The reserves increase, which resulted from 9 successful exploration wells out of 10 drilled by the Company during the year, is being followed in 2007 by a significantly larger exploration program.
Australia-based Petsec will drill between 14 and 20 wells in the Gulf of Mexico, USA, and offshore China in the current year, targeting another 60 Bcfe that would double current reserves if successful.
Details of the reserves boost and the larger 2007 oil and gas search were outlined Wednesday in Petsec Energy's results announcement for the year ended 31 December 2006.
The results included a 36% improvement in Petsec's underlying earnings, which rose to US$24.7 million before tax and exploration write-offs and provisions.
Key Points in the Company's 2006 results included:
--2006 Production: 8.2 Bcfe of gas - up 27% --Revenues: US$59.5 million - up 30% --EBITDAX: US$45.3 million - up 34% --Earnings before exploration write-offs, provisions and tax: US$ 24.7 million - up 36% --Net profit before tax: US$8 million - down 17% --Net profit after tax expense (non-cash): US$5.1 million - down 46% --Net operating cashflow: US$44.4 million - up 20%
The reserves increase stemmed from 8 successful wells in the Gulf of Mexico, USA, and one well in the Beibu Gulf, China – resulting in the discovery of 5 new gas fields in the USA and one oil field in China. The 5 US gas fields discovered were Main Pass 18, Mobile Bay 873, 950, 951and 993. In China the 6.12 South oil field was discovered some 3 kms to the south of the 6.12.1 discovery made in 2002.
The 27% higher annual production of 8.2 Bcfe in the USA followed the commissioning of the Main Pass 19 field, discovered in 2005.
The price received for natural gas of US$7.24 per thousand cubic feet (Mcf) was up 2.8%, in line with the three-year average of natural gas prices received in the Gulf of Mexico, USA.
Petsec's full year revenues of US$59.5 million (A$78.8 million) were up 30% and earnings before interest, tax, depreciation, amortization and exploration (EBITDAX) increased 33% to US$45.3 million (A$59.6 million), reflecting the higher production and healthy operating profit margin of US$5.54/Mcfe, typical of the Gulf of Mexico.
Earnings before exploration write-offs, provisions and tax was US$24.7 million (A$32.7 million) and US$8 million (A$10.6 million) after exploration write-offs and provisions, mainly for the one failed well in the year at Vermilion 257. The well costs of US$11.5 million were written off in the first half of the year and a provision of US$3.5 million was made for the potential removal of the Vermilion 257 jacket. A provision of US$1.7 million was also made against the remaining book cost of West Cameron 343/352 in anticipation of this field being produced and abandoned in the first half of 2007.
A tax expense of US$2.9 million was recorded for the year (compared with a low US$0.1 million in 2005 due to booking of previously unrecognized tax losses). The tax expense is a non-cash item, given carry forward tax losses of approximately US$39 million. As a result of the above items, reported net profit after tax was US$5.1 million (A$6.8 million) compared to US$9.5 million (A$12.5 million) for the prior year.
Commenting on the 2006 results, Petsec's Chairman, Terry Fern, said: "The considerable growth achieved by the Company in 2006 was highlighted by our exceptional rate of drilling success which in turn was reflected in record reserves at year end.
"Particularly pleasing was the 6.12 South oil discovery in China, which has substantially increased the probability of success for the 5 adjacent oil field prospects.
"Also of significance, was the acquisition of 33 Gulf of Mexico leases in August 2006 which yielded 4 discoveries in Mobile Bay, USA, within months of being acquired. This acquisition gave a substantial increase to the Company's prospect inventory, which now stands at 290 Bcf of gas and 30 million barrels of oil in the USA, and 5-8 million barrels of oil in China.
"Our exploration program for 2007 will see between 14 and 20 wells drilled (up from 10 in 2006 and 4 in 2005) in the USA and China, which will expose the Company to 60 Bcfe of reserves (net to Petsec).
"On the development front, the Mobile Bay gas discoveries have already been completed for production and are expected to come on line in the third quarter of 2007 and a final decision on the development of the 6.12/6.12 South oil discoveries should be taken in the second half of the year.
"Capital expenditure of approximately US$68 million is proposed, supported by current working capital of US$36 million and anticipated 2007 operating cashflow of US$50 million from 9.8 Bcfe of production (up 20% on 2006) from existing reserves.
"In conclusion, we expect this 2007 program to substantially build on our successes of the past year which saw reserves increase by 55% to 60 Bcfe, and continued growth in production and cashflow providing a reliable earnings base to fund exploration of Petsec's sizeable prospect inventory."
Petsec Energy Ltd is an independent oil and gas exploration and production company listed on the Australian Stock Exchange. Its focus of operations is on gas in the shallow waters of the Gulf of Mexico and onshore Louisiana Gulf Coast region of the USA, and on oil in the shallow waters of the Beibu Gulf off the south coast of China.
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