The first half of 2005 saw Venture's 2004/5 development program delivering a step change in production volumes. Average net daily production during the first six months of 2005 was 24,250 barrels of oil equivalent per day ('boepd'). This represents an increase of 35% over the comparable period last year and a 44% increase over 2004 annual average production levels. As a result of development projects already underway, this is expected to rise further to an average of 45,000 boepd during the fourth quarter.
As a consequence of the unexpected shut-in of all 'Trees' production during the early part of the year, average production for the first quarter was limited to 13,300 boepd. However, with the reinstatement of 'Trees' production in early February and the successful commencement of production from Venture-operated Annabel and Gadwall fields, average production rose to 35,000 boepd during the second quarter. Annabel and Gadwall represent important new field development projects for Venture and were both successfully brought on stream in April. Since then both of these fields have performed in line with expectations enabling Venture to commit to the drilling of a second production well on Annabel and a water injection well on Gadwall. Both these wells will be drilled during 2005.
Venture is currently drilling three wells. The Noble Ronald Hoope jack-up rig has started drilling the second production well on the Annabel field. It is anticipated that this well will be completed during the third quarter with the aim of bringing new gas production on stream ahead of the 2005/6 winter period.
The Sedco 704 semisubmersible drilling rig is drilling a new water injection well in the Mallard field and the well is currently just above the anticipated reservoir section. We have encountered some operational issues whilst drilling this challenging well, which will delay its completion slightly with a resultant impact on the timing of its contribution to increased production in 2005. Nevertheless, the provision of more effective water injection support to the Mallard production well remains an important component of production growth in 2005 and beyond.
Following agreement with Canadian Natural Resources Limited ('CNR'), the operator of the Tiffany field located in block 16/17 immediately to the south of the 'Trees' block 16/12a, Venture has recently commenced drilling the first well of the South Sycamore development (SP-4) using the Tiffany platform rig. It is anticipated that this will be completed in the fourth quarter. Whilst utilising a platform well rather than drilling from a sub-sea location has accelerated this project and reduced development costs, actual drilling commenced about one month later than had been originally planned. This will slightly reduce the well's impact on calendar 2005 production.
The recently drilled North Audrey development well (B5) intersected the reservoir section as expected. However, the reservoir pressure was found to be at the low end of the anticipated range and the well has not yet been brought on stream.
The ConocoPhillips-operated Saturn development project (Venture 22.0%) remains on schedule for first gas production in the fourth quarter of 2005. The jacket was installed during June and the operator is currently drilling the first of three planned production wells.
Significant progress has been made on the Venture-operated Goosander and
Chestnut oil development projects, which are on track to come on stream during
mid-2006 and mid-2007 respectively.
The recently announced exit from operations in Trinidad together with the minor delays in commencing key projects discussed above mean that full year average production expectations have today been updated to between 30,000 and 32,000 boepd - an increase of 78-90% over 2004. For the full year 2005, Venture's forecast earnings remain in line with our expectations. Venture anticipates rising cashflow and profitability towards the end of the year as a result of higher production volumes and favourable commodity prices.
Overall, Venture's development programme remains on track to exit 2005 at a fourth quarter average production rate of 45,000 boepd from the UK and, based on the current development programme, we expect production to increase to 55-60,000 boepd by the end of 2006 or early 2007.
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