Salamander issued the following Interim Management Statement for the period from January 1, 2011 to May 18, 2011.
Exploration and Appraisal
The Group completed one appraisal well during the period, the Dao Ruang-2 well in block L15/50, Northeast Thailand, while progressing its analysis of a follow up location on the Dao Ruang structure ahead of drilling during the current year. The well intersected a number of the targeted fracture zones with associated gas shows. Gas was seen all the way to TD, without any water, demonstrating a significant gas column in the Dao Ruang structure. An openhole DST was undertaken but only sub-commercial flow rates were recorded indicating a low permeability formation with a limited open, connected fracture network at the Dao Ruang-2 location. The Dao Ruang-3 well spudded at the end of April and is targeting an independent fault network in the Dao Ruang structure where it is hoped the well will encounter an open fracture network.
Offshore in block B8/38 in the the Gulf of Thailand, development drilling on the Bualuang platform is underway and the East Terrace prospect will be tested as part of this program. Exploration drilling elsewhere in the B8/38 block will follow the completion of development drilling.
The Group has been continuing its technical analysis of the Angklung-1 discovery well and the existing 3D seismic data in order to better understand and map the play systems in the Northern Kutei area. This analysis will assist in identifying the location of the follow up wells in the Bontang PSC planned for 4Q 2011, which will be aimed at appraising the gas play and exploring the oil play.
In the SE Sangatta PSC, adjacent to the Bontang PSC, the Group completed 2D and 3D seismic surveys during 1Q. The results of these surveys are now being interpreted, with early indications of a number of prospects on trend with the Angklung discovery, confirming the continuation of the prospective trend into the SE Sangatta license. A well on this license is planned for 4Q 2011.
In the Tarakan Basin the HPS-1 land rig has commenced mobilization to the South Sebuku-2 well site and is expected to spud during May 2011.
The Aquamarine Driller jackup rig has been contracted to drill the Cat Ba prospect, offshore North Vietnam. This well is expected to spud in July 2011.
Production and Development
The Group's producing assets have performed broadly to plan. During 1Q 2011 production averaged 19,434 bopd. The Group reiterates its average production forecast for 2011 of 22-23,000 bopd. The current development drilling program on the Bualuang oil field, Gulf of Thailand, incorporating six development wells, will drive increased volumes in the second half of the year.
The Group is in an advanced stage of negotiation and expects imminently to announce agreement on a new debt facility. It will be a $325 million senior and junior reserves based lending facility that will replace the existing senior, junior and acquisition bridge facilities in addition to providing additional liquidity.
At March 31, 2011, total Group debt, including the $100 million convertible bond, was $273 million, total available funds were $103 million, and net debt (including the convertible bond) was $170 million.
As announced on 3 May Nick Cooper, Chief Financial Officer, will be leaving the Company to join Ophir Energy as Chief Executive Officer with effect from 31st May. The Company has begun a search for a successor and anticipates an orderly transition. A further announcement will be made in due course.
Through a combination of higher than expected commodity prices, a growing production base and the expected refinancing of its debt facility the Group's solid financial position has been further strengthened. Operationally the focus is on delivering the 2011 exploration and appraisal program that combines a mixture of low risk, high value wells with higher impact drilling in both Vietnam and Indonesia with the Angklung follow up wells in Bontang and SE Sangatta PSCs.
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