Addressing Petsec's annual general meeting in Sydney, Executive Chairman Mr. Terry Fern said 2004 production from the Company's expanding Gulf of Mexico operations was expected to jump to around 6.5 billion cubic feet (bcf) of natural gas.
This represents a 44.4% increase on 4.5 billion cubic feet (bcf) of gas in 2003 which in turn was a sharp rise from only 46 million cubic feet in 2002.
Mr. Fern said this year's sharply increased production was expected to provide sufficient cash flow at current gas prices to fund Petsec's 2004 exploration and development budget of US$ 28 million.
"The outlook for gas and oil prices remains firm, as dwindling supply is tested by a growing US economy and substantial energy demands from Asia, particularly China and India," he said.
"Your board is very pleased with the growth being achieved and we see continuing opportunity to acquire additional Gulf of Mexico leases that will have a further substantial impact on the Company."
"We look forward to this year's drilling program which holds considerable promise and has the potential to maintain the Petsec growth trend in 2004 and beyond."
In the past calendar year, Petsec achieved a spectacular earnings turnaround as it continued to reinforce its re-emergence as an independent oil and gas exploration and production company.
Profit rebounded to $22.7 million - representing 21.5 cents per share and a significant turnaround from the $4.4 million loss incurred in 2002.
"For shareholders, it is pleasing to see that the market has responded to this much improved performance, with your Company's share price rising from 25 cents at the beginning of 2003 to $1.05 at the end of 2003 - and now around $1.25," Mr. Fern said.
During 2003, Petsec's operating cash flows of $27.5 million were reinvested into exploration and development in the Gulf of Mexico and China.
"In the 15 months since we began drilling on our West Cameron leases, your Company has discovered an estimated net 36 bcf of recoverable gas in the USA," Mr. Fern told the meeting.
"We have 5 wells scheduled to be drilled in 2004 on Vermilion 258. The first of these - the Vermilion 258 # 2 well - was drilled in January discovering an estimated 9 bcf of recoverable gas," he said.
"The other 4 wells are proposed to be drilled from the Vermilion 258 platform commencing in September to test mapped potential of an estimated 20 bcf of recoverable gas."
Petsec now holds 5 contiguous leases in Vermilion and interests in a total of 13 leases in the Gulf of Mexico.
As well as the drilling of 5 wells in the US this year and the construction of facilities at Vermilion 258, Petsec's exploration budget of US $ 28 million provides for 3 wells in China.
The China wells, in the offshore Beibu Gulf 22/12 Block, were drilled in April and May this year to test an exploration prospect of 43 million barrels (bbl) potential with well 12.7.1 and to appraise the prior discoveries at 12.8.2 ( 20 to 30 million bbl potential ) and 12.3.1 ( 9 million bbl potential ) with wells 12.8.3 and 12.3.4 respectively.
Well 12.8.3 discovered 11 meters of net pay containing 18 –20 degree API oil in high quality sands, confirming the joint venture's estimation of oil in place of 80 to 90 million bbl.
The viscosity of the oil was higher than anticipated which will adversely affect well productivity and the amount of oil that can be economically recovered. Work over the next 3 months will concentrate on development economics for this discovery in combination with the 12.8.1 field, 2 km to the west, which contains an estimated 10 million bbl of recoverable oil.
This 3 well program in China cost Petsec some US $ 2 million. Of this amount US $ 1.5 m accounts for the 2 unsuccessful wells and will be written off in the Company's half-year accounts.
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