Longtom Gas Project (Nexus 100%), VIC/L29 -- Gippsland Basin, Victoria
Development of the Longtom gas project continued with the completion of installation work now scheduled to occur between September 28 and October 15, 2009. The range of scheduled completion dates account for variations in the mobilisation date for the alternative diving support and installation vessel that was required to be secured and potential weather interruptions during the installation work program.
Development costs for the project are expected to increase by around 5% to A$315 million.
Activity during the June quarter included:
Sale of a 50% interest in Longtom
On May 28, 2009, Nexus announced the conditional sale of a 50% interest in Longtom and exploration permit VIC/P54 to AED for A$155 million. The transaction delivered Nexus near term funding and upon completion of the sale will provide new capital to fund activities into 2010.
As part of the transaction, Nexus received a A$35 million cash deposit with the remaining A$120 million to be paid once completion conditions are met. Nexus will use some of the funds from the sale to repay part of the existing Longtom project debt and associated expenses. It is expected that this will leave surplus funds of approximately A$65 million. The parties have executed an agreement which sets out the conditions that must be satisfied or waived, including:
Crux Liquids Project (Nexus 85%)
AC/L9 -- Browse Basin, Western Australia
Crux appraisal and engineering has now matured to a point where the proposed liquids project could be sanctioned within a short period of time. The current global financial conditions have constrained potential partners from purchasing an interest in the project. Nexus continues to explore the option of a part sell-down and development of the liquids project with the introduction of an additional new partner.
Activities during the June quarter included the minimization and rescheduling of certain capital commitments for the Crux liquids project, providing flexibility to maximize long term value. Placing the project on hold enables potential parties to enter without significant pre-commitment to expenditures.
On May 19, 2009, Transocean Inc.'s, Sedco Forex International terminated a drilling contract with Nexus Energy WA Pty Ltd relating to the supply of the Transocean Legend for exploration/ development drilling in the AC/L9 licence. Nexus Energy WA Pty Ltd has disputed Sedco Forex’s entitlement to terminate the contract. Sedco Forex has foreshadowed a damages claim, which Nexus will be vigorously defending. Further information will be provided when a claim is initiated.
Appraisal and Exploration Assets
Exploration activity has focused on maturing plans for potential prospects, subject in certain cases to securing appropriate farm-out arrangements. Prospects include, in the Browse Basin: Auriga-1 in the Crux permit AC/L9, Fossetmaker-2 in WA-377-P (Echuca Shoals); Dusky-1 and Leopard-1 in the Gippsland Basin permit VIC/P49; and Yngling-1 in the Perth Basin in WA-368-P.
AC/L9 License (Nexus 85%)
Browse Basin, Western Australia
Two near field appraisal opportunities at Auriga and Caelum have been identified as possible additions to the Crux field. The successful Libra-1 gas/condensate discovery in the adjacent exploration permit AC/P41 has increased the confidence of encountering significant additional hydrocarbons in the Auriga structure. Drilling activity is on hold until a new partner is identified.
Echuca Shoals gas discovery (Nexus 66%)
WA-377-P Permit -- Browse Basin, Western Australia
Additional geological studies have indicated that the Echuca Shoals Tithonian reservoir section is stratigraphically isolated, highlighting the up-dip potential for additional trapped gas. The Fossetmaker-1 well is interpreted to have intersected the gas-water-contact and detailed seismic inversion studies and an assessment of the well data indicate that the potential gas in place at the Echuca Shoals gas field within WA-377-P is approximately 2 Tcf, with the potential for associated condensate. Geological studies also indicate the presence of a deeper exploration target which has the potential to add another 2 Tcf of gas in place.
Another well will be required to test this potential and several possible well locations are being considered. Nexus is targeting this follow-up well to be drilled subject to successfully farming-out the cost of the well. The farm-out process is ongoing.
VIC/L29 Permit (Nexus 100%), Gippsland Basin, Victoria
Results from the Garfish-1 exploration well and Longtom-4 development well are being incorporated into the Longtom gas field reservoir model to review current 1P and 2P reserve estimates. The outcome of this study work is expected in 3Q 2009.
VIC/P49 Permit (Nexus 80%), Gippsland Basin, Victoria
The Dusky prospect is a possible extension of the Basker field and is mature for drilling. There is potential for Dusky-1 to be drilled utilising the Kan Tan IV rig in 2H 2010, subject to Joint Venture approval. Interpretation of seismic data over the Tiger and Leopard leads, both large structures in the deep water part of the permit, has been completed and further work to generate drill ready prospects is underway prior to farming out an interest in the permit.
WA-424-P (Nexus 100%), Browse Basin, Western Australia
Technical evaluation of WA-424-P has begun with the intention of farming out an interest before a commitment well is scheduled to be drilled in late 2010. Nexus plans to test the large Tristram prospect which will evaluate the potential of a Jurassic aged stratigraphic trap. The oil potential of the permit is confirmed by the small Gwydion oil field which was discovered in 1995.
WA-368-P (Nexus 50%), Perth Basin, Western Australia
Yngling is an oil prospect with a mean unrisked resource of 90 MMbbl. Nexus will seek to farm-out equity in the permit prior to drilling the prospect.
NT/P66 (Nexus 100%), Bonaparte Basin, Northern Territory
No activity during the quarter. All drilling commitments for this permit have been fulfilled.
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