Each of the 37 wells in the current program will cost about US$210,000 to drill and complete. This was relatively inexpensive because of the already established infrastructure, flow lines and electricity, said Amadeus’ US-based operator TNT Engineering president DeWayne Travelstead.
Total development of the program is expected to cost about US$7.7 million. Travelstead said the companies were using the same geology scenarios and 3D seismic as the previous operator and therefore expected the same 83% success rate.
Amadeus said the leases, which contain an estimated five million barrels of oil equivalent, illustrated the company’s preferred farm-in method.
“Our business plan has always been to acquire proven producing assets and then over time explore with the surplus cash flow,” said managing director Geoffrey Towner, adding that this method reduced risk.
“Seventy-six per cent of what we paid for in this deal was that type of reserve. The other 24% was also proven reserve, but they’re a combination of mostly proven undeveloped reserves and proven developed non-producing reserves.”
Travestead said the company had an opportunity to discover additional reserves using geology and 3D seismic, which has already been acquired over 5200 of the 18,000 acres to define ‘proven undeveloped reserves.’
"There is very little question that there’s more oil and it’s important to make the distinction here,” Travelstead said.
“Just because we’re using 3D seismic does not mean that there is risk associated with it - this is not wildcatting or blue sky.”
But Travelstead said the exploration and production of additional reserves would wait until the existing leases were exhausted.
“We have no obligation to quickly jump in there and just drill wells. We’ll just drill them as we see the opportunity,” he said.
Of the 3D seismic already shot, 55 prospects have been identified. Eighteen have been drilled so far, with 15 deemed commercially successful.
Amadeus estimated the acquisition would help drive up its oil production by about 120% and its gas production 375%, said Towner.
The US$55.6 million deal which Amadeus farmed into with a 85% working interest is currently netting the company US$850,000 a month after operating costs. This brings the company’s total net cash flow to about US$2.75 million per month, said the company.
“We’re buying reserves from fields that have a production history of 60 years,” said Towner.
“We estimate the remaining average well life to be around 40 years at current prices.”
Towner said the acquisition was mainly debt-funded, with US$15 million equity contributed after the successful A$23 million share placement.
TNT Engineering will receive a 10% free carry from Amadeus in the project.
