PERTH Feb.12, 2007 (Dow Jones Newswires)
Tap Oil Ltd. (TAP.AU) said Monday that it will step up efforts to repair its poor exploration record as the Australian oil and gas producer prepares for a new chief executive early next year.
Paul Underwood, Tap's outgoing CEO, told Dow Jones Newswires that he is "pretty confident that we're about to get the ship turned around", in a reference to the Perth-based company's recent share price slide and revenue setbacks.
"Why Tap is in decline is that it hasn't found any new oil for four years, other than Amulet," Underwood said in an interview.
The latter, discovered in June near Woodside Petroleum's (WPL.AU) Legendre oil field offshore Western Australia, is 20%-owned by Tap and regarded as a potential 10,000 barrels per day producer.
Tap is in "turnaround mode", after suffering a near-40% share price decline in the past 12 months due partly to exploration failures, Underwood said.
Tap shares ended Monday flat at A$1.49, valuing the company at A$231.5 million. The stock has traded as high as A$2.52 in the past 12 months, and as low as A$1.41.
The company's recent disappointments include the Cutter-1 well offshore New Zealand, which encountered non-economic gas shows in November after targeting a potential 80 million barrel oil structure.
Tap also suffered a sharp revenue decline in the December quarter due to problems at its Woollybutt oil field and Harriet joint venture, both offshore Western Australia.
Earlier Monday, Tap announced that Underwood will step down as CEO in January, handing over to current exploration manager Peter Strickland.
Underwood, who will remain an executive until mid-2008 and continue as a board member after that time, defended the lengthy handover.
He is required to give 12 months notice under his contract, but "on this occasion I am giving 18 months just to make sure everything beds down smoothly".
His decision to step down after more than 10 years at the helm was made as part of a "pre-determined succession plan", and the company chose not to seek any external candidates, Underwood said.
"We felt we had the right guy in-house," he said.
Strickland is a former BHP Billiton (BHP) geologist who has worked with Tap for the past two years.
Tap has instigated changes, including hiring more technical personnel such as Strickland, to improve its exploration capabilities, Underwood said.
He also expects Tap to announce several new permit interests in the "immediate future".
The new blocks will be the results of Tap participating in recent "bidding rounds" in Australia, New Zealand and Southeast Asia, he said.
Tap is also examining merger and acquisition opportunities, Underwood said, adding the company is debt free with A$105 million in cash.
The war-chest is being replenished by ongoing revenue from Woollybutt, operated by Italy's ENI, and Harriet, operated by Apache Energy, Underwood said.
Tap funds its A$40 million per year exploration program out of revenue from the two fields.
In December, Tap and its Harriet partners declared force majeure in relation to "gas reservation requirements" under a 2001 contract with Burrup Fertilisers, a Western Australian facility owned by India's Oswal Group.
"We're required to have 20 years reserves, and we don't," Underwood said.
"We've had some fields underperform and fields that have failed, so that is what we have to do under the contract - make that declaration."
Discussions between the Harriet partners and Burrup are continuing, Underwood said.
Copyright (c) 2007 Dow Jones & Company, Inc.
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