Beach Energy Limited (ASX:BPT) Quarterly Report For The Period Ending 30 June 2010
A Production Sharing Agreement (PSA) over the Lake Tanganyika concession was signed on 23 June 2010. The PSA is structured into three exploration phases (4+4+3 years) for a total term of 11 years.
The specific terms of the PSA are confidential. However, due to requirements related to operating in the western, more remote region of Tanzania, they are more favourable than the standard terms published on the Tanzania Petroleum Development Corporation website: http://www.tpdc-tz.com.
Subsequent to the end of the quarter, Beach entered into a non-binding memorandum of understanding with ITOCHU Corporation (TYO:8001) (PINK:ITOCY) of Japan to investigate and discuss the potential for a future business arrangement in connection with supply of gas from Beach's onshore Australian portfolio to a potential integrated LNG project.
PRODUCTION & SALES
Total production during the quarter was 1.6 MMboe, 7% lower than the previous quarter (1.7 MMboe). The decrease was due to a combination of the heavy impact of flooding in the Cooper Basin and unscheduled down time at the BMG operation. As reported in the March quarter, oil pipelines on Beach operated areas and gas storage facilities continue to help alleviate the affects of Cooper Basin flooding.
Oil production from the Beach operated, Cooper Basin fields exceeded expectations due to the performance of the Callawonga field.
An airstrip to support the PEL 92 fields is complete and the first field staff crew change using this airstrip occurred in June.
Total oil and gas sales volumes for the June quarter were 2.3 MMboe, an increase of 19% from the March quarter due to higher sales from existing inventory of both oil and gas (higher demand). Revenue of A$125.8 million for the June quarter is up by 23% due to the higher sales volumes as well as higher prices and a higher proportion of oil sales.
No new hedging arrangements were entered into during the quarter.
EXPLORATION & DEVELOPMENT
Capital expenditure rose by 154% in the June quarter due to the recovery from flooding in the Cooper Basin coupled with an insurance recovery and reallocation of costs which reduced exploration and appraisal capital costs in the previous quarter by A$8.3 million.
COOPER & EROMANGA BASINS
Flooding in the Cooper Basin began to recede during June, although Beach's operations in the Western Flank region will continue to be adversely affected and commencement of drilling in this area may not be possible until the end of 2010. All three Santos-operated (ASX:STO) (PINK:SSLTY) rigs, operating further eastward, commenced drilling in late June. While access will remain problematic in some areas of the basin for months to come, most of the Santos operations will return to normal over the coming weeks.
A successful extended production test was conducted on the Brownlow gas/condensate discovery (PEL 106FI Block, Beach 50%). Data from the testing is being assessed to determine gas volumes. Maximum gas flow rates were over 18 MMcfd. The well is now shut in.
Canunda-1 in PEL 106FI (Beach 50%, Drillsearch 50% (ASX:DLS) (PINK:DRLLF)) was flow tested at an initial rate of 10.5 MMcfd, with a condensate to gas ratio (CGR) of 180 bbl/MMcf. With unexpectedly high CGR for the area, the flow has been restricted to 1-3 MMcfd due to liquids storage and trucking constraints. Testing is ongoing.
The previously reported six well drilling program has been increased to up to five wells in PEL 91 (Beach 40%) and seven wells in PEL 92 (Beach 75%). The start date for the program remains dependent upon the extent of flooding in the region and rig availability. Prospects to be addressed are within existing or recently acquired 3D seismic data areas and near to recent discoveries.
The recently acquired Acavus 3D seismic survey in ATP633P (Beach 100%, Santos earning 50%) is currently being processed and an intermediate product has been received in house.
Due to the extensive flooding event across the Basin and its impact on operations Beach has been granted a six month extension/ suspension of license conditions on its operated permits in the South Australian Cooper Basin. This extension does not affect our right to carry out operations on the permits as required, but extends the permit term by six months.
Drilling of a two well exploration program targeting Shale Gas potential within the South Australian portion of the Nappamerri Trough, is now expected to commence in mid to late August with Encounter-1, followed by Holdfast-1 in mid-October. The program is expected to cost approximately A$19 million. Weather conditions in Thailand have hindered completion of maintenance work on some of the Ensign 16 rig components and their subsequent shipment to Australia, causing the small delay. Holdfast-1, originally planned to spud in mid July as the first well in the program, will now follow Encounter-1 due to ease of access following Cooper Basin flooding (Beach - Operator, 90%, Adelaide Energy 10% (ASX:ADE)).
Santos Operated - Oil
Drilling operations in the Cooper Basin are currently still restricted to one rig (in Queensland) as floodwaters recede across the Cooper Creek system. Two oil wells have been completed since the previous report, both of which were successful (Total66 Block, Beach 30%).
