early July (expected to recommence production in October), plus natural declines during the quarter from other wells. However, this is partly offset by an improvement in AUS$/US$ exchange rate. Production from the recently completed F1 exploration well which is currently being completed as a producer and a successful drilling outcome in the next six months should replace and build production, adding to the Company's US$ revenue base.
-------------------------------------------------Production September '08 June '08 Variance (%) (Sun WI%) Quarter Quarter-------------------------------------------------Gas (mmcfg) 46.14 83.56 -44.7%Oil (bo) 1,017 1,437 -29.2%Revenue (US$)$627,135 $716,658 -12.5%-------------------------------------------------
Units: mmcfg - million cubic feet gas; bo - barrels of oil
Lake Long, Louisiana, USA (Sun Resources - 10%)
The SL328 #9 well was shut in on July 5th after a production log identified a hole in casing below the level of the gas zone perforations. A work-over of this well was initiated and was continuing at the end of the quarter. It is hoped the well will be back on line by late October and will continue to produce from 24 feet of net pay in the Middle Hollywood Sands. At a latter date, after production decline from the Middle Hollywood, the 13 feet of net pay in the Upper Hollywood Sands will be completed through tubing for further production from this level. Gross reserves at both levels are approximately 3 billion cubic feet of gas equivalent ("bcfge").
Project Margarita, Texas, USA (Sun Resources - 37.5%)
Amalgamated production from Agavero and Dona Carlota Gasfields, plus the Milagro Oilfield (as it is now entirely oil production) averaged 0.834 mmcfgd with 34 bopd during the September 2008 quarter. The average amalgamated production should significantly increase in the December 2008 quarter following the post quarter successful testing of the James Stewart Gas Unit #1 well on the F1 prospect at 0.300 mmcfgd.
Flour Bluff Gas Field, Texas, USA (Sun Resources - 20.00 to 24.1667%)
Production from the fields during the September 2008 quarter averaged 1.64mmcfgd with 14 bopd. A 3D seismic programme scheduled over the West Flour Bluff Gas Field, to detail remaining reserves and target additional reserves, is undergoing a feasibility study. Development drilling will re-commence following the 3D seismic programme to further increase production rates.
B OIL AND GAS EXPLORATION
Sun Resources will have a material equity position in the following exploration wells currently scheduled for the remainder of 2008:
---------------------------------------------------Project Prospect Interest Potential Comments ---------------------------------------------------Viking Meek 12.5% 18 bcfe Middle WilcoxMargarita TB#18 37.5% 1.7bcfe Frio Fm.Redback R-1.95 20.0%* 58 bcfe Middle Vicksburg---------------------------------------------------
* Subject in part to successful farm-out negotiations
Project Margarita, Onshore, South Texas, USA (Sun Resources - 20% to 37.5%)
The F#1 prospect was drilled as the James Stewart Gas Unit #1 well during September to a total depth of 1,219m below rotary table. The well encountered strong oil and gas shows in the primary Frio Formation target and in the underlying secondary Vicksburg Formation target. The drilling rig was released after production casing was run to total depth and cemented. Post quarter a testing program was successfully completed with a 0.300 mmmscfgd flow from the primary target. Ihe well is currently being tied into a gas sales line for production. Reserves for F#1 are in the range of 0.6bcfe (gross).
Planned drilling of the TB #18 prospect is delayed as it still the subject of a leasing process.
The "Deep Wells Programme" will test a number of deeper, larger volume, but higher risk, Wilcox prospects in the deep gas prospect inventory having potential un-risked recoverable volumes of 15 to 200 billion cubic feet of gas ("bcfg"), refer table below. The Cazadores Prospect (20 to 60 bcfg) is the most advanced prospect with the joint venture currently generating farm-in interest for possible drilling in the first quarter of 2009.
