The company posted a 34 per cent increase in revenue to A$48.2 million and a slight increase in sales while delivering steady production volumes in the second quarter of 2002.
Novus chief executive, Dr Bob Williams, said the increase in the average realised oil price from A$39.60/bbl to A$49.21/bbl helped lift sales revenue for the first half of 2002 to A$84.3 million, slightly down on the second half of last year.
Dr Williams warned that while the strong revenue position provided cash flows to fund the company's active exploration program, the first half profitability would be impacted by higher charges during the six months.
"We have made significant headway in the last quarter with the granting of an onshore concession in Ras Al-Khaimah which signifies a new country entry into the United Arab Emirates in addition to the award of Block 31 in Oman and continuing exploration success," Dr Williams said.
"Our first exploration success in the US, La Playa-1, has now commenced production at the modest rate of 2 MMscfd from just one sand. In conjunction with the joint venture we are considering ways to build on the success of this well to accelerate production from the field.
"We were pleased to report that the time period from initial spud to first gas sales was a matter of months compared to many years in most other exploration regions. This demonstrates there is a real commercial prize to be won in this area in the event of continued success."
Highlights for the quarter include:
· Sales revenue increased from A$36.1 million in the March quarter to A$48.2 million. This brings sales revenue for the half year to A$84.3 million representing a nine per cent decline when compared to the second half of last year. This decrease was largely due to an overall reduction in production and entitlements.
· Oil and gas liquids sales volumes increased 13 per cent from 1.137 to 1.283 MMboe whilst production remained flat. The difference being due to increased purchases of 3rd party gas for onsale.
· United States (Padre Island): the first well, La Playa-1, is now on production with an average daily production of approximately 2 MMscfd.
· United Arab Emirates (Ras Al-Khaimah): in June Novus was awarded operatorship in an exploration block in the northernmost Emirate in the United Arab Emirates covering approximately 600 km2 and contiguous with Block 17 in Oman.
· Oman (Block 31): in May Novus was awarded an Exploration and Production Sharing Agreement and operatorship over Block 31 covering an area of 8,550 km2 east from the border with Abu Dhabi.
Despite the active drilling program exploration costs in the quarter declined substantially. Total exploration, development and production costs were down 39 per cent on the previous quarter (from A$42.9 to A$26.3 million). Production costs for the Australian and Indonesian assets were, however, higher in this quarter.
The United Emirates concession, which lies in the northernmost emirate of Ras Al-Khaimah in the United Arab Emirates, is adjacent to Novus' Block 17 in Oman's Musandam Peninsula which includes the Tibat prospect. Drilling on Tibat is scheduled to commence later in the year.
Dr Williams welcomed the concessions in Ras Al-Khaimah and Oman which represent the next step in Novus' strategy to expand its presence in the region.
"This development is significant as it constitutes another valuable addition to the gas-condensate play fairway which Novus is chasing on the Northern Arabian Peninsula," he said.
"It demonstrates the value that Novus is creating through actively building relationships and exploring in Oman and the UAE."
In the second quarter, Novus also reached final depth at both Zarghun North-1 in Pakistan and Dunn Murdock-1 in onshore Texas. Zarghun North was plugged and abandoned after the target reservoirs were found to be wet. Attention in the area will now turn to developing the stand-alone Zarghun South gas field, discovered in 1997.
Dunn Murdock-1 has resulted in the second Padre Island discovery in the shallow prospect known as Tomato. Despite encouraging shows, the underlying deep Murdock section has so far failed to flow gas at commercial rates on test. Further to Novus' release yesterday, the JV is currently deciding whether or not to abandon the deep section; in this eventuality plans to complete the Tomato discovery for production will be implemented.
"The results of the deep part of the Dunn Murdock well are disappointing, mainly because mechanical difficulties while drilling meant that only part of the prospective deep section was intersected."
Dr Williams said Novus was encouraged by evidence of a working petroleum system at depth in Dunn Murdock.
"Although we were unable to get it to flow at commercial rates, there was gas in the deep section of the well," he said.
"Our numerous other exploration prospects in Padre Island are not dependent on success at Murdock, and several other high-impact deep prospects remain to be tested later this year and beyond," he said.
Looking forward to the half yearly results, Dr Williams said Novus' active exploration program will inevitably result in some failures and write downs to ensure the company maintains its balance sheet in good order.
"While cash continues to flow strongly, the combination of reduced production levels in some assets and high oil prices (which increases the effective rate of tax in some fiscal regimes) may lead to increased charges over earnings," he said.
"The cash flow being generated coupled with the funds raised from the placement with Mitsui in September 2001 significantly exceed our planned exploration expenditure. As a result the company remains strongly placed to pursue its exploration-led strategy.
"We expect the next several quarters to be dominated by our exploration activities, funded by the strong underlying cash flows. We have a deep and strong exploration portfolio and we look forward to announcing further discoveries in the coming months and years."
