In its latest unaudited regulatory filing in Canada, where it is incorporated, the Wellington-headquartered company said it started the six-month period with a US$17.04 million loss, which then worsened by US$1.56 million.
Operating activities produced a US$1.56 million loss (US$0.68 loss for 2004), while its oil and gas sales accounted for only US$2947 (US$45,121). The US$2735 of production costs and US$36,169 of royalties paid meant an overall production loss of US$35,957 for the 2005 period compared with the US$42,866 credit for the 2004 period.
Oil and gas write-offs of US$840,829 (US$52,566), plus other expenses, meant a net loss for the period (before other income) of US$2.34 million (US1.22 million). But income from interest and joint venture activities produced US$779,396 (US$541,595), softening the overall company loss to the US$1.56 million (US$0.68 million).
Chief executive David Bennett said given reasonable commercial success in any or all of the three Eocene-aged zones being tested at Cardiff-2A, a 3D seismic survey was planned for late 2005-early 2006.
This would cover the mapped extent of both the Cardiff and Cheal fields in PEP 38738 and would be used to select further drilling targets on both fields.
Cardiff-2A was still cleaning up – flowing gas, oil and completion fluid to flare, from the upper two test zones – after fraccing operations and all three primary test zones were established producer sandstones in offsetting wells and fields.
The Cardiff-2 site was designed to allow a further two wells to be deviated to suitable targets from the location; and it could form the nucleus of field processing facilities and a pipeline link to regional gas distribution infrastructure, with high capacity gas pipelines within 8km of the site.
The nearby Cheal-A3X well had now produced over 24,000 barrels of oil during testing and future site reconfiguration might result in improved flow rates for Cheal-A3X, which had been flowing around 350 barrels of oil per day (bopd) and for the Cheal-A4 well. Two more wells, Cheal-A5 and Cheal-A6, were planned to be drilled from this site in early 2006.
Ultimately, Cheal gas would be used for on-site electricity generation and when the associated gas reserves justified it, a gas pipeline would be built.
A gas-engine powered electricity generation system was presently being commissioned and an interconnection agreement to the regional electricity distribution grid system finalised. Commissioning was expected to be achieved in late 2005.
The PEP 38738 participants were still awaiting word from Crown Minerals on their application for long-term production rights covering the mapped extent of the Cardiff and Cheal fields, as the application was now on hold pending determination of flow potential of Cardiff-2A.
Forward expenditures for the rest of the year were likely to be dominated by Cheal and Cardiff appraisal activities, with the pace and scale of expenditure linked to the degree of ongoing success in establishing sustainable and economically viable flow rates and reserves.
The PEP 38738 deep partners are: operator Austral (25.1%), Genesis Energy (40%), Cheal Petroleum (15.1%) and International Resource Management (19.8%). The PEP 38738 shallow partners are: operator Austral (36.5%), Cheal Petroleum (30.5%) and IRM (33%).
