Onshore New Zealand-focused junior explorer Kea Petroleum admitted Tuesday that its future is "precarious" as it seeks funds to drill a well to test the potentially company-changing Shannon prospect.
The Shannon Prospect – which lies in onshore zone of the Taranaki Basin and contains an estimated 9.6 million barrels of gross un-risked mean prospective resources – is ready to drill, with Kea's directors wanting to drill the Shannon-1 well during the third quarter of 2015. But the company is facing severe financial constraints, which means it is talking to partner MEO about potentially contributing towards the GBP 3 million ($4.5 million) cost of drilling Shannon-1 as well as enlisting the help of Rockpoint Corporate Finance to find a farm-in partner.
The Shannon Prospect is located directly beneath Kea's Puka production station, which is part of the PEP51153 license area that Kea has already invested GBP 22 million ($32.8 million) in over last five years. Kea noted that in the current low oil price environment many companies are reassessing expensive offshore portfolios as onshore, conventional prospects can withstand lower prices.
"If we make a discovery in the Shannon Prospect 9.6 million barrels recoverable, then over 15 years, presuming an average of $70 per barrel, this translates into $673 million of gross income," the firm said in a statement issued to the London Stock Exchange.
Kea also noted that even if Shannon-1 is not a success there is a second potential prize for the firm.
"The Shannon-1 well is expected to intersect the Mount Messenger sandstone reservoir, above the oil-water contact, that Kea has previously penetrated from the shallower Puka wells. As a safety net for investors in any future fundraising, the well will be drilled so there is a fall back production scenario from the Mount Messenger reservoir if, as expected, it contains oil," the firm added, pointing out that production from another Mount Messenger well with similar characteristics to Puka-1 and Puka-2 would improve the economics of resuming production from these wells – which have been shut in since January.
Have a news tip? Share it with Rigzone!
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
More from this Author
Most Popular Articles
From the Career Center
Jobs that may interest you