DNO Re-defines West Heather & North Terrace as Single Field

DNO reports that the West Heather and North Terrace oil accumulations, located some 8 km west of the Heather platform, are to be defined as a single Field.

The field will be known as the Broom Field in keeping with the practice established for the DNO Operated Thistle and Heather Fields of naming them after Scottish wild flowers. In addition there is a geological connection in the name in that the lower part of the reservoir section of the field is in the Broom Formation of the Middle Jurassic Brent Group.

A positive implication of the determination of a separate Field is that profits arising from the development of the Broom Field will not be subject to Petroleum Revenue Tax (PRT) which for 'Oil Fields' is levied at a rate of 50 percent. This together with the recently announced abolishment of Royalty means that only Corporation Tax and the Supplementary Charge at a combined rate of 40 percent will be applicable.

Commenting upon the announcement, DNO's UK Chief Executive, Dr Stewart Watson, said "this announcement is a significant step forward in the planning of the development of the 45 million barrels of reserves recognised in the Broom Field. It is envisaged that the field will be brought into production in 2004 with initially three production wells, all of which have been drilled, with two injector wells and a further three wells possibly being phased in 2004 and 2005. It is estimated that a peak production rate of some 25,000 barrels per day will be realised.

As a result of bringing the Broom Field on stream there is the potential for around 30 million additional barrels to be recovered from the Brent and Triassic reservoirs of the Heather Field, in which DNO has 100%. The total recoverable proven and probable reserves from the Heather and Broom Fields is now estimated to be some 74 million barrels with the Heather Alpha platform continuing in service until 2014." These reserves have been confirmed in an independent engineering report and are some nine million barrels more than previously reported. DNO's share of the Heather and Broom reserves is 54 million barrels.

The current development plan for the Heather and Broom fields has a breakeven oil price of around 12 USD/bbl. Using a long-term oil price (ref. dated Brent) of 17 USD/bbl, the Heather and Broom fields have a net pre-tax value to DNO of some 170 million USD.

It is expected that, subject to financing and approval of the DNO Board and Co-venturers CMI (a subsidiary of GlobalSantaFe Inc) and Palace Exploration Company, who collectively stand to earn a 45 percent interest in the project, formal consent for the development of the field will be applied for in the very near future.


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