'I am pleased to report that during 2004 Venture continued to make very good progress in the development of its business with record levels of production and reserves. 2004 represented a transition year as the Company built on the acquisitions it made in 2003. The primary focus of our activity during the year was the execution of our development program, which because of North Sea project cycle times, which was intended to deliver increased production during 2005.
2005 has started well and, despite difficult operating conditions in the North Sea caused by winter weather conditions, our development programme remains on track. In February, we re-instated production from 'Trees' after the gas leak from the riser on the Brae 'A' platform in late November. Better than expected production resulting from the Birch workover completed in February has offset the disappointment caused by the failure of the first central Sycamore water injection well drilled in early 2005.
On GKA, we successfully brought the Gadwall field on stream in mid-April and initial reservoir performance has been in line with expectations and has already confirmed sufficient connected reservoir volumes to justify drilling a water injection well in the field, which is scheduled to commence drilling in the third quarter of 2005. The Sedco 704 semi-submersible rig is currently drilling the Mallard water injection well which is expected to be completed in June.
Bringing the Annabel gas field on stream in early April has provided a material increase in production levels and completion of the Annabel tie-in work on the Audrey platform has enabled sustained and improved production from Audrey, Ann and Alison. In addition, we have recently completed drilling an in-fill well into the northern part of the Audrey field which is anticipated to come on stream in June.
In April, Venture entered into a swap agreement with BG Group plc ('BG'), whereby it exchanged its 12.5% interest in exploration Block 16/13c in the 'Trees' area for a 33.3% interest in the Channon prospect located in Blocks 47/ 3h and 47/8c in the southern North Sea. Channon is a low risk exploration prospect, with expected gas in place of 100 - 110 Bcf, on which a well is expected to be drilled in late 2005 or early 2006.
In addition to the acreage swap discussed above, during May Venture announced the acquisition of interests in a number of licenses in the central North Sea from Amerada Hess. These contain seven undeveloped oil and gas discoveries, many of which are operated. This acquisition will add to Venture's existing long term development inventory and will enable Venture to sustain its growth beyond 2007.
Total net Group production for the first five months of 2005 averaged approximately 22,000 boepd, reflecting the timing of the restoration of production from 'Trees' in February and bringing Annabel and Gadwall on stream in April. Current production is approximately 40,000 boepd and this is expected to rise during the course of the year as new projects are brought on stream. While there remains development execution risk, including project timing and operational issues, we remain on track to deliver annual average Group production of approximately 34,000 boepd, which represents a more than doubling of 2004 levels. We also continue to anticipate 2005 at an average production rate of over 45,000 boepd during the fourth quarter with an increased reserves base to provide future growth.'
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