The Sydney-based company today said its December quarter sales revenue slipped to $33.6 million from $35.8 million in the September quarter.

AWE’s total oil and gas production for the quarter was 920,000 barrels of oil equivalent, a decrease of 7% on the previous quarter.

The company said endurance testing and final project commissioning are now underway at permits T/L1 and T/RL1 at the BassGass project, in which it has a 30% stake.

Gross gas production during the quarter was 4569 terajoules, with AWE’s share of gas, condensate and liquefied petroleum gas production being 1370TJ, 73,500bbl and 3240 tonnes, respectively. These production levels were 10% below its internal targets for gas, 17% for condensate and 34% for liquefied petroleum gas.

“This production performance was related to commissioning issues at the Lang Lang gas plant and is not expected to reflect a long-term trend,” it said.

The company said the “underperformance” of the Lang Lang gas plant related to problems in two process units that reduced both the total capacity to process raw gas and the efficiency of liquids recovery.

A brief project shutdown is planned for first quarter 2007 to complete remedial works to improve the gas plant’s performance, it said.

AWE said permit WA-31-L in the Cliff Head oil project in Perth Basin, in which it has a 27.5% share, also performed more poorly than expected.

During the quarter, gross oil production from Cliff Head averaged 8697 barrels of oil per day. AWE’s share of this production was 220,023bbl.

These production levels were 26% below internal targets mainly due to an electrical fault and related facility problems, it said.

The cause of the electrical fault has been identified and rectified and production rates are now about 9200bopd.

“While the short-term production performance was disappointing, field reservoir performance has been good, with production rates holding at high levels and associated water production lower than expected,” AWE said.

But it was not all bad news. AWE said the Otway Basin-based Casino gas project, in which it holds a 25% stake, produced and sold gas at, or above, contracted levels.

“Production performance from the Casino reservoir continues to exceed expectations,” it said.

“The joint venture is now reviewing further gas sales opportunities within the region.”

Managing director Bruce Phillips said disappointment at BassGas and Cliff Head is likely to only be short term.

“It is important to note that the underlying performance of the oil and gas reservoirs has been very good in all asset areas and remedies for the poor performance of the facilities at BassGas and Cliff Head are underway,” Phillips said.

“The producing assets at Casino, Cliff Head and BassGas have nevertheless provided significant operating cash flow and AWE is focused on optimising the value of these assets.”

He said a key component of this additional value creation is the development of discoveries adjacent to recently installed infrastructure. This included the decision to move to front-end engineering and design on the Henry gas field (AWE 25%) in the Otway basin and the initiation of development scoping studies over the Trefoil discovery (AWE 22.6%) in the Bass basin.

AWE started the New Zealand drilling program last November, with the initial wells, Cutter-1 and Tieke-1.

The Tui Area Development is the key part of the current Taranaki Basin activity, but at least three further exploration wells (Hector-1, Taranui-1 and West Cape-1) are planned in the current campaign, which extends throughout the first half of 2007.

AWE said it retains a high equity stake in all of these prospects, which will result in “substantial value growth” in the event of success.

The company said it was also “actively reviewing” a number of new venture opportunities and asset acquisitions.