Boosted by Vermilion, Petsec reported a big improvement in December half-year results with production, revenue and profit all significantly higher.

The company received a substantial lift when production from its Vermilion 258 gas field began in late July, executive chairman Terry Fern said.

Petsec said that the main reasons for the lower net profit were significantly higher depreciation, depletion and amortisation expenses, and exchange rate differences due to the stronger Australian dollar.

But executive chairman Terry Fern put a positive spin on this, focusing on the December half results.

“The buoyant second half performance has set the scene for further improvement during 2005,” he said.

“We anticipate production and operating cash flow to be significantly ahead of the 2004 result, in the absence of any unforeseen operating or economic circumstances.”

The increased 2004 second half production was accompanied by higher gas prices received, which reached US$6.50 per thousand cubic feet in the latest December quarter. The average gas price improved from US$5.58 in 2003 to US$5.77 in 2004, according to Fern.

“Twelve-month forward gas prices are currently in excess of US$6.60 per Mcf and we have hedged part of near-term production at attractive prices,” he said.

Petsec’s production jumped by 26.7% to 5.7 billion cubic feet equivalent (bcfe) in the 12 months ended 31 December 2004. This substantial improvement followed the start of production in July 2004 from the Vermilion 258 gas field.

Petsec claimed that as of 31 December 2004 its net US proved and probable reserves as estimated by independent petroleum engineers, were 16.3 bcfe. The company’s internal estimate of net recoverable gas is 22 bcfe in its US stakes plus 7.5 bcfe in China for a total of 29.5 bcfe.

Petsec now has four wells in production on the Vermilion 258 leases, with daily net production of 23 million cubic feet of natural gas per day.

The company’s total daily net production from its interests in the Vermilion 258/244, West Cameron 343/352 and Ship Shoal 184/191 fields is currently about 28 million cubic feet of gas per day.

The group said current well performance indicated gas production in 2005 from these fields to be about 7 bcf. Petsec has budgeted US$25 million for exploration and development budget this year.

“In 2005 we look forward to further increases in production and an active exploration programme of seven wells onshore and offshore Louisiana, and offshore China,” Fern said.