Roc CEO Dr John Doran blamed this blowout on bad weather, operational and equipment delays, as well as increased costs for materials and services, and other mechanical revisions and industry factors.
“We hate cost overruns…and the fact that they are becoming the norm in many parts of the resource sector,” Doran said.
“It’s all very well talking in the abstract about the rising cost of goods and services. But it hits home when you realise that, for all practical purposes, the increased Cliff Head budget will – on a post-tax basis - reduce Roc’s net present value by about A$3.8 million, equivalent to two cents per share.”
The latest budget estimation for the Cliff Head development is now at A$265 million.
After a final investment decision was made for the project in March last year, the project partners agreed to an initial A$227 million budget, including contingencies. But in late 2005, the joint venture said it would drill an additional well, worth A$12.5 million, to access and produce a further one million barrels of oil. This took the budget to A$240 million.
Full-field production of the Cliff Head field is expected shortly after production starts during the first quarter, Roc said.
Doran said recent project milestones included installing the Cliff Head “A” platform jacket late last month. Construction and pre-commissioning of the topsides for the Cliff Head “A” platform have also been successfully completed in Malaysia. Sail-away is expected later this week, with a scheduled arrival at Cliff Head in late January.
Drilling the planned five producing wells and two water injection wells has started, with the batch drilling of the 30-inch and 20-inch conductors completed late last month. All drilling and completion is expected to finish in early April.
On completion, the Ensco-67 rig will drill exploration wells in the nearby WA-286-P and TP/15 permits, Roc said.
The joint venture also completed a Cliff Head oil sales contract last month with BP, under which all crude produced during the field's will be sold into BP’s Kwinana Refinery.
Construction of the onshore Arrowsmith Production Facility is now 85% complete and commissioning work has begun, Roc said.
Roc is planning to drill up to 21 exploration and appraisal wells throughout 2006.
The Cliff Head joint venture comprises: Roc Oil (operator and 37.5%), AWE Oil (27.5%), Wandoo Petroleum (24%), Arc Energy (6%) and CIECO Exploration and Production (5%).
