Annual Report to Shareholders
Brisbane, Oct 1, 2012 AEST (ABN Newswire) - Linc Energy Limited (ASX:LNC) (OTCQX:LNCGY) are pleased to provide the Company Annual Report to Shareholders for the year ended 30 June 2012.
REVIEW OF OPERATIONS AND ACTIVITIES
OIL & GAS DIVISION
Strategy and Delivery
The focus of the Oil & Gas Division in 2011-12 has been on expanding and accelerating development to increase Linc Energy's reserves, production and cash flow.
This has included a number of key elements:
Maintaining cash flow through the development of existing, lower-risk opportunities
Linc Energy's current producing asset base in the Gulf Coast contains significant near term drilling opportunities. The company has identified several up-dip trends, infill and adjacent block drilling locations, recompletion and re-entry opportunities in the Barbers Hill, Black Bayou and Hoskins Mound fields that provide access to proved, lower-risk reserves.
Drilling plans for the remainder of 2012 and all of 2013 contemplate drilling approximately 60 wells and initiating approximately 30 recompletions. These lower-risk reserves can be developed from infrastructure currently in place and utilising Linc Energy's proprietary 3D seismic data technologies.
The development of these lower-risk reserves will boost existing cash flow and help to obtain financial flexibility as the Oil & Gas Division deploys additional capital to develop longer-term resource plays.
Linc Energy has also commenced an extensive seismic reprocessing program over the company's salt domes at Barbers Hill, Port Neches, and Black Bayou fields to improve its ability to recognise deep sub-salt potential in these fields.
Increasing long-term, proved reserves through the development of Umiat
In 2011, Linc Energy strategically identified and acquired an 84.5% interest in the Umiat oil field in the North Slope region of Alaska.
Umiat is one of the largest undeveloped petroleum resources in North America with OOIP of 1 billion barrels. Over the next 24 months, the Oil & Gas Division will strategically deploy our capital and internal resources toward taking the necessary steps to delineate the reserve potential of the Umiat oil field while ensuring that all environmental and regulatory issues are appropriately addressed.
Once these near term objectives are achieved, we expect a significant rise in the value of Umiat and the potential conversion of probable reserves to proved reserves. Based on the findings of the near term initiatives and the availability of capital, Linc Energy will seek to leverage our technological and drilling expertise to optimally exploit the oil & gas resources of the Umiat asset.
Aggressively develop Wyoming assets to increase production
The Oil & Gas Division intends to apply an EOR strategy using CO2 flooding techniques to aggressively develop the Group's acreage position and maximise the value of its resource potential in the Powder River Basin region of Wyoming.
These assets represent opportunities with strong return characteristics over the life of the asset, supportive of significant nearterm production, cash flow growth and long-term proved reserve growth. Over the next 18-24 months, Linc Energy expects its Wyoming assets to be producing approximately 2,400 BOPD from phase one of the EOR project. Ultimately, with the development of additional phases of the EOR project, expected production is in excess of 10,000 BOPD.
Actively managing the risks and rewards of the drilling program
The Oil & Gas Division operates 100% of the wells that comprise Linc Energy's proved reserves as of 30 June 2012, and the company owns net revenue interests in its properties that average approximately 74% on a net acreage basis.
The Oil & Gas Division considers operating the company's properties to be important because it allows control over the timing and costs in the Division's drilling budget, as well as control over operating costs and production marketing. In addition, the high net revenue interests enhance returns from each successful well drilled by generating a higher percentage of cash flow.
Linc Energy's high net revenue interests provide a unique opportunity to retain a substantial economic interest in riskier wells while mitigating the risk associated with these projects through farm-outs or promoted deals. Additionally, the company will review and rationalise its properties on a continuous basis in order to optimise its existing asset base.
Leveraging technological expertise to ensure high return projects
Linc Energy has assembled a highly effective and experienced team of geological, geophysical, and engineering professionals to evaluate and exploit the Oil & Gas portfolio of assets and to explore for significant untapped potential at greater depths.
3D seismic analysis, extensive subsurface mapping, and other advanced technologies and production techniques are useful tools that help improve drilling results and ultimately enhance production and returns. The company either owns or holds licences for 3D seismic data covering over 75% of its acreage in the Gulf Coast, Wyoming and Alaska fields. The Oil & Gas Division intends to utilise these technologies and production techniques in exploring for, developing and exploiting oil and natural gas properties to help reduce drilling risks, lower funding and development costs and provide for more efficient production of oil and natural gas from Linc Energy properties. The use of these technologies, together with Linc Energy's experienced geological and geophysical personnel, enhances the probability of locating and producing reserves that might not otherwise be discovered.
Pursue opportunistic acquisitions
Linc Energy continually reviews opportunities to acquire producing properties, leasehold acreage and drilling prospects at attractive prices. The company's acquisition strategy, as exemplified by the Gulf Coast and Wyoming acquisitions, focuses primarily on underdeveloped assets with significant growth potential and allows Linc Energy to enhance and exploit properties quickly without assuming significant geologic, exploration or integration risk. The Oil & Gas Division is also pursuing longer-term opportunities, such as Umiat, where significant upside potential exists. Along with the organic growth of the company's existing reserve base, our acquisition strategy will allow us to maintain a balanced portfolio of near term and exploratory opportunities for the benefit of sustainable long term growth.
Key Highlights in 2011-12
- Acquisition of the Gulf Coast oil & gas assets with initial gross oil production of 2,700 BOPD;
- Opening of the Houston office;
- Commencement of an aggressive drilling and recompletion program on the Gulf Coast;
- Formation of the Oil & Gas Division with headquarters in Houston, Texas.
- Achievement of 4,200 BOPD production in the Oil & Gas Division; and
- Achievement of No Lost Time Accidents in the Division.
View the complete Linc Energy Annual Report at the link below:
Linc Energy Limited
Linc Energy Limited