Petsec Energy March 2016 Quarter Report
Sydney, April 20, 2016 AEST (ABN Newswire) - Petsec Energy Ltd (
ASX:PSA) (PSJEY:OTCMKTS) are pleased to provide the Company's March 2016 Quarter Results.
KEY POINTS:
Corporate
- Acquisition of 100% working interest in Damis (Block S-1) Production Licence in Yemen which holds five oil and gas discoveries including the developed/productive An Nagyah Oilfield.
Operations
- Net production from USA operations for the March 2016 quarter of 65 MMcfe (53 MMcf of gas and 1,998 barrels of oil/condensate).
- Commenced fabrication of a platform jacket for the Main Pass Block 270 #3 BP 1 discovery well drilled on the Hummer exploration prospect.
- Independently assessed net proved and probable (2P) reserves increase by 3000% to 9.3 MMboe as of 1 January 2016.
- Assessed net present value (NPV10) of US$188.1 million or A$1.06/share for the Company's net 2P reserves of 9.3 MMboe.
Financials
- USA net oil and gas revenues of US$0.2 million.
- Cash balance of US$10.9 million (including US$3.7 million of restricted deposits) and no debt.
FINANCIAL:
Production
Petsec Energy produced 65 MMcfe (comprising 53 MMcf of gas and 1,998 barrels of oil/condensate) for the March 2016 quarter, predominantly from the Williams No.2 Alt. well in the Mystic Bayou Field onshore Louisiana, USA.
This was 62% lower than the 170 MMcfe (134 MMcf of gas and 6,073 barrels of oil/condensate) achieved in the previous quarter due to the shut-in of both the ASF No. 4 well (shut-in since mid-November 2015) and the Williams No. 2 Alt. well on 10 February 2016.
Refer to table and "Operations" section in link below for further details on production from the various fields.
Revenues and Cashflow
The Company generated net oil and gas revenues from its USA operations of US$195,000 for the March 2016 quarter (December 2015 quarter:
US$534,000), from production of 65 MMcfe (December 2015: 170 MMcfe) at an average realised gas equivalent sales price of US$3.00/Mcfe (December 2015 quarter: US$3.14/Mcfe).
The Company received an average sales price for the current quarter of US$2.40/Mcf and US$34.03/bbl for its natural gas and oil/condensate production, respectively. This compares to US$2.25/Mcf and US$38.28/bbl achieved in the previous quarter.
The Company recorded negative EBITDAX of US$2.3 million for the March 2016 quarter (December 2015 quarter: negative EBITDAX of US$1.5 million), reflecting additional operating costs associated with the acquisition of the An Nagyah Oilfield in Yemen and associated GG&A.
Acquisition, exploration and development expenditure incurred for the March 2016 quarter of US$2.5 million comprised the acquisition cost of the Damis (Block S-1) interest and development costs associated with the Main Pass 270 #3 BP 1 well.
A "Financial Summary and Production Data" table is provided on page 4 of this report, see link below.
Cash Position
At 31 March 2016, the Company's cash balance of US$10.9 million (A$14.2 million) was US$1.9 million or 15% lower than the 31 December 2015 cash balance of US$12.8 million (A$17.5 million). The cash deposits which are predominantly held in US dollars include secured deposits of US$3.7 million primarily held in an escrow account to secure operator bonds that are on issue to the Bureau of Ocean Energy Management ("BOEM").
U.S. Oil and Natural Gas Prices
U.S. WTI crude oil futures prices fell in the March 2016 quarter reaching a low of US$26.21 on 11 February 2016, before rising to close just below US$39/bbl at quarter end. NYMEX WTI futures contracts for delivery in May 2016 were trading at approximately US$42/bbl at the date of this report.
The NYMEX 12 month and 36 month forward strip prices for WTI crude oil settled at US$44.41/bbl and US$46.43/bbl, respectively on 15 April 2016. In comparison, the 12 month and 36 month forward strip prices were trading at US$36.75/bbl and US$40.46/bbl, respectively on 22 January 2016.
U.S. natural gas prices trended lower for much of the March 2016 quarter, trading in a range between US$1.64 and US$2.39/MMBtu. NYMEX futures contracts for delivery in May 2016 were trading at approximately US$1.95/MMBtu at the date of this report.
The NYMEX 12 month and 36 month forward strip prices for U.S. natural gas were trading at approximately US$2.47/MMBtu and US$2.75/MMBtu, respectively on 15 April 2016. This compares to US$2.42/MMBtu and US$2.68/MMBtu, respectively, on 22 January 2016.
