Strike Oil has reported overall a very successful June 2008 Quarter which has strengthened the Company
The successful development of the Rayburn project has underpinned record quarterly production and a 165% increase in sales revenues from the prior corresponding period. The company successfully tested and produced from four wells at the Rayburn project, lifting gross daily production from the Rayburn and Mesquite fields to 38 million cubic feet of gas and 900 barrels of oil condensate and Strike Oil’s share of daily production
The strong lift in revenues, coupled with the USD debt facility secured in May, will underpin Strike’s exploration and development activities in the US and Australia going forward. Production is expected to increase substantially into the next quarter as additional wells are tested and brought into production on the Rayburn Project. The 2007/08 oil and gas revenues for the year totalled $15.7 million (up 82% on $8.7 million for 2006/07). The Company’s revenues have now reached record levels of $4 million per month (on track to exceed recent forecasts of $35-40 million for the 2008/09 financial year) and enabling the Company to revise its 2008/09 forecast to $50-55 million based only on estimated production from wells already drilled assuming gas prices of US$10 per thousand cubic feet (mcf) and oil prices of US$120 per barrel. Additional success from new wells could see the production increase above these estimates.
The increase of the Company’s interest in the Gulf Coast, Eaglewood Area
Participation Agreement from 25% to 30% holds the potential for additional revenues and production from further exploration success. A strategic decision to sell the Company’s interests in the Rocky Mountains Project
In addition to its strong revenues , the Company’s US$11.7 million debt facility with the Commonwealth Bank of Australia provides considerable flexibility to fund the Company’s exciting exploration and development activities in the US and Australia.
Steps were taken to develop the Company’s Carnarvon Basin interests through a proposal to the Department of Defence for the supply of gas from the Rivoli gas field to its communication station north of Exmouth. The Department of Defence continues to fund work to progress the development. The Company also pursued strategies to secure a cost effective drilling rig for its shallow water acreage in the Carnarvon Basin.
Rayburn Project, Gulf Coast, Texas (22.8% Working Interest, ~ 17.5% Net Revenue Interest)
Activities during the quarter continued to be focused on drilling, testing and producing
Test Results, rates /day; Well Status Gas Oil Condensate
The initial discovery well, Duncan 1, continued to flow for the whole quarter at daily rates of approximately 10 mmcf of gas and 270 bbl of oil condensate. The well has now produced over 2.1 billion cubic feet of gas and over 58 thousand barrels of oil condensate since coming on stream in December 2007.
The Duncan 2 (currently producing 10 mmcf and 230 bbl per day) and Gilbert Freeman 1 (currently producing 4 mmcf and 140 bbl per day) wells were successfully tested and brought onto production in early April. In late April, production (less than 50 thousand cubic feet per day) was added from a zone above the Wilcox Formation in the Hlavinka Duncan 1R well.
The testing of Duncan 3, the fifth successful well on the Rayburn Project, commenced in the last week of June with all test gas and oil condensate being sold. Results subsequent to the end of the quarter recorded a test result of 10 mmcf of gas and 234 bbl of oil condensate per day.
The Gilbert Freeman 2 and 3 wells, which have previously encountered gas and were cased awaiting facilities to be installed, will be tested in the next quarter. Subsequent to the quarter’s end, the Hlavinka Gas Unit 1-1 well was spudded. This well is targeting multiple objectives in the Wilcox Formation which could add new
Up to two more development wells are planned to be drilled next quarter.
Mesquite Project, Gulf Coast, Texas (26.25% Working Interest, ~20% Net Revenue Interest)
Production from the Mesquite Project was lower than the previous quarter due primarily to natural decline. Average gross daily production for the quarter was approximately 3.25 mmcf of gas and 52 bbl of oil condensate.
Strike Oil's Working Interest revenue from gas and oil condensate sales for the quarter was $9.22 million. This is an increase of 165% on the previous quarter. This result reflects the substantial impact of bringing the additional wells into production at the Rayburn Project and strong oil and gas prices.
At Rayburn, the Wilcox wells are targeting 5 bcf per well with upside potential to 10 bcf per well. An independent reserve report at Rayburn is planned for next quarter.
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