December 2016 Quarter Report
The Company relocated its Sydney office to Level 27, Governor Macquarie Tower - One Farrer Place, Sydney NSW 2000, and raised approximately A$11 million from fully underwritten non-renounceable entitlement offer.
Net production from USA operations reached 97 MMcfe (82 MMcf of gas and 2,658 barrels of oil/condensate) for the December 2016 quarter, and did a successful production test of the Main Pass Block 270 No. 3 BP 1, Hummer discovery well- 20 MMcfpd/400 bopd on a 16/64 inch choke. The Company also increased interest to 100%
for Block 7, Yemen, following execution of an Acquisition Agreement with KUFPEC to acquire their 25% working interest in the block.
Net oil and gas revenues achieved to US$0.4 million. Cash balance was US$13.1 million (including US$3.6 million of restricted deposits) and had US$4.5 million drawn down under US$15 million secured convertible note facility.
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 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 5.0 MMcfpd and 144 bcpd for the December 2016 quarter.
Main Pass Block 270 #3 BP 1 well - Hummer Project
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.
The fabrication and installation of the jacket was completed during the quarter. This was followed by the successful flow testing of the well in November. The well was tested on variable choke sizes at restricted rates over a 48 hour flow-back period. During the last 3 hours of the test period, the well flowed at an average rate of 19.88MMcfpd (million cubic feet of gas per day) and 396 bopd (barrels of oil per day) through a 16/64th inch choke with an average flowing WHP of 9,753 psi and no formation water. Production rates continued to rise over the duration of the test with a maximum gas rate of 20.5MMcfpd recorded.
Well logs indicate additional potential reservoirs in the well, but a decision was made not to run additional tests at this time. These untested sands will be targets of future drilling on the Hummer project. Significant production occurs for similar reservoirs along trend with peak production rates from those intervals exceeding 25 MMcfpd and 1,000 bcpd.
The well has been temporarily suspended pending the design, fabrication and installation of permanent production facilities and pipelines. The Company estimates first production from the Hummer project to commence in late third quarter 2017.
The Company has been focused on the re-start of oil production from the An Nagyah Oilfield located within the Company's Damis Block S-1, in Yemen.
The political situation in Yemen is approaching a resolution. More than 80% of the country, including the country's oilfields and the Southern coast of Yemen ,is now under the control of the Gulf Coast Coalition (GCC) backed Government. As a result of the growing stability in Yemen, oil production in the Masila Basin located in the Eastern part of Yemen ,recommenced in Q4'16 and that crude oil is being shipped from the Ash Shihr Terminal on the Gulf of Aden near the city of Mukalla.
Current production from the Masila Basin is of the order of 50,000 bopd and is expected to rise to meet the pre shut-in rate in March 2015 of 75,000 bopd.
Some 6 million barrels of crude oil from the Masila Basin have been shipped from Ash Shihr since the third quarter of 2016. The GCC backed Yemen government is now actively encouraging all oil producers to restart operations and ramp up oil production to optimal levels as soon as is feasible. The Company anticipates the restart of oil production soon in the Shabwah and Marib Basins, located in the middle of the country, which hold Petsec Energy's An Nagyah Oilfield.
The UN continues to actively encourage peace negotiations that will result in a permanent end to the conflict and the formation of a unity government based in the capital Sana'a.
Block 7, Al Barqa Permit, Yemen
Petsec: 100% working interest (85% participating interest)
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 block contains the Al Meashar oil discovery as well as an inventory of leads and prospects defined by 2D and 3D seismic surveys with significant oil potential.
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 and operatorship.
During the quarter the Company entered into an agreement with KUFPEC to acquire their 25% working interest in Block 7. The KUFPEC transaction brings the Company's potential interest in the block to 100% pending completion of the KUFPEC and Oil Search transactions which are subject to customary approvals from the Government of Yemen and the Ministry of Oil and Minerals.
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-50 MMbbl) into production. In 2010-11, 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 at the appropriate time.
Damis (Block S-1), Production Licence, Yemen
Petsec: 100% working interest (82.5% participating interest)
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.
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 300,000 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 the political situation in Yemen and the resulting inability to ship oil for the An Nagyah oilfield from the export pipeline terminus on the west coast of Yemen. The field was producing at a restricted rate of over 5,600 bopd prior to its being shut-in.
It is the Company's stated intention to restart production as early as the political/logistical situation allows. With stability now returning to the Eastern half of the country, the re-opening of Southern port facilities and the recommencement of oil production and export, the Company is now actively planning for the restart of production at the An Nagyah Oilfield.
The An Nagyah production facility has been well maintained during the shut-in period and remains in good condition. As the crude oil export terminal at Ras Isa remains closed on the Red Sea at the terminus of the Marib Export Pipeline to which Petsec Energy's An Nagyah Oilfield is connected, the Company is pursuing an alternative transport option which is to truck An Nagyah crude East to the Masila Basin Pipeline Hub.
Crude oil is transported from the hub through the pipeline South to the Ash Shihr Oil Terminal on the Gulf of Aden, near the city of Mukalla, from which crude is shipped for export. Shipping resumed in the third quarter of 2016 and oil liftings are becoming increasingly regular.
Management is currently negotiating trucking, pipeline access, and storage and shipping contracts for An Nagyah oil production.
Proposed Activities - March 2017 Quarter
In the March 2017 quarter, following the successful well production test on the Hummer Project discovery well, production facilities and pipelines will be fabricated and installed to meet the scheduled commencement of gas/oil production late in third quarter 2017.
MENA - Yemen
The focus of Yemen operations will be the restart of production at the An Nagyah Oilfield, with the objective of achieving production in the second quarter of 2017.
These operations to recommence oil production at An Nagyah include onsite preparations for production and trucking of produced oil, and the negotiation of trucking, pipeline access, storage and shipping contracts for An Nagyah oil production.
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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.
Petsec Energy Ltd
Oil Search Limited