Joint venturers are in discussions regarding development options for the Charo Oil Field (SA FFA, Beach 20.21%).
A draft relinquishment plan for ATP 259P (Queensland) provided by Santos is under review. A submission for the 33% relinquishment is due by the end of September.
Santos Operated - Gas and Permian Oil Development
Two rigs recommenced drilling a seven well gas program in the Coonatie Field in South Australia in late June.
North Shadwan (Beach 20%)
First production from the NS-377 Oilfield is expected during the second half of 2010. Partial relinquishment of the permit (25%) is due in early August and no drilling commitment is required to enter into the next phase of the concession.
South East July (Beach 20%)
Reprocessing of seismic data is underway. Opportunities for future drilling will be assessed after receipt of results.
BMG PROJECT (Beach 30%)
Basker sub-surface study work has progressed with future development options to be discussed by the Joint Venture in late July.
Australia - PEP 168, Onshore Otway Basin (Beach 50%)
A 50% equity in permit PEP-168 was transferred to Beach as part of the arrangement to re-structure Somerton Energy Limited (formerly Essential Petroleum Limited (ASX:SNE)). Beach assumed operatorship of the permit subsequent to the end of the quarter.
Albania - Durresi Block (Beach earning 25%)
San Leon Energy Plc (LON:SLE) (PINK:SLGYF), based in Dublin, has completed a takeover of Island Oil and Gas (LON:IOG), the designated Operator of the Durresi concession.
The Joint Venture continues to wait on ratification of the Petroleum Complimentary Agreement (PCA) by the Council of Ministers.
Geothermal - Paralana Project (Beach 21% - earning)
Paralana-2 is expected to be fracture stimulated in the September 2010 quarter.
Subsequent to the end of the quarter, a A$62.8 million grant Funding Deed under the Commonwealth Government's Renewable Energy Demonstration Program (REDP) was executed. The grant monies (exclusive of GST) are to be applied to the development of a 30MW geothermal demonstration project post the proof of concept stage currently underway at the Paralana Project.
North Dakota, USA June - South Antelope, Williston Basin (Beach 23% (18.5% revenue interest))
The Henderson 4-25H oil appraisal well reached a final total depth of 4865 metres measured depth (3320 metres true vertical depth). Well-site shows throughout the reservoir target are encouraging and a multistage fracture stimulation will be undertaken as planned.
Tanzania, East African Rift, Lake Tanganyika South
A Production Sharing Agreement (PSA) over the Lake Tanganyika concession was signed on 23 June 2010. The PSA is structured into three exploration phases (4+4+3 years) for a total term of 11 years. Beach will conduct geophysical surveys and geological studies in the first phase to determine the range of drilling opportunities available. Beach has a well commitment in each of the second and third exploration phases but has the option, at the end of each phase, to relinquish the remaining acreage without further obligation. Prior to the execution of the PSA, Beach undertook planning work in respect of the upcoming geophysical surveys and depending on weather, hopes to complete aerial gravity and magnetic surveys over the concession during the 2010 calendar year.
Profit guidance was issued in June indicating a full year underlying net profit after tax in the range of A$30 million to A$40 million. Although production from the Santos operated Cooper Basin fields has improved since the March quarter, it continues to be heavily impacted by flooding and resultant equipment damage. BMG production has been reduced by ongoing unscheduled downtime due to a failed FPSO thruster requiring a drydock repair, and more recently, repair of the disconnectable turret mooring.
During the June quarter Beach paid a partially franked interim dividend of 0.75 cents per share based on its interim financial results for the six months ended 31 December 2009.
Beach continues to be in a strong financial position with an increasing cash reserve of A$169.9 million, nil debt and a A$25 million working capital facility at its disposal. Cash reserves rose by A$29.2 million primarily due to deferral of maintenance and capital costs resulting from flooding in the Cooper Basin.
At 30 June 2010, 102,550,672, 2008 Bonus Options expired and were not exercised and 1,410 Bonus Options were exercised during the quarter.
Beach participated in six conventional oil/gas wells during the June quarter. All of the wells drilled were successful.
---------------------------------------------------------- Area Category Wells Successes Success Rate ---------------------------------------------------------- Cooper Exploration - Oil 1 1 100% Development - Oil 2 2 100% Development - Gas 2 2 100% ---------------------------------------------------------- USA - Appraisal - Oil 1 1 100% Nth Dakota ---------------------------------------------------------- TOTAL 6 6 100% ----------------------------------------------------------For the complete Beach Energy Quarterly Report, please refer to the following link:
About Beach Energy Limited
Beach Energy Limited (ASX:BPT) is a long established oil and gas Exploration and Production Company, based in Adelaide, South Australia.
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