Production was also up, reaching 8.2Bcfe of gas, a rise of 27%, largely due to the commissioning of the Main Pass 19 field, discovered in 2005, and Petsec also posted a 36% improvement in underlying earnings, which rose to $US24.7 million ($A31.4 million) before tax and exploration write-offs and provisions.
The company said the price received for natural gas of $US7.24 per thousand cubic feet was up 2.8%, in line with the three-year average of natural gas prices received in the Gulf Coast region.
But profit was down, despite increased revenue (up 30% at $US59.5 million) and operating cashflow (up 20% at $44.4 million). Net profit before tax was $8 million, down 17% on the previous year, while profit after tax was $5.1 million, down 46%.
The drop in profit was largely due to exploration write-offs and provisions, mainly for the company’s one failed 2006 well, Vermilion-257.
The well costs of $11.5 million were written off in the first half of the year and a provision of $3.5 million was made for the potential removal of the Vermilion 257 jacket. A provision of $1.7 million was also made against the remaining book cost of West Cameron 343/352 in anticipation of this field being plugged and abandoned in the first half of 2007.
Petsec’s reserves increase resulted from nine successful exploration wells out of the 10 drilled by the company during the year, resulting in the discovery of five new gas fields in the USA and one oil field in China.
One of these wells was the Roc-operated Wei 6-12 South discovery in the Beibu Gulf, China; the remaining wells were in shallow Gulf of Mexico, USA waters.
“The 6-12 South oil discovery has substantially increased the probability of success for the five adjacent oil field prospects,” Petsec chairman Terry Fern said.
A significantly larger exploration program is planned for this year, the company said.
Petsec will drill between 14 and 20 wells in the Gulf of Mexico, USA, and offshore China in the current year, targeting another 60Bcf, which would double current reserves if successful.
The company said its prospect inventory now stands at 290Bcf of gas and 30 million barrels of oil in the US, and 5-8MMbbl of oil in China.
Petsec’s Mobile Bay gas discoveries have already been completed for production and are expected to come online in the third quarter of 2007 and a final decision on the development of its Chinese assets should be taken in the second half of the year, according to Fern.
“Capital expenditure of approximately $US68 million is proposed, supported by current working capital of $US36 million and anticipated 2007 operating cashflow of $US50 million from 9.8Bcfe of production – up 20% on 2006 – from existing reserves,” he said.
“We expect this 2007 program to substantially build on our successes of the past year, which saw reserves increase by 55% to 60Bcfe. Continued growth in production and cash flow [should provide] a reliable earnings base to fund exploration of Petsec’s sizeable prospect inventory.”