U.S. Energy Information Administration estimates for working natural gas in storage for the week ending 8 April 2016 was 2,477 Bcf. This is 956 Bcf or 62.9% higher than the level a year ago and 849 Bcf or 52.1% higher than the 5-year average.
OPERATIONS:
Production
USA
Adeline Sugar Factory No. 4 Well - Jeanerette Field Petsec: 12.5% working interest (9.2% net revenue interest) The Adeline Sugar Factory ("ASF") No. 4 well located in St. Mary Parish, Louisiana was drilled and brought into production in June 2014.
The ASF No. 4 well was shut-in mid-November 2015 due to high water production and a restriction in the tubing due to salt build-up. The well has produced on an intermittent basis since that time, and it's the operator's intention to continue as is for the near-term.
16,700 RA SUA; Williams No.2 Well - Mystic Bayou Field
Petsec: 25% working interest (18.75% net revenue interest)
The 16,700 RA SUA; Williams No.2 gas/condensate discovery well on the Mystic Bayou Field in St. Martin Parish, Louisiana was drilled and brought into production on 31 August 2015.
The well averaged gross daily production rates of approximately 7.5 MMcfpd and 300 bcpd prior to being shut-in on 10 February 2016. The well was shut-in due to a leak in the tubing at a depth below the producing reservoir. Repairs are currently underway to bring the well back into full production.
Development
USA
Main Pass Block 270 #3 BP 1 well - Hummer Prospect
Petsec: 12.5% working interest (10.24% net revenue interest)
The Main Pass Block 270 #3 BP 1 well on the Hummer exploration prospect in 215 feet of water, offshore Louisiana (federal waters) was drilled during the second half of 2015.
The well encountered the Miocene age sand objectives as anticipated and was mud-line suspended at 14,300 feet TVD/ 14,342 feet MD for future completion and production testing after the fabrication and installation of a platform jacket.
The fabrication and installation of the jacket, tie-back and well completion, and testing are anticipated to be complete in the third quarter 2016. The estimated net cost for the fabrication and installation of the platform jacket is approximately US$1.1 million. Net cost for completion and testing of the well are anticipated to be approximately US$0.9 million.
MENA
The Company has been very active during 2014 and 2015 in the MENA region, pursing its objective of acquiring onshore leases with oil reserves, both developed/producing and undeveloped, that hold significant development, exploitation and exploration potential. To-date, the Company has acquired in Yemen, a 75% working interest (63.75% participating interest) in Block 7 Exploration Licence and a 100% working interest (82.5% participating interest) in the Damis (Block S-1) Production Licence.
The political situation in Yemen is progressing towards a resolution of the conflict to the benefit of the Company. It is anticipated that Yemen oil production is likely to recommence in the next few months.
Block 7, Al Barqa Permit, Yemen
Block 7 is an onshore exploration permit covering an area of 5,000 square kilometres (1,235,527 acres) located approximately 340 kilometres east of Sana'a, the capital of Yemen.
Petsec currently holds a non-operating 35% working interest (29.75% participating interest) in the Block 7 Joint Venture and has an agreement with Oil Search Limited (ASX:OSH) to acquire its 40% working interest (34% participating interest) in Block 7.
The Company expects to conclude the acquisition of the Oil Search interest in Block 7 in mid-2016. The acquisition which involves acquiring all the shares of its subsidiary, Oil Search (ROY) Limited, will increase Petsec Energy's overall working interest in the block to 75% (63.75% participating interest). On completion of the transaction Petsec Energy will assume operatorship of the block.
As soon as the political situation allows, the Company's first objective in this block is to bring the two suspended discovery wells of the Al Meashar Oilfield (target resource of 11 MMbbl) into production. In 2011, short-term testing of the wells delivered flow rates ranging from 200 to 1,000 bopd. Analysis of this data suggests cleanup of the reservoir is likely to result in stabilised production rates over a longer production period.
Well engineering and cost estimates of the re-entry programme for both wells on the Al Meashar Oilfield are complete and will be followed by a tendering process for equipment and services as the political situation allows.
Damis (Block S-1), Production Licence, Yemen
The Company announced on 5 February 2016 a further significant expansion of its oil and gas interests in Yemen with the acquisition of entities holding a 100% participating interest (82.5% equity interest) and operational control of the Damis (Block S-1) Production Licence.
Damis (Block S-1) is located approximately 80 kilometres to the southwest of Block 7 and holds five sizeable oil and gas discoveries - the developed and productive (until suspended in 2014), An Nagyah Oilfield, and a further four undeveloped oil and gas fields - Osaylan, An Naeem, Wadi Bayhan, and Harmel.
