Meridian Petroleum has provided an update for its US operations.
Operations -- East Lake Verret Field, Louisiana, USA
The current period of low US natural gas prices provides an opportunity to carry out a program of planned work at East Lake Verret aimed at sustaining production volumes at the current level into 2010. This work will require wells to be shut-in for a period, but with existing hedging contracts providing significant monthly cash gains, the short-term reduction in revenue at current gas prices is not that material. At the same time, barge and other costs and equipment availability are very favorable at present.
The work program is underway as follows:
Production -- East Lake Verret Field, Louisiana, USA
Net natural gas production from ELV was 26.3 mmcf in July and 19.4 mmcf in August, which was affected by the shut-ins at the end of the month. Net oil production was 1,240 bbls and 1,124 bbls in July and August respectively. The combined average daily rate of production was 187 barrels of oil equivalent per day ("boepd") in July and 140 boepd in August.
September production will be affected by the shut-ins and work-over program.
The average prices received for ELV production in July were US $4.21/mcf and US $60.38/bbl for gas and oil respectively. In August these prices were respectively US $3.56/mcf and US $67.02/bbl.
The current pattern of US natural gas prices, with high storage levels contributing to very weak prompt prices, benefits the Company's hedging contracts as these are settled on the monthly closing price, which for the August contract was below US $3/mcf.
As a result the Company's hedging contracts are currently performing exceptionally well, delivering cash gains of US $349,000 in July/August.
Stephen Gutteridge, Chairman of Meridian, said, "Operationally, when we acquired ELV in June last year, we anticipated that work on the existing six producing wells would be required at some point, but we have been pleasantly surprised that production has been sustained beyond our expectations. With low gas prices and falling costs, now is an ideal time to perform this work, particularly as monthly hedging gains are currently well in excess of our cost base. Based on production levels over the past year there remains over two years of proven reserves in producing wells, plus the upside potential in the field."
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