Harvest signed an agreement through its Venezuelan operating company Benton-Vinccler with state oil company PDVSA to evaluate the two fields, Temblador and El Salto, in November 2003. "If there's an opportunity to expand the business, we would like to consider those opportunities and see if we can put something together that makes sense for both sides," Tholen said. Harvest's discretionary cash flow is projected to exceed capital expenditures by some US$25mn in 2004, the company said in a statement, some of which could be used to develop the new fields, Tholen said.
The purpose of the study is to "determine how much oil and gas is recoverable, how much drilling would have to be done, what the operating costs might be and what processing requirements might be," Tholen said. "All of these are unknowns at this point."
Harvest has a period of six months to submit a field development plan and negotiate a production contract with PDVSA under the terms of the agreement. Harvest expects its hydrocarbons production to increase 50-75% from 2003 to 33,000-38,000 barrels of oil equivalent a day (boe/d) in Venezuela in 2004, the statement said.
The company produced an average of 21,400boe/d in 2003. Oil production is expected to increase to 22,000-26,000b/d from 20,200b/d in 2003, while gas production is expected to average 70-80 million cubic feet a day (mcf/d). Such production estimates will yield net income in the range of US$15mn-20mn, assuming a WTI oil price of US$26/b for 2004, the statement said.
Harvest delivered first gas to Venezuela's state oil company PDVSA on November 25 from the Uracoa and Bombal fields in the South Monagas Unit (SMU), and is currently shipping about 70mcf/d, Tholen said.
Harvest plans to drill 10 wells in the Uracoa Field starting in the second quarter this year, Harvest president and CEO Peter Hill said in the statement.
The main objective of the drilling program will be to access oil reserves under the gas cap, enhancing both oil and gas production capacity. Harvest's capital expenditures for 2004 are projected to fall to US$30mn-35mn from US$58mn in 2003, mainly because investment in the project to supply gas to PVDSA has been completed. "That's behind us now at this point in time, and the capital expenditures we have for 2004 are primarily for the drilling of oil wells [in Urucoa]," Tholen said.
Operating expenses in Venezuela are projected to fall to US$2.50-2.75/boe in 2004 from US$3.90/boe in 2003, mainly due to the negative impact of the national strike in early 2003, the statement said.
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