After having emerged less than three years ago from the ashes of failed company Renewable Energy, Salinas is already self-funding, managing director John Begg told the Excellence in Oil & Gas Conference in Sydney on Monday afternoon.
"We are forecasting $US20 million in revenue and 287,000 barrels of production for 2008," he said. "We have cash reserves of $7 million and no debt."
Begg also announced that two horizontal wells, Lombardi 10-27H and Lombardi 13-27H, had lifted the average field production rate to 1135 barrels per day. Further improvements are expected as an additional two wells are yet to be completed and brought on line.
"The field is performing exceptionally well and so far the new wells are delivering primary production beyond expectations, without the need for steam," Begg said.
"This means that not only are we achieving progressively higher production rates but we are also able to keep our operating costs down resulting in very high margins per barrel.
"We hope to be able to measure the impact of two more horizontal producers within the next month and it is clear that we will be achieving record rates during a period of record oil prices.
"The value of NSA continues to climb, giving us confidence in our oil field redevelopment strategy and in the potential of the other projects in our portfolio."
Salinas owns 100% of the North San Ardo field, its key asset, but this is just a small part of the 40,000 acres it holds in the San Joaquin and Salinas basins.
The company decided to focus on California because the state has plenty of oil, high rates of drilling success and good infrastructure, yet there is less competition than in other parts of the US, particular the Gulf Coast region, according to Begg.
Salinas currently focuses on redeveloping old, shallow heavy oil fields, although it is also planning to undertake exploration for light oil. All prospects are in sandstone reservoirs near large fields.
Begg emphasises the importance of operatorship and large equity stakes for Salinas.
"This allows us to execute our plans," he said.
"We avoid being held hostage to partners' agendas and can control our costs. We get better and faster access to key equipment and practical learnings transfer between projects."
But this can only be achieved because the company has managed to recruit experienced, capable and positive staff, according to Begg.
"We have already achieved a reputation for excellence in managing environmental and regulatory regimes," he said. "The net result is rising oil production cashflow and profits."
The company uses 3D seismic and horizontal drilling to redevelop its fields. While horizontal wells are twice as expensive as vertical ones, initial production can be almost four times higher.
So far, Salinas has had success in 11 out of 11 appraisal and production wells drilled so far, Begg said.
Salinas is currently planning to secure another drilling rig for its second production drilling program, scheduled for late in the third quarter. It will drill 13 wells this year. Most of these will be infill development wells, but three will be exploration wells.
The Paris Valley infill wells are targeting a field that could have up to 100MMbbl in place, while the Osso Bucco-1 exploration well is targeting undrilled sands beneath an already known oil and gas field. This prospect has a mean recoverable resource potential of 11 million barrel of oil equivalent and upside of 28MMboe.
