Stuart Boosts Cooper Basin Oil Development Program and Exploration

Stuart Petroleum is progressing a number of projects to develop its recent oil discoveries in the Cooper Basin, the latest being the successful Rimfire 1 and Revenue 1 wells on the Dunoon Ridge in PEL 113, some 50 km south of Moomba.

Stuart Petroleum managing director, Mr. Tino Guglielmo, said "The Dunoon Ridge around the Harpoono, Rimfire and Revenue oil discoveries is shaping up to be an extremely productive core area for us. A real boost is the highly productive oil pay found in the McKinlay Formation at Harpoono 2 and Revenue 1 which upgrades the prospectivity of the area significantly".

Rimfire and Revenue will be tied in to the existing Harpoono facility over the next month. The wells will then be put on pump to further boost flow rates. "The McKinlay discovery in Revenue 1 can be expected to deliver substantially higher oil flow rates than the Murta Formation alone", Mr. Guglielmo added.

Within the area covered by the Harpoono 3D seismic survey, a total of twelve drillable prospects have been identified, four in the northern area of the Dunoon Ridge together with eight in the central and southern area. Additional drillable prospects are likely outside the seismic survey area to the west along the remainder of the ridge.

Stuart's successful exploration program is set to continue with the drilling of Light Fingers 1 in EL 113 to the southwest of Derrilyn and Toparoa. The well is due to spud late this week. Stuart ill then participate in a further 5 wells, the Derrilyn 4 development well, scheduled to drill in August, followed in October by the Tawriffic East 1 exploration well in PEL 93, plus three Dunoon Ridge exploration wells.

Elsewhere in PEL 113 an early production test is ongoing on the Padulla 3 well. Plans are well advanced to fracture stimulate Padulla 2 and Padulla 3 to increase production rates Both wells will then be connected to the recently constructed Modular Production Facility in conjunction with new artificial lift systems.

Oil price:

Stuart has a positive view of the impact of current oil prices and advises that per barrel oil revenues are significantly higher in the current fiscal year arising from a substantial reduction in the volume of crude oil hedged from June 30, 2006.

Some thirty months ago, Stuart Petroleum entered into oil price swap arrangements which matured in June 2006; to the extent of 21,000 barrels of oil a month forward sold at US$27.02 a barrel. The swap exposure for Fiscal 2007 has fallen to 8,000 barrels a month forward sold at US$26.36 a barrel. These prices compare with current spot oil prices for prime Cooper Basin light sweet crude in excess of US$70 a barrel.

"These forward sales have impacted our oil revenues as we have continually advised in our quarterly production and exploration reports to the ASX," commented Stuart Petroleum managing director, Mr. Tino Guglielmo.

"These forward sales have impacted our oil revenues as we have continually advised in our quarterly production and exploration reports to the ASX," commented Stuart Petroleum managing director, Mr. Tino Guglielmo.

"If the oil price and foreign exchange rates hold at current levels through this year, Stuart's revenue will be enhanced by approximately $800,000 a month or more than A$9m a year, at no increase in our cost base."

Stuart still engages in forward cover for its other oil revenues mainly through the purchase of put options and the sale of call options over APPI Tapis Oil. "This cover, for 40,000 barrels a month, gives Stuart revenue per barrel for production not covered by swaps (8,000 barrels per month) of around A$100 a barrel at current spot prices." Mr. Guglielmo said.

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