Group Production and Outlook
Average Group net daily production for the first six months of 2007 was 42,160 barrels of oil equivalent per day ("boepd"), just over 3% below the comparable period in 2006. Strong field performance from Annabel, Saturn and Goosander was offset by higher than anticipated downtime on GKA due to exceptionally poor weather and a damaged tanker loading hose in April, delay in the start-up of production from the Chiswick field and a delay in gas 'blow down' within the Birch field reservoir.
During the first half of 2007, the benefit of Venture's strong underlying reservoir performance was limited by operational events largely beyond the Company's control. However, the last few months has seen a period of strong production performance and facilities uptime with production currently running at approximately 50,000 boepd. With the addition of new production from fields due on stream in the second half of the year, we expect to exit 2007 with production rates in excess of 60,000 boepd. Revised guidance for average Group production for full year 2007 is between 46,000 and 48,000 boepd representing a 4% reduction in and a narrowing of our previous guidance range of 47 - 51,000 boepd.
In the first half of 2007 Venture continued to pursue its active development program across its North Sea business. During the period three new wells were drilled and completed and one new field was brought on stream. Today Venture has four active mobile drilling units, three of which are operated.
Strong production performance has continued from Venture's southern North Sea 'A' Fields gas production hub, particularly from the Annabel and Saturn fields. In June, the Mimas field (Venture - 15.0%) was brought on stream as a satellite to the Saturn production facilities. Venture is currently drilling the Channon exploration well (Venture - 53.0%) with initial well results anticipated within the next month. After drilling the Channon well, the Noble Julie Robertson jackup will move on to drill the Agatha exploration well (Venture- 66.7%).
Greater Markham Area ("GMA")
During the first half of 2007, production from the Markham area has been boosted by the commissioning of the Markham compression tower ("CT"). In June, the Noble Kolskaya commenced drilling the Chiswick Gamma well, the second development well in the field. Venture is planning to hydraulically fracture the first Chiswick production well in late July or early August with first gas production from the field now expected in early September.
Greater Kittiwake Area ("GKA")
Production from the GKA hub was adversely affected by poor uptime availability of the tanker loading and export system due to weather conditions over the 2006/7 winter. The accidental damage to the tanker loading base in April further interrupted normal production. This was partially offset by continued strong reservoir performance, particularly from Goosander, which has continued to produce materially ahead of expectations. The recent focus on development activity on GKA has been the construction and installation of the new export pipeline between the Kittiwake platform and the Forties Pipeline System. The pipeline has now been successfully laid and the project remains on schedule and budget to be completed during the early part of the fourth quarter. The new pipeline is expected to substantially improve operational uptime, lower overall operating costs and allow GKA field life to be extended. In addition, Venture is planning to spud an appraisal well on the Grouse oil field during the third quarter which, if successful, is expected to lead to the field coming on stream in 2009.
'Trees' production (Venture - 100.0%) has been steady during the first half of 2007. The Birch oil field has produced steadily but the gas 'blow-down' of the reservoir has not yet occurred. It is inevitable that this natural change in production characteristics will happen and at some point significantly more associated gas will start to be produced, thus raising the overall field production rates. However, as the gas produced from Trees is all sold offshore at a high discount to benchmark market prices in order to benefit from lower oil transportation costs, the economic impact of this higher production is limited and so its absence, to date, has a minimal impact on profit.
Other Central North Sea
Field development activity in the central North Sea has focused on the Chestnut field (Venture - 69.875%). The new Sevan 300 floating production unit, the Hummingbird, is undergoing installation and commissioning of the production and support facilities in Rotterdam. The project remains on track for tow out later in the year with first oil anticipated by year end.
The Noble Ton van Langeveld ("NTvL") semisub spudded the Pilot heavy oil field appraisal well (Venture - 70.7%) in late June and results from this well are expected later this month. After drilling the Pilot well, the NTvL will move to drill an appraisal well on the Narwhal heavy oil discovery immediately to the south of Pilot in Block 28/2a. Following Narwhal the NTvL is expected to move on to drill the Millburn appraisal well.
The reduction in commodity prices experienced in the early part of 2007 resulted in Venture receiving less sales revenue for its oil and gas production in comparison with the first half of 2006. However, this adverse impact was partially offset by the oil and gas price hedges in place. Financial performance and operating costs were in line with expectations and our forecast for 2007 capital expenditures remains in the range of £200 - £230 million excluding costs associated with the GKA pipeline or any additional acquisitions.
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