"Burren has had an encouraging start to 2007, following on from record profits for the sixth successive year in 2006. The Group's strategy of low-cost onshore development enabled it to achieve a 9% increase in production, an 11% increase in earnings per share and to declare a dividend 17% higher than in the previous year; thus enabling Burren to increase the dividend paid as it has done every year since flotation. I am pleased to report that in 2006 Burren was one of the lowest cost producers within the UK listed independent sector, achieving a net profit of US$19.9 per barrel of oil produced.
"The challenge for the Group in 2007 has been to maintain Burren's growth record against a background of higher costs and increasing asset prices. The recent purchase in Congo of an additional 5.5% of M'Boundi and 2% of Kouilou from ENI, following ENI's acquisition of Maurel et Prom's interests in these assets, is expected to be completed shortly. This acquisition will increase both reserves and production, taking the Group's working interest reserves to 232 million barrels of oil. We believe that the new operator ENI is well placed to continue to exploit the untapped potential of these assets.
"Burren's production for the first four months of 2007, excluding the purchase from ENI, has averaged 35,500 barrels per day on a working interest basis (first four months 2006: 34,700 bopd) with a net average realized price of US$56.74. Burren has no oil hedges in place. The Group has recently renegotiated the offtake terms for its Turkmen crude with effect from 1 July 2007 and has succeeded in lowering the discount to Brent crude from US$8.00 per barrel to US$6.85.
"On the Loufika shallow discovery in Congo, four appraisal wells drilled between January and April 2007 have produced mixed results. Whilst three of the four wells encountered hydrocarbons, the reservoirs proved to be low permeability indicating channelled reservoir development. Further shallow drilling is planned later in the year following a technical review.
"Development drilling continues in Turkmenistan with a further 6 deep and 8 shallow wells planned for 2007 and an additional 12 in M'Boundi. Water injection is proceeding in Turkmenistan and M'Boundi with current injection rates of 5,700 and 4,300 barrels of water per day respectively. In Turkmenistan the number of water injectors is expected to increase from 8 to 12 by the end of the year while in M'Boundi the number will increase from 4 to 11.
"Four further deep exploration wells are planned in Congo including one well on La Noumbi and in Egypt, subject to an acceptable drilling rig contract; we plan to drill the East Kanayis Jurassic gas prospect in Q4.
"In India, the PY-1 gas-sales agreement has been formally executed and Hindustan Oil Exploration Company, of which Burren holds 27%, is now progressing the development of this field, subject, as always, to acceptable costs.
"I am also pleased to report that Burren's HSE performance, in terms of accident statistics, was excellent in 2006, with no work-related fatalities amongst staff or contractors and a considerable reduction in Lost Time Incidents compared to 2005.
"In line with UK Government guidelines, we substantially increased our reporting of quantitative environmental data for 2006, which confirmed that the main carbon emissions issue facing the company remains the level of gas flaring in Congo and, to a lesser extent, Turkmenistan. We are addressing this issue by actively supporting ENI, as incoming operator, in plans to implement gas utilization measures in Congo, and progressing gas export discussions with the Turkmen authorities.
"With a robust production base, an active exploration and development program and focused acquisition strategy, I am confident that Burren will maintain its impressive track record."
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