---------------------------------------Prospect Gross Potential Comments ---------------------------------------Cazadores 20 to 61 bcf Upper WilcoxW2A 100 to 200 bcf WilcoxW2B 16 to 32 bcf WilcoxW3 15 to 38 bcf WilcoxAgave 67 to 208 bcf Cook MountainCM1 5 to 8 bcf Cook MountainCM2 4 to 9 bcf Cook Mountain---------------------------------------
Project Redback, Onshore, South Texas, USA (Sun Resources - 20% to 37.5%)
The two highest ranked prospects are targeted for farm out after leasing is completed. Sun Resources expects to farm down from the current 37.5% WI to retain a 20% WI through the first well. The top-ranked prospect in the prospect inventory has multiple targets in the productive Vicksburg Sands with high upside potential for both gas and oil as accompanying condensate (ie up to 58 bcfge). On trend to the Redback area are production analogues of the recognised prospects from the same targeted stratigraphic level. Individual wells from these analogues have produced at high initial daily well production rates of 3 to 4 mmcfgd with 100 to 140 bod.
Meek Prospect, Onshore Texas, USA (Sun Resources 12.5%)
Sun Resources finalised its farm-in to a new Joint Venture with Mueller Exploration Inc to take a 12.5% working Interest (10% NRI) in the Meek Prospect in Wharton County of Southern Texas. This opportunity also allows Sun Resources to develop a relationship with Mueller Exploration's prospect generator, Viking International, who has a very successful business model, similar to Wandoo Energy. The prospect is now waiting for a suitable rig to be contracted after Turnkey Drilling Co. withdrew from its contract. The latest estimate for spudding of the Meek Prospect as the Ammann Heirs #1 well is late December 2008.
The Meek Prospect targets 16 bcfg with 269,000 bo (18 bcfge) in stacked, highly productive, Middle Wilcox (Meek) sands. Nearby production wells in Meek sands are good analogues and have produced similar order of reserves to that being targeted by Sun Resources at the Meek Prospect in 4 to 5 year production periods. The Meek Prospect is relatively low risk because it has been keyed off an adjacent Meek producing field by using good 3D seismic. Seismic attributes indicate the presence of hydrocarbons conforming to the prospect structure.
Eagle Project, Onshore San Joaquin Basin, California, USA (Sun Resources 10.0%)
Sun Resources elected to withdraw its support for this project at the end of June quarter 2008 as the long drawn out Eagle farm-out effort by the Operator was not successful. Notwithstanding the presence of oil in the prospect and the farmout being carried out in a period of high oil prices, peer companies have also recognised the very high technical and geological risks associated with the project to bring into production.
3 MALTA EXPLORATION
Offshore, Southern Mediterranean Sea (Sun Resources 20%, farming down to 5% after 2D Seismic and 2 wells fully funded by Anadarko International Energy Company)
This is a high impact project is still awaiting settlement of border issues between Malta, Tunisia and Libya that has been farmed out to Anadarko International Energy Company ("Anadarko"), one of the world's largest independent oil and gas exploration and production companies. Anadarko has agreed to free-carry Sun Resources for 2D seismic and two wells (a likely US$100+ million programme) following which Sun Resources would maintain a 5% contributing interest. Renewed exploration of the area will be discussed with the government of Malta in the coming quarter.
4 AUSTRALIA EXPLORATION
WA-254-P, Offshore Carnarvon Basin, W. Australia (Sun Resources 7.86% to 9.25%)
The Operator of WA-254-P, Apache Northwest ("Apache"), continues to evaluate the exploration potential of the permit from reprocessed and new 3D seismic data. Sun Resources and two other joint venture parties continue an active divestment process of their combined 24.8% to 29.8% working interest in the permit which contains the stranded Sage Oilfield. The process commenced in late April 2008 and will hopefully be concluded in Q4 2008 or Q1 2009.
5. MINERAL EXPLORATION/INVESTMENT
No activity for the Quarter. The Joint Venture on the Butterfly gold tenement in the North Coolgardie Mineral Field, Western Australia in which the Company has a 5% NPI interest remains current.
6. CORPORATE
During the quarter, a placement of convertible notes was approved by shareholders and the placement finalised, which in addition to Sun's cash at bank, US$2.1 million Thailand work bond and strong operating cashflow ensures Sun is very well funded to progress its international oil and gas exploration programme.
Contact
Matt Battrick
Managing Director
Sun Resources NL
Tel: +61-8-9388-6501
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