Drillsearch Energy has been asked by a number of 3D Oil Limited shareholders about Drillsearch's intentions for the West Seahorse Oil
Drillsearch proposal for West Seahorse Development
The West Seahorse oil field located in permit Vic/P57 formed the centrepiece asset of 3D Oil's IPO in May 2007. Despite ongoing studies over the intervening two year period, little apparent progress has been made towards commercialising the oil reserves contained in the West Seahorse structure.
To date 3D Oil has not announced its preferred development option. Moreover in the 23 months since listing, the proved and probable (2P) oil reserves plus best estimate contingent resources in West Seahorse have decreased by 16% from 10.3 to 8.7 million barrels.
In its current takeover offer for 3D Oil, Drillsearch brings production and development experience and is keen to see the development of West Seahorse expedited.
By Gippsland Basin standards West Seahorse is a small oil accumulation. Nevertheless Drillsearch believes that with the application of appropriate technology the field can be economically exploited.
One of Drillsearch's preferred options is to utilize a low cost mobile offshore production unit ("MOPU") -type development. The MOPU development approach is based on utilizing a jack-up drilling rig that has been specially converted into a mobile offshore production system. Given the reserves size and relatively fast depletion using minimal fixed facilities would seem applicable.
Drillsearch would propose a production scheme involving 1-2 subsea wells producing to a leased MOPU with minimal processing facilities. Stabilized crude oil would be exported to a leased Floating, Storage and Offloading vessel ("FSO") before tanker offtake to market. Similar development methods have been used worldwide where the resource size does not support a more traditional development.
Alternatively, oil could be exported to a small scale onshore oil receiving and storage terminal if project costing and environmental considerations justify this solution. This option is likely to have higher upfront capital and abandonment costs and a more substantial environmental footprint. The ultimate development solution Drillsearch would adopt would balance these and other operational cost considerations to deliver the best outcome for all shareholders.
Drillsearch has had positive initial discussion with it’s financiers, regarding the financing of this project.
Extension of Offer Period
Drillsearch has extended the offers for ordinary shares in 3D Oil as set out in the Bidder’s Statement dated March 6, 2009 to 7.00pm (Sydney time) on May 26, 2009.
Escrowed shareholders of 3D Oil hold 75,110,000 shares equivalent to 36.4% of the total issued capital. The contractual obligation preventing them accepting the offers without the consent of 3D Oil and ASX expires on May 21, 2009. Drillsearch has extended the offer period to a date after the expiry of the escrowed shares to allow holders of escrowed shares of 3D Oil to accept the offers without breaching their contractual obligation.
The Second Supplementary Bidder's Statement was lodged with the Australian Securities & Investments Commission and ASX and served on 3D Oil on April 16, 2009.
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