“Your board remains confident of Petsec’s growth potential and its ability to build on our current reserves base of around 56 billion cubic feet equivalent of gas to achieve a medium term goal of 100 bcfe of reserves in 2006-2007,” chairman Terry Fern told shareholders at the company’s annual general meeting in Sydney yesterday.
“Certainly, the achievements of recent years have formed a solid platform for the company to reach that potential.”
In the four years since restarting operations in the Gulf of Mexico, Petsec had discovered about 72 bcfe of gas from drilling 26 wells, 22 of which were successful, according to Fern. These figures do not include a recent oil discovery in China by the Roc Oil-led joint venture, in which Petsec has a 25% interest.
“Four oil and gas fields have been discovered and developed, which have delivered free cash flow of over $US100 million to Petsec,” he said.
“This success is being recognised by the market such that the company’s market capitalisation at the close of trade [Tuesday] on the ASX was in excess of $A400 million.”
Fern said Petsec was off to a “flyer” in 2006, with successes in the opening five months including the 100% gas discovery strike rate in the company’s four wells drilled from the Main Pass 19 platform in the Gulf of Mexico. This is in addition to the oil discovery in China.
“Revenue and earnings have rebounded strongly with the resumption of production from areas affected by Hurricane Rita and we have won and acquired two new Gulf of Mexico leases with a further two leases subject to grant by the MMS,” he said.
Petsec plans to drill about 10 wells this year to test target potential in excess of 50 bcfe in the US and more than 2.5 million barrels in China.
“We estimate that we can produce 8-10 bcfe of gas in the current year, which should generate sufficient cash flow to meet the estimated expenditure of $US50-60 million to drill nine wells in the USA and one well in China,” Fern said.
He added that the company currently holds about $US25 million ($A32.5 million) in cash to fund this exploration and development program.
One high-value project, in which Petsec holds a 50% interest, is the 60,000 acre Moonshine Project, onshore Louisiana. Drilling is scheduled to start later this year.
This area has produced more than 340 bcf of gas and 7 million bbl of oil, but has only had early 2D seismic data recorded on 25% of the area.
“The Moonshine joint venture recorded 3D seismic over the entire area in the first half of 2005. The data quality is very good and the prospects which are being mapped hold significant potential,” Fern said.
“We are looking forward to the start of drilling on these prospects which we expect late in 2006. This style of onshore play is appealing and the company will be alert to similar opportunities.”
In March, Petsec drilled the first well on its Main Pass 18, located immediately north of the Main Pass 19 gas field in the Gulf of Mexico, discovering 7.5 bcf of gas and about 1 million bbl of oil.
Further exploration will take place later in the year on Main Pass 18 and the neighbouring Main Pass 103.
Around the same time, Petsec also plans to start exploration drilling on its recently acquired leases in the Gulf of Mexico.
Fern said Petsec’s 2005 performance represented another year of positive growth, with production, net revenue, cash flow and earnings before interest, tax, depreciation and exploration expenditure (EBITDAX) all increasing for the third successive year.
“We also achieved further significant exploration success, boosting year-end reserves by 31% to 38.5 bcfe of gas and bringing new Gulf of Mexico gas fields into production in short timeframes,” he said.
