The second offtake of 180,000 barrels was sold in late January. “I’m an accountant by background and if you don’t have cashflow you can’t pay the bills,” said Hockney.
A good cashflow shouldn’t be a problem. Stockbroking firm Intersuisse Investment has forecast earnings after tax for Matrix of $12.7 million in 2002, $25.5 million in 2003 and $28.8 million in 2004. Intersuisse is one of a number of investment houses that have taken sufficient interest in Matrix to prepare research reports.
Just prior to Langsa coming on stream, Intersuisse concluded in a report: “With first production about to commence, we are confident Matrix is just in the first stages of becoming a substantial petroleum company.”
That may occur quicker than expected if Matrix has the success it is aiming for at Glagah-Kambuna. “Glagah-Kambuna could be a few tcf of gas or a billion barrels of oil, and we would go through the roof,” Hockney said. “But if it does not work we would have lost our money. That’s why early cashflow was imperative.
“If the gas is recoverable each tcf is worth about $US1 billion to us in revenue. The gas is there; we just have to understand the field better.”
The West Kambuna (WK) step-out exploration well is 3.5km south-west of Kambuna 1, in Matrix’s 75%-owned 4200sq.km Asahan offshore production sharing contract area. WK was designed to test a major seismically defined structure mapped as extending north and west from the Kambuna discovery. The WK well is located in just 106ft of water, about 30km from the coastline of North Sumatra.
In late December Matrix reported the well indicated a minimum gas column between WK and Kambuna of 350ft. The group’s expectations on the size of the field were vindicated but the jury is still out on the ability of Matrix to commercialise the discovery. Independent studies have estimated there is between 600,000-4.5 billion cubic feet (bcf) of gas and 40-320 million barrels of condensate.
While the numbers are sufficient to push Matrix up another league it has some challenges ahead. Results from drilling of WK showed the structure containing the gas was impermeable, making it difficult to recover. A deviated well is proposed for around mid-year in order to gain a better understanding behind the lack of permeability and to determine if the field can be stimulated to release the gas. It is also possible the WK well was damaged in the drilling and that the deviated well will return better flows.
If the gas can be tapped Matrix has a ready market. In a recent research report Russell Langusch of CIBC World Markets said ExxonMobil and Pertamina were desperate for more gas to sustain the long-term viability of the 12.3 million tonnes a year Arun LNG development. Already two of the six LNG trains have been shut down due to insufficient gas reserves.
“ExxonMobil and Pertamina have effectively guaranteed to buy any sizeable gas reserves within a 200km radius of Arun,” the report stated.
“A series of events through the 1980s including the 1986 oil price collapse has meant that full exploration potential of the Asahan and Glagah-Kambuna contract areas has never been properly assessed by the former operators.
“Technical work by Matrix has confirmed that the area is highly prospective for more oil and gas discoveries. Field sizes of 200-400 million barrels of oil and 1-2tcf gas are feasible.”
Although Matrix could develop a large gas field, it is more likely to pursue a deal with say Exxon, take a very large wad of cash and seek out the next opportunity.
If WK cannot be developed Matrix is still expected to develop production facilities at Kambuna. Kambuna already has proven and probable gas reserves of 24 million barrels of oil and condensate and 60bcf of gas, thanks to the work of previous owners, Caltex and Bow Valley, in the early 1980s.
Despite the difficulties of WK the market has not dismissed the potential of the group’s assets in Indonesia. In the months leading up to first production Matrix experienced a significant increase in turnover as institutions started to have a sniff. At the same time stockbrokers began including the company in their daily gossip.
In late November the level of interest was realised when Matrix raised $7 million from a capital raising organised by Burdett, Buckeridge & Young. The raising was $2 million more than the company originally expected, and gave a strong indication local financial markets are beginning to throw off the gloom that settled after the September 11 terrorist attacks in the US.
Most of the new funds will go into exploration of Glagah-Kambuna, with cashflow from Langsa fuelling other exploration programs within the region.
Both Davies and Hockney believe there are other WK-type structures to be drilled within acreage already held by Matrix. Plans to acquire additional promising acreage in the region are on the table.
West Sumatra will prove to be the testing grounds for Matrix. If the group can expand its production base and bring some more of the gas and oil in the region into production it will fulfil the group’s ambitions, and give it the credibility to develop other neglected hydrocarbon provinces in South East Asia and the Middle East.
