Group net production for 2004 averaged 14,200 bopd, an increase of 74% over 2003 (8,140 bopd). In Turkmenistan net production averaged 9,300 bopd compared with 6,770 in 2003, an increase of 37%, and net production from the Republic of Congo (Brazzaville) ('Congo') averaged 4,900 bopd compared with 1,370 bopd in 2003, an increase of 256%.
Group net production is currently just above 20,000 bopd, compared with 9,000 bopd in January 2004. Burren expects to have achieved net production of 24,000 bopd by the end of 2005 as a result of continued development drilling in both Turkmenistan and Congo and without taking into account the impact of any production arising from exploration drilling.
Cash flow before financing in 2004 was positive despite a doubling of capital expenditure compared with 2003. Cash balances at the year end were £21 million and debt (including finance leases) was £4.3 million. The debt is all attributable to the shipping business and is not guaranteed by the parent company.
In 2005 Burren intends to invest approximately £100 million on its existing projects of which approximately a quarter will be exploration-related. Geographically, 50-55% of this investment is expected to be spent in Turkmenistan, 40-45% in Congo, and a maximum of 5% in Egypt. In all up to 60 wells could be drilled, of which up to 17 could be exploration wells (the majority of which will be in Turkmenistan). This compares with 29 wells in 2004 of which only one was exploration.
During 2005 Burren will continue to advance negotiations with the Turkmen authorities regarding a gas sales contract for its gas production.
The Company has engaged Ryder Scott, the Houston-based petroleum consultants, to perform an independent audit of its oil reserves as at 31 December 2004, the results of which are expected to be made public on or before the preliminary results announcement date.
A review by individual operation follows:
Nebit Dag (100% working interest. Operator : Burren)
In Turkmenistan, current production is approximately 18,000 bopd gross, 11,000 bopd net to Burren. In 2004 10 development wells were drilled on the Burun field of which 7 were shallow wells to depths less than 1500m. The 4 most recent shallow wells, drilled since October, are currently producing an average of 450 bopd per well. The workover program continued throughout the year. At year end there were 115 producing wells in on the Burun field, with a further 40 wells shut in.
In 2005 Burren intends to run a continuous program of shallow drilling for up to 15 wells, and to drill up to 6 deep development wells on the Burun field.
3D seismic over a 700 sq. km area of the license area outside the Burun field has been acquired and processed, and interpretation is expected to be complete by the end of April to enable the selection of locations for exploration drilling. Up to 12 deep and shallow exploration wells are intended to be drilled this year, and negotiations are advanced to contract a second deep drilling rig for this purpose. An early drilling project will be to re-enter and test the B60 exploration well on the south flank of the Burun field.
Despite a significant increase in capital expenditure compared with 2004, Nebit Dag is expected to continue to generate substantial free cash flow in 2005 for use by the Group for other investment opportunities.
Republic of Congo (Brazzaville)
Kouilou / M'Boundi (35% working interest. Operator : Maurel & Prom) Kouakouala (25% working interest. Operator : Maurel & Prom)
Current gross production from Congo is 38,000 bopd , 9,300 bopd net to Burren. 36,000 bopd is from M'Boundi (22 wells in production) and 2,000 bopd is from Kouakouala (4 wells in production).
In 2004, 17 wells were completed on M'Boundi and 1 on Kouakouala, and there are now 4 rigs in operation in these fields. The three most recently drilled wells in the M'Boundi field are currently producing more than 4,000 bopd each. In 2005 3 rigs will drill continuously on M'Boundi, with up to 22 development wells planned. Facilities upgrade will continue in order to ensure gross production capacity of 60,000 bopd, and pilot water injection programs will be initiated in Kouakouala and, subsequently, on M'Boundi.
As well as a high-resolution aeromagnetic survey over the whole of the Kouilou license area, a 230 sq. km. 3D seismic survey has nearly been completed over possible extensions to the M'Boundi field to the north-west and south-east, the results of which are expected to have been interpreted by mid year. Within the rest of the Kouilou license area it is intended to shoot 2D seismic during the first half of 2005 over several prospects, the results of which should be available during the second half of the year.
Up to four exploration wells are expected to be drilled within the Kouilou area during the year, of which two will be sited to test the northern and southern extent of the M'Boundi field.
The PSA relating to the Noumbi permit to the north of Kouilou was signed on behalf of the Congolese Ministry of Hydrocarbons in 2004 and is awaiting parliamentary ratification. Burren expects to be in a position to commence exploration activity during 2005.
East Kanayis (100% working interest)
Following signature of the PSC for the East Kanayis block in Egypt's Western Desert in September, an office has been established in Cairo and work is well advanced to prepare for seismic acquisition and drilling, with spud of the first exploration well intended around the middle of 2005.
Applications have been made for 3 other blocks in recent licensing rounds, the results of which are still awaited.
During 2004 Burren acquired 3 tugs and barges with a combined deadweight freight capacity of 10,500 MT for operation in the Russian river system. Overall, freight carried in 2004 was below expectations, primarily due to the unscheduled closure of the Volga-Don canal for a month in the autumn.
The shipping business is no longer considered core to Burren and the Company is working towards its disposal.
Finian O'Sullivan, Chief Executive of Burren, commented:
'Burren has had an excellent year with significant growth in production delivered across the business, in particular from our assets in West Africa.
'The company expects that ongoing development and exploration drilling programs planned in Turkmenistan and the Congo over the new financial year will further drive performance as well as supporting exploration operations in our new geographical area of Egypt.
'The Group is on track to deliver a record performance for the year and the Board remains confident of the prospects for growth going forward.'
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