"Your Board remains confident of Petsec's growth potential and its ability to build on our current reserves base of around 56 billion cubic feet equivalent (Bcfe) of gas to achieve a medium term goal of 100 Bcfe of reserves in 2006/2007," the Company's Chairman, Mr. Terry Fern, told shareholders at today's annual meeting in Sydney.
"Certainly, the achievements of recent years have formed a solid platform for the Company to reach that potential," Mr. Fern said.
"In the four years since the Company recommenced operations in the Gulf of Mexico, we have discovered some 72 Bcfe of gas from the drilling of 26 wells, 22 of which have been successful (not including the recent China oil discovery).
"Four oil and gas fields have been discovered and developed which have delivered free cash flow of over US$100 million to Petsec.
"This success is being recognized by the market such that the Company's market capitalization at the close of trade yesterday on the ASX was in excess of A$400 million."
Mr. Fern said Petsec was off to a "flyer" in 2006 with successes in the opening five months including the exceptional 100% gas discovery strike rate in the Company's four wells drilled from the Main Pass 19 platform in the Gulf of Mexico, and the recently announced oil discovery in China by the ROC Oil led joint venture (Petsec 25% interest).
"Revenue and earnings have rebounded strongly with the resumption of production from areas affected by Hurricane Rita and we have won and acquired two new Gulf of Mexico leases with a further two leases subject to grant by the MMS."
Mr. Fern said Petsec would drill about 10 wells in 2006 to test target potential in excess of 50 Bcfe in the USA and in excess of 2.5 million barrels in China.
"We estimate that we can produce 8-10 Bcfe of gas in the current year which should generate sufficient cash flow to meet the estimated expenditure of US$50-60 million to drill nine wells in the USA and one well in China," he said.
"The Company currently holds approximately US$25 million in cash to support this active exploration and development program."
Mr. Fern said a project with high potential value to Petsec was its 50% working interest in the 60,000 acre Moonshine Project, onshore Louisiana, fifty miles west of New Orleans.
"This area has produced over 340 Billion cubic feet of gas and seven million barrels of oil but has only had early 2D seismic recorded on 25% of the area - and no 3D seismic," he said
"The Moonshine joint venture recorded 3D seismic over the entire area in the first half of 2005. The data quality is very good and the prospects which are being mapped hold significant potential.
"We are looking forward to the start of drilling on these prospects which we expect late in 2006. This style of onshore play is appealing and the Company will be alert to similar opportunities."
In March 2006, Petsec drilled the first well on its Main Pass 18, located immediately north of the Main Pass 19 gas field, discovering some 7.5 Bcf of gas plus approximately one million barrels of oil.
"Further exploration potential exists on Main Pass 18 and the adjacent Main Pass 103 lease which we hope to test later in 2006," Mr. Fern said.
"Development of that new Gulf oil discovery is under review and may require a platform at Main Pass 18. Main Pass 7 and 91 lie to the immediate north of Main Pass 18 and have similar geological and production characteristics to Main Pass 19 and 18.
"Upon award of new leases from the MMS we would also wish to drill these leases later in 2006.
"Prospects mapped in Vermilion 257 of the order of 40 Bcfe are expected to be tested in June 2006. A rig is contracted for two to three wells and is expected on site later this month."
Mr. Fern said Petsec's 2005 performance represented another year of positive growth for the company, with production, net revenue, cash flow and earnings before interest, tax, depreciation and exploration expenditure (EBITDAX) all increasing for the third successive year.
"We also achieved further significant exploration success, boosting year end reserves by 31% to 38.5 billion cubic feet equivalent (Bcfe) of gas and bringing new Gulf of Mexico gas fields into production in short timeframes."
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