Pan Orient provides an update on operations and the 2010 capital program for Thailand and Indonesia.
The first two exploration wells on Concession L53 have both resulted in the discovery of hydrocarbons at commercial rates, highlighting the remaining undrilled potential identified through 3D seismic on the remainder of this concession. Work is currently proceeding towards the completion of production license applications over each of the two oil discoveries. It is anticipated that these applications will be ready for submission in approximately 30 days with Government of Thailand approval anticipated within an additional 90 day period after submission. In the intervening period, the wells will be produced and oil trucked to the approximate 12,000 barrels of storage capacity available on Concession L44, until the granting of the production licenses after which production will be trucked directly to the refinery.
The impact of production from Concession L53 to Pan Orient's cash flow is significant as the SRB tax is levied on a per concession basis, and production of up to approximately 2,500 bopd per concession under current oil prices results in negligible SRB owing. Production from Concession L53 should be Pan Orient's highest net back production in Thailand.
Pan Orient exited 2009 producing approximately 5,200 bopd (net). Production for the first 24 days of January 2010 averaged 4,575 bopd (net), and is currently 3,969 bopd (net). Production declines from early to late January 2010 are mainly due to the NSE-G2 exploration well that came on at a flush production rate of over 600 bopd (net) and is currently producing at 78 bopd (net). Production gains of approximately 600 bopd (net) are anticipated within the next seven days from Concession L53, but will not be realized in sales until the granting of two production licenses in early Q2/10. Additional volume increases are anticipated in the short term from development of the NSE-F1, Bo Rang "A" & "B", NSE Central and Na Sanun fields and any exploration drilling success such as the NSE-G2 deep volcanic prospect where the well is currently setting casing just above target. The corporation has set a production target in Thailand of 6,000 barrels of oil per day average for 2010, an approximately 30% increase above 2009 average production of 4,495 bopd (net).
In 2009 Pan Orient utilised two drilling rigs for Thailand operations and experienced significant downtime and three to five day rig moves over the course of the year. In late December 2009, Pan Orient signed a six month contract for a rig with superior equipment and performance that had been operating in Thailand with another operator. It is anticipated that the new rig will be capable of drilling approximately three wells per month, matching last year's performance using two rigs and with an estimated cost savings of approximately 25%. One of the rigs utilised in 2009 has been released with the second to be released at the completion of the L53-D sidetrack.
The 2010 Thailand capital budget has been set at CDN$38 million and includes the drilling of 34 wells (gross) on Concessions L44, L33 and L53. Locations are currently under construction for development wells on the NSE-F1 and Bo Rang "B" fields in Concession L44. First drilling in these fields with the new rig is anticipated to commence in February 2010. Additional drilling in the 100% POE owned and operated Concession L53 is not anticipated until mid year, after the granting of two production licenses.
Exploration drilling in 2010 will continue to target volcanic reservoirs and will also evaluate shallow conventional sandstone reservoirs within and to the north of the producing Wichian Buri field. Success in the volcanic targets three years ago had resulted in the postponement of these potentially large reserve sandstone targets due to their lower rates of production.
Pan Orient continues to target growth in reserves and production with a keen focus on profitability. 2010 will see optimisation of the Thailand operations with a target of further decreasing per unit of production expenses and overhead costs.
Indonesian capital expenditures for 2010 are estimated at CDN$29 million and will include the drilling of seven exploration wells and the completion of both 2D seismic programs currently underway. The Corporation continues to seek out and is committed to new venture opportunities in Indonesia.
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