Sydney, Jan 29, 2009 AEST (ABN Newswire) - Mosaic Oil NL (ASX:MOS)(PINK:MSAOF) remains on-track to implement the Company's strategy of accelerated growth with consistent production increases recorded during the December 08 Quarter. Despite the impact of lower oil prices, increased production in the Surat-Bowen Basin has helped the Company to deliver another strong quarterly result.
- Time adjusted cash receipts of $7.0 million which is the second highest quarterly receipts for the Company
- Mosaic realised an average oil price for the Quarter of US$60.69/bbl or A$89.19/bbl (Sept 08 Quarter - A$154.82/bbl ).
- Cash at the end of the Quarter was $15.27 million.
- Overall production was 26% higher (on a BOE basis) than the previous quarter.
- Gas production increased by 35% due production from Taylor-19.
- Mosaic continued to evaluate domestic and international exploration and production opportunities.
Mosaic Oil will continue to focus on unlocking shareholder value through an accelerated drilling campaign for the 2009-2010 period.
While pricing for oil declined materially during the quarter, Mosaic Oil is confident that improved gas markets will continue to allow the Company to deliver sound financial results.
Mosaic Oil continued to supply gas from the Churchie, Downlands, Silver Springs and Waggamba areas to existing sales contracts and spot contracts. A strong performance from the Silver Springs and Waggamba area increased gas production by 35%, LPG production by 10% and oil production by 3.5% compared to the previous quarter. The high production was achieved despite a 5 day production interruption in late December at the Wallumbilla LPG Plant that significantly affected condensate and LPG production. Successful wells from the 2008 drilling campaign will continue to add to Mosaic Oil's overall production throughout 2009
Gas production from the Silver Springs/Waggamba area increased by 68% compared to the September 08 Quarter due to the contribution from Waggamba-4H and Taylor-19.
Silver Springs underground gas storage
Technical and commercial work continued on underground gas storage in the almost depleted Silver Springs gas field. There is significant interest in this project in the marketplace as it will allow users to store CSM ramp-up gas, protect gas supplies, and even-out gas supply.
Testing of three zones in the Freneau-1 exploration well drilled in ATP 709P in September 2008 was carried out during the quarter. A weak gas flow with a minor oil recovery was obtained from the Tinowon Sandstone while a weak gas flow with a recovery of formation water and minor quantities of oil was recorded from the basal Rewan Formation. The Wallabella Sandstone test was unsuccessful. The results of this test program will be evaluated prior to further exploration activity in this area, with the focus on identifying both an up-dip location at basal Rewan level and areas of improved Tinowon sandstone reservoir development.
2009 drilling program
In preparation for the Company's 2009 drilling program, Mosaic has recently completed a comprehensive safety system audit of MB Century Drilling Rig #7 and is in the process of finalising contract negotiations. The recent marked decline in oil price has led to an economic review of those wells proposed for drilling in 2009 with the program currently being revised to focus more on appraisal and development drilling.
ATP 608P Stratton farm-in seismic program:
Planning for the ATP 608P Stratton Block 116 km 2D seismic program commenced during the report period. This survey will be recorded during February, 2009. This seismic program is designed to define drilling locations for a farm-in exploration well, to be drilled later this year and targeting oil in Jurassic Evergreen and Boxvale sandstone reservoirs.
Mapping by Mosaic has identified 20 prospects and leads within the Stratton Block, 6 of which will be addressed by the proposed seismic program.
ATP 934P Application Area, Cooper-Eromanga Basin: (Mosaic 20%) No update.
WA-208-P: Hurricane-2 (Mosaic 6%) WA-208-P has been renewed for a further five year term with effect from 14th January 2009.
PRL-08 - Kimu (PNG) (Mosaic 28.57%)
Mosaic has completed an independent reprocessing of the 2007 Guavi River seismic survey data and selected historical seismic data recorded over the Kimu structure. The reprocessed data will be interpreted and mapped, to allow Mosaic to conduct an independent assessment of the Kimu gas resource and assess its options for this asset. The permit operator, Oil Search Limited, has recently made a number of public announcements and presentations regarding the PNG LNG project and the possible role of Kimu gas in this or alternative projects.
PEP 51151, Taranaki Basin, New Zealand (Mosaic 50%)
Technical studies on this permit commenced during the Quarter as a precursor to seismic acquisition in late 2009/2010.
CORPORATE AND FINANCE
Cash flow from Operations for the December Quarter was $1.2 million.
Development expenditure was $3.3 Million and Exploration expenditure was $877,000 for the quarter.
Capital expenditure on new equipment was $1,064,000 for the December quarter.
The cash receipts from our normal operations for the quarter were $6.3 million, which is down from the record September quarter ($8.4 Million September 08 quarter). This was due in part to falling oil prices and a delay in the receipt of the November oil sales of $654,000 which were not received until early January 2009.
Accordingly, allowing for this timing adjustment the December 2008 quarter would be A$7.0 million, which is the second highest quarterly cash receipts by the Company.
Despite a drop of 42% in the average Australian Dollar Oil price we receive in the quarter our cash receipts have declined by only 17%. This is due to the fact the Company has diversified revenue streams from gas (long term contracts), LPG, tariff and tolling income, as well as oil. As a result, the revenue base is far more stable than some other companies in the sector.
In the next quarter, Mosaic Oil will benefit from higher production but the prices likely to receive for oil and LPG are currently expected to be down from the prices received in the December quarter.
The Company will also continue to fund an extensive exploration and development program with the aim of driving further increases in our revenue.
Mosaic Oil continues its strategy to evaluate both domestic and international new venture opportunities for diversification and medium to long term growth.
Mosaic Oil: Lan Nguyen Managing Director Tel: +61-2-9247-9324