In its first report on minority Maari partner Horizon Oil, Bell Potter says Horizon will soon start enjoying its first cash flows once the $US508 million ($A544 million) Maari development starts production.
The project is due to come online in September.
Although capital costs had increased from $US365 million ($A391 million) in late 2005, this was not unusual in the current industry environment and still represented a modest rate of less than $US10 ($A10.7) of capital expenditure per barrel, the broker said.
"We have assumed capex of $US520 million ($A557 million), to allow for some further cost escalation," Bell Potter said.
Net cash flow to Horizon would approach $US10 million ($A10.7 million) per month at $US100 per barrel oil prices, according to the broker.
Initial peak production rates from Maari are expected to be about 35,000 barrels per day, and Bell Potter expects this level of output to be maintained for about 12 months.
"We assume a natural field decline of almost 20 percent annually thereafter, although it could in fact be less than that," the broker said.
Based on a conservative base case of 60 million barrels of 2P (proven and probable) reserves, Maari could be exhausted by 2020.
"But there is a very good chance that significant additional reserves will be recovered from higher recovery factors, additional reservoirs and the Manaia structure, which could add up to another 50 million barrels, at very low capital costs," the broker said.
The project's final investment decision of late 2005 was based on estimated reserves of 50-60 million barrels, representing a 36-43% recovery rate of the 140MMbbl of oil initially in place in the Moki Formation.
But ultimate recoverable reserves would ultimately depend on oil prices, production rates and recovery factors.
If oil prices continued at high levels, producing another 10-20MMbbl seemed feasible, according to the broker.
"Ultimately, the Maari-Manaia project could recover 80 million barrels plus of oil," Bell Potter said.
Maari crude is a medium-density (34.6 degree API), low sulphur, waxy oil. Independent analysis commissioned by operator Austrian firm OMV had confirmed the oil is an attractive feedstock that should trade at a slight price discount to Singapore's Tapis marker crude.
The broker said the main risk with Maari was that first oil could be delayed, as commissioning depended on winter weather off Taranaki over the next few months.
The Maari partners are OMV New Zealand (operator and 69%), Todd Energy 16%, Horizon Oil 10% and Cue Energy Resources 5%.
