Following a change of its year-end reporting date from September 30 to December 31, Valiant Petroleum has provided a trading update for the period from April 1 to September 30, 2008.
Don Fields Development Update
During the Update Period significant progress has been made on the joint development of the Don Southwest field (Valiant 40% interest) and the West Don field (Valiant 17.275% interest) (together the 'Don Fields') located in Block 211/18a (License P.236) and Blocks 211/13b and 211/18a (Licenses P.1200 and P.236) respectively.
Development drilling is progressing on West Don with the Transocean John Shaw semisubmersible drilling unit. The top-hole sections of the two production wells and the water injection well have been drilled and the first production well is due for completion by the end of 2008.
Valiant has assigned its rights to a second drilling rig (Stena Spey semisubmersible drilling unit), to the Don joint venture in order to facilitate the acceleration of development drilling in preference to using this rig for 2009 exploration. The Stena Spey will now complete the remaining West Don program starting in January 2009 in parallel with using the John Shaw to drill Don Southwest development wells. Using the two rigs allows early access to the West Don producers and therefore the opportunity to secure first oil from West Don in early 2009.
The net result of this decision will allow the project to remain ahead of schedule at minimal additional cost and will increase the likelihood of slightly accelerating first production from West Don to the first quarter of 2009. Don Southwest is currently forecast to come on production during the second quarter of 2009 under the revised project schedule. Average production from the Don Fields for 2009 is anticipated to be in line with Valiant's estimates at the time of its AIM admission.
The infield pipelines between Don Southwest and West Don have been installed as have the first phase of subsea structures installation. The tanker Submerged Anchor Loading (SAL) unit and the remaining export pipelines are scheduled for installation all by the end of 2008.
The Northern Producer Floating Production Unit modifications and hull refurbishment are on track and the Northern Producer is scheduled for sail-away during November.
Capital costs associated with the Don Fields development continue to be broadly in-line with original estimates. Some cost escalation has occurred since the project commenced though this is within normal project contingency levels.
Other Development Assets Update
During the Update Period, progress also continued towards submission of Field Development Plans ("FDP") for Valiant's two other near-term development assets: Crawford (Valiant 29%, Licence P.209, Block 9/28a Rest of Block including Crawford field) and Causeway (Valiant 14%, Licence P.201, Block 211/22a South East Area and Licence P.1383, Block 211/23d).
The Crawford field, operated by Fairfield Acer Limited (the "Operator"), continues to move quickly through the conceptual phase and will shortly be into the front-end engineering and design phase. Reservoir modelling and simulation work is nearly complete and the field partners are encouraged by the results to date. An increase in the oil-in-place volumes are being reported by the Operator in comparison with the Competent Persons Report in Valiant's AIM admission document and Valiant believes this will ultimately lead to an increase in recoverable reserves.
Final agreement on an export route is likely to be reached in the short term which will allow a field development plan ("FDP") to be submitted by year end. First oil is tentatively scheduled for the second half of 2010 with the project not expected to enter full execution mode until mid-2009 at the earliest. Current scoping cost estimates remain broadly in line with expectations.
On July 4, Antrim Energy, the operator of Causeway, announced the successful drilling results from Causeway well 211/23d-18. The development plan includes an initial phase targeting a tie-back of the East and Far-East panels of the field to the Dunlin infrastructure. Submission of the FDP is still targeted by the operator before the year end. The bulk of any development spend is not likely to occur until the end of 2009 or the beginning of 2010.
Both the Crawford and Causeway fields await formal 2009 budget proposals from the respective operators.
As detailed in the interim results for the period to March 31, 2008, on June 2, Valiant announced that its operated exploration well on the Globe prospect in UK North Sea had been plugged and abandoned.
On September 15, Valiant announced that its operated exploration well on the Prospero prospect (Blocks 211/18c and 211/17) was plugged and abandoned as a dry hole. The Prospero well, was on prognosis and encountered a good quality Brent Sandstone which was water wet. The probability of success for the fault blocks around Don Southwest are unaffected by the Prospero well.
Fox Petroleum has notified Valiant that it still anticipates commencement of drilling operations on the Bourbon prospect (Block 211/17) before the end of 2008. Fox is drilling the well on a promoted basis to 'earn-in' to the block. Under the terms of the agreement, Valiant has the right to terminate Fox's farm-in if a well has not been spud by 31 December 2008.
Valiant is currently working with Petrofac Energy Developments Limited, the Don Fields operator, to secure drilling slots on the John Shaw at the end of the Don Fields development drilling program to test one or more of the Don Southwest 'panels' which flank the core field area currently under development. Discoveries from this 'step-out' exploration program could be quickly monetized through the Don Fields infrastructure creating incremental, long-term value for the field partners.
Following the dedication of two of Valiant's previously booked 2009 drilling rig slots to the Don Fields development, the remainder of Valiant's 2009 exploration program remains under review, with a view towards limiting overall capital exposure given the current global financial market conditions. In addition to drilling one or more prospects in the Don Southwest panels during 2009, Valiant is in negotiations to drill one-to-two additional exploration wells during the course of the year.
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