Antrim Energy has provided an operational update on its exploration and development activities for the second quarter 2009.
- Increased average production in Argentina to 1,764 boepd in Q2, current production is 2,000 boepd
- Increased licence holdings in the yne Area, UK North Sea
- Average gas price in Argentina increased 68% to $1.56 per mcf from $0.93 in Q2 2008
- Financial flexibility with strong cash position of US $30.6 million and no debt
In the first half of 2009, average production in Argentina increased to 1,677 barrels of oil equivalent per day ('boepd') compared to 1,448 boepd in the first half of 2008. Oil and gas revenue decreased to $5.3 million for the six months ended June 30, 2009 compared to $6.0 million for the same period in 2008. Revenues decreased as a result of lower oil production and lower oil prices partially offset by higher gas
production and higher gas prices. Antrim incurred a cash flow from operations deficiency of $0.4 million for the six months ended June 30, 2009 compared to positive cash flow of $0.5 million for the same six month period in 2008. In addition to the reduction in revenue second quarter 2009 cash flow was also impacted by higher operating expenses. Current production in Argentina is 2,000 boepd.
Work continues on Antrim's two major North Sea properties, Fyne (Antrim operated, 75% working interest) and Causeway (Antrim operated, 65.5% working interest). A Field Development Plan ('FDP') for the approximately 20 million barrel (gross) Fyne Field is being prepared. The FDP envisages oil production from three producing wells two of which were drilled in 2008. Production systems and an export route are currently under evaluation including production through existing infrastructure located between 7 and 21km from the Fyne Field and the deployment of an independent floating production storage and offloading system ('FPSO'). As previously announced, Antrim was awarded an additional block, 21/24b, as part of the UK 25th Seaward Licensing Round. The Fyne Field forms the core of a group of Antrim owned and operated licenses, the Greater Fyne Area, in the Central North Sea including several licenses awarded in the UK 25th Seaward Licensing Round (blocks 21/24b, 21/24c, 21/28b and 21/29c). Antrim is currently in the process of seeking a partner to assist in funding the Fyne development.
Significant progress has been made on Antrim's Causeway FDP (submitted to the UK Department of Energy and Climate Change ('DECC') in December 2008) with the objective of tying into existing subsea facilities adjacent to the Dunlin platform. This would provide for significant cost savings compared with those in the previously submitted FDP. Further geological and geophysical work has been completed including reprocessing and interpretation of Causeway 3D seismic data and the changes will be included in the updated FDP. On April 22, 2009, the United Kingdom government announced a package of reforms to its North Sea fiscal regime as part of the 2009 budget. The Causeway and Fyne projects will receive economic benefits from these measures.
The pipeline linking the Company's gas producing fields in Tierra del Fuego with the San Martin gas sales line, across the Straits of Magellan, has allowed Antrim to deliver increasing volumes of gas to the Argentine mainland at higher prices. The system is currently delivering 24.3 (net 6.3) million cubic feet per day ('mmcf/d') to mainland markets compared to 20.0 (net 5.2) mmcf/d at the end of the first quarter. Antrim's focus in the second quarter 2009 has been on increasing production from its Tierra del Fuego property through well tie-ins with this work ongoing during the third quarter 2009. Antrim anticipates production in 2009 to average approximately 1,850 boepd. The lower production forecast is due to reduced demand for natural gas by mainland industrial users and delays in well tie-ins because of inclement weather
OVERVIEW OF OPERATIONS
United Kingdom - Block 21/28a ('Fyne')
The area surrounding the Fyne field has rapidly developed into Antrim's core operational area in the UK and an FDP for the 20 million barrel (gross) Fyne Field is being prepared. The FDP envisages oil production from three producing wells, two of which were drilled in 2008. Production systems and an export route are currently under evaluation including production through existing infrastructure located between 7 and 21km from the Fyne Field and the deployment of an independent FPSO. The Fyne Field forms the core of a group of Antrim owned and operated licenses in the Central North Sea including several licenses awarded in the recent UK 25th Seaward Licensing Round (blocks 21/24b, 21/24c, 21/28b and 21/29c).
The 21/28a-2 discovery well tested at a stable 3,600 bopd with no water. In August 2008, the 21/28a-10z well tested on natural flow at rates up to 4,000 bopd with no water.
25th Seaward Licensing Round
As previously announced, Antrim was awarded an additional block, 21/24b as part of the UK's 25th Seaward Licensing Round.
Block 21/24b is approximately 10 kilometers northeast of the Fyne Field, and immediately adjacent to the Teal and South Teal Fields to the east, the Clapham and Guillemot Northwest Fields to the south and the Pict Field to the west. These fields all produce from either the Eocene Tay or the Upper Jurassic Fulmar sandstone and block 21/24b is anticipated to have potential in both of these formations. A significant oil column in the Fulmar Formation was discovered in this block by a previous operator. This discovery well 21/24-4 was drilled in 1991, but not tested.