Petsec Energy's net interest in the reserves of the An Nagyah Oilfield is independently assessed to be 5.6 million barrels of remaining 2P reserves of oil, net of all royalties and costs, with a NPV10 value of US$155.4 million at Brent oil forward prices current as of 1 January 2016.
The four undeveloped fields hold substantial oil and gas resources, in excess of 34 million barrels of oil and 550 Bcf of gas which will be a source of future growth of reserves and production for the Company.
The block contains significant existing infrastructure, including surface facilities with a capacity to process up to 20,000 barrels of oil per day (bopd) and an 80,000 bopd pipeline, which joins the 200,000 BOPD Marib export pipeline to the Ras Isa terminal on the Red Sea Coast.
The An Nagyah Oilfield was shut-in at the end of February 2014, following the declaration of Force Majeure by the previous operator due to political issues in Yemen and a consequent inability to ship oil for the Al Nagyah oil field from the export pipeline terminus on the west coast of Yemen. The field was producing at a rate of over 5,600 bopd prior to its shut-in.
It is Petsec's intention to restart production as early as the political situation allows. The production facility has been maintained during the shut-in period and preparations are underway for the restart of production, delivering crude either by pipeline or trucking or a combination of both.
Appointment of COO & VP Technical MENA
In February 2016, the Company announced the appointments of Mr. Murray Hawkes and Mr. John Rees as Chief Operating Officer and VP Technical, respectively, of the Company's wholly owned subsidiary, Petsec Energy (Middle Eastern) Limited. Mr. Hawkes will also take on the role of Yemen General Manager, focussing on reactivating field activities in Yemen, including the re-start of production at the An Nagyah Oilfield in Damis (Block S-1).
Mr. Hawkes and Mr. Rees both have significant managerial experience overseeing the delivery of major oil and gas projects, and extensive contacts in the MENA region which will enhance the Company's capabilities and expansion of activities in the region.
Further information on Mr. Rees and Mr. Hawkes is contained within the media releases to the ASX on 11 and 16 February 2016, respectively, and is also available on the Company website at http://www.petsec.com.au.
Oil and Gas Reserves and Valuation
Independently estimated proved and probable (2P) oil and gas reserves net to the Company as of 1 January 2016 were 9.3 MMboe with a NPV10 of US$188.1 million or A$1.06/share. This represents a 3000% increase on the prior year reserves of 0.3 MMboe.
USA
In the 2015 year, the Company returned to conventional exploration and drilled eight conventional exploration wells on eight separate prospects in the USA, onshore and offshore Louisiana. The programme delivered major discoveries to the Company on each of the Mystic Bayou and Hummer exploration prospects and a consequent increase in 2P reserves of 3.6 MMboe. The year end NPV10 value of the USA closing reserves of 3.7 MMboe was US$32.7 million.
MENA - Yemen
The acquisition of the developed/productive An Nagyah Oilfield added net 2P reserves to the Company of 5.6 MMbbl with an NPV10 value of US$155.4 million. The gross target resources of the four undeveloped oil and gas fields contained in the Damis (Block S-1) Production Licence and the Al Meashar Oilfield in Block 7, amount to 45 MMbbl of oil and 550 Bcf of gas.The reserves assessment follows guidelines set forth by the Society of Petroleum Engineers - Petroleum Resource Management System (SPEPRMS).
The USA and Yemen reserve assessments presented above and throughout this report are consistent with the announcements released to the ASX on 8 March 2016 and 15 March 2016, respectively.
The Company confirms that it is not aware of any new information or data that materially affects the information included within the Financial Statements and the Annual Report, and that all the material assumptions and technical parameters underpinning the estimates therein continue to apply and have not materially changed.
Proposed Activities - June 2016 Quarter
USA
During the June 2016 quarter, the Company will participate in the fabrication and setting of a platform jacket for the Main Pass Block 270 #3 BP 1 well, and the subsequent testing of the well to determine gas flow rates and quanta of associated oil in order to size the production facilities.
MENA - Yemen
Yemen operations will focus on making ready the An Nagyah Oilfield to recommence production at the earliest, subject to the Yemen political situation.
The Company is hopeful of recommencing production in the third quarter of 2016.
To view complete report, please visit:
http://abnnewswire.net/lnk/130W2QTF
About Petsec Energy Ltd
Petsec Energy Ltd (ASX:PSA) (OTCMKTS:PSJEY) is an independent oil and gas exploration and production company listed on the Australian Stock Exchange. It has operations in the shallow waters of the Gulf of Mexico and state waters of the Louisiana Gulf Coast region of the USA, and exploration activities in the Gulf Coast onshore and bay areas of Texas and Louisiana, USA and Yemen.
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