Block 21/24b adds approximately 36,000 acres to Antrim's asset portfolio in the area. The license is a Traditional License, with seismic processing to be completed and a contingent well to be drilled during the initial four year term.
United Kingdom -- Block 211/22a South East and Block 211/23d ('Causeway')
Antrim signed a Heads of Terms agreement in 2008 for the provision of platform hosting services on the Dunlin Alpha platform. Work continues with the Dunlin platform operator to incorporate significant cost and time savings into the subsea completion and tie-in. Since the submission of a FDP to DECC in late 2008, Antrim has modified the original plan to tie into existing subsea facilities adjacent to the Dunlin platform. This would provide significant cost savings compared with those in the previously submitted FDP. Antrim plans to include these changes into an updated FDP, which is expected to be submitted to DECC in late 2009. Geological and geophysical work and interpretation of Causeway 3D seismic data has been completed and will also be incorporated into the FDP.
There are no additional wells planned before oil is produced under the proposed first phase of the development which will involve production from the 2006 discovery well 211/23d-17z supported by the pressure maintenance well 211/23d-18 drilled in 2008. An initial production rate of 15,000 bopd is expected (net 9,800 bopd) with a first year average rate of 7,000 bopd (net 4,600 bopd). Facility construction commitments will not be undertaken until these commitments are fully funded.
Argentina -- Tierra del Fuego, Austral Basin
Net production to Antrim from the Tierra del Fuego licences in the six months ended June 30, 2009 increased 28.1% to 1,436 boepd compared to 1,121 boepd for the same period in 2008. Gas and natural gas liquids ('NGL') production in the second quarter 2009 was 6.6 mmcf/d and 42 barrels per day, respectively, compared to 4.5 mmcf/d and 71 barrels per day in the same period in 2008.
The pipeline linking the Company's gas producing fields with the San Martin gas sales line across the Straits of Magellan has enabled Antrim to redirect and deliver gas to the continent where higher prices are available. The system is currently delivering 24.3 (net 6.3) million cubic feet per day (mmcf/d) to mainland markets. The current delivery rate decreased from a previous expected rate of 32 mmcf/d (net 8.2 mmcf/d) as industrial demand was weaker than forecasted.
Net oil production in the first half of 2009 was 292 bopd and 307 bopd for the comparable period in 2008.
The drilling program in Tierra del Fuego was successful in adding reserves, future production potential and significant value. Current economic conditions dictate a shift in strategy away from drilling, which was discontinued in December 2008, towards increasing production through existing well tie-ins. Subject to favorable commodity prices, Antrim has added new locations to the drilling inventory and drilling is
expected to recommence in early 2010.
Argentina -- Medianera and Tres Nidos Sur, Neuquen Basin
The Medianera licence was determined uneconomic at current oil prices and in February 2009, Antrim shut-in all production from the field. Under the terms of the Tres Nidos Sur licence, Antrim must acquire a minimum of 50 km2 of 3D seismic and drill an exploration well by end 2009. Required permitting and environmental studies for the 3D seismic acquisition are underway. Antrim has a 70.0% working interest in the Tres Nidos Sur License.
Argentina -- North West Basin
Net production to Antrim from the Puesto Guardian License in the first half of 2009 averaged 234 bopd compared to 268 bopd for the same period in 2008. In the second quarter 2009, production averaged 230 bopd, compared to 256 bopd in the same period in 2008. The reduction in production volumes was the result of natural production declines. Antrim has a 40% working interest in the Puesto Guardian License.
On December 31, 2008, Antrim issued 41,011 common shares at Cdn $0.39 for a total value of Cdn $15,994 under the Employee Share Ownership Plan ('ESOP') in excess of the amount of common shares authorized for this purpose by the Toronto Stock Exchange ('TSX'). These shares were subsequently retracted by the Company and the total common shares issued and outstanding was reduced by 41,011.
For the annual and special meeting of shareholders held on May 28, 2009, Antrim submitted to the shareholders for approval, a resolution to increase the number of common shares issuable under the ESOP. However, Antrim inadvertently did not specifically require disinterested approval for the ESOP and did not pre-file its circular disclosure with the TSX, as required. As a result, the ESOP disclosure set out in the circular contained certain attributes that were inconsistent with current TSX policies and the disclosure set out in the circular was deficient in this regard. In addition, the circular contained a representation of TSX conditional approval, which had not been obtained by the Company as required. Consequently, Antrim has suspended any further issuances of common shares under the current ESOP.