Antrim reported its financial and operational results for the three month period ended March 31, 2010.
All financial figures are unaudited and in US dollars unless otherwise noted
In the first quarter 2010, average production in Argentina increased to 1,835 barrels of oil equivalent per day ("boepd") compared to 1,590 boepd in the first quarter 2009. Oil and gas revenue decreased slightly to $3.1 million for the three months ended March 31, 2010 compared to $3.2 million for the same period in 2009. Higher gas sales volumes and higher product prices were offset by lower oil sales volumes due to the sale of the Puesto Guardian field in 2010.
Antrim generated cash flow from operations of $0.2 million in first quarter 2010 compared to $0.3 million in 2009. Cash flow decreased due to higher general and administrative costs and lower interest and other revenue partially offset by lower operating costs. Current production in Argentina is approximately 1,800 boepd.
Antrim is in discussions with several potential industry partners to accelerate the development of the Fyne and Greater Fyne areas. Discussions with floating production storage and offloading ("FPSO") providers as well as local existing infrastructure owners to select the most efficient production export route for the Fyne Field are on-going. Engineering studies are continuing for a subsea tieback scheme to nearby third party infrastructure.
On March 4, 2010, Antrim announced the signing of a Conditional Letter Agreement ("CLA") with Valiant Petroleum plc ("Valiant") to sell a 30% interest in Causeway. Antrim will receive up to a $21.75 million carried contribution towards the development costs of bringing the field to production start-up. Completion of the transaction is subject to several conditions including the sanction of a Field Development Plan ("FDP") by the UK Department of Energy and Climate Change ("DECC") which is anticipated in early 2011.
In Argentina, commodity prices continue to rise as increasing mainland demand has resulted in increased market prices since late 2009. The Company commenced its eight well drilling program in late February targeting liquid-rich gas bearing reservoirs in Tierra del Fuego. Of the five wells drilled to May 12, 2010, two were cased as gas wells that flow tested at rates of 2.5 and 10 million cubic feet per day plus liquids. The most recent well has been drilled and logged with preliminary analysis indicating that it will also be cased for gas production. Two wells were plugged and abandoned after failing to encounter reservoir quality sands.
OVERVIEW OF OPERATIONS
The conditional divestiture of an interest in Causeway in March 2010 allows Antrim to concentrate on the development of its core UK asset, the Fyne Area located in the central North Sea in block 21/28a. In addition to the 17.5 million barrels (net) of proved plus probable reserves in the Fyne license, Antrim holds 100% interest in three adjacent licenses (total of four blocks) comprising the Greater Fyne Area. Antrim's strategy in this core area is to accelerate its development by working closely with industry partners. Antrim is in discussions with several potential industry partners to accelerate the development of the Fyne and Greater Fyne areas.
Antrim is also in discussion with floating production storage and offloading ("FPSO") providers as well as local existing infrastructure owners to select the most efficient production export route for the Fyne Field. An FPSO pre-qualification process has been conducted and engineering studies are continuing for an alternative subsea tieback scheme to nearby third party infrastructure. The production system is being engineered to handle up to 20,000 barrels of oil per day ("bopd") directly from the Fyne Field, with potential capacity add-ons to handle additional volume from the satellite fields.
Antrim intends to select the optimum development scheme and prepare a FDP for submission in late 2010.
In addition to the Fyne development, Antrim is evaluating drilling prospects on its surrounding licenses (the 'Greater Fyne Area', Antrim 100%) with a view to drilling in 2011. These licenses hold a best estimate of 54.9 million barrels recoverable prospective resources with a range of 29.7 million barrels (low estimate) to 105.5 million barrels (high estimate). These prospective resources have been risked for chance of discovery but not for chance of development. If a discovery is made, there is no certainty that it will be developed, or if it is developed, there is no certainty as to the timing of such development. The prospective resources referenced herein were estimated by Mr. Terry Lederhouse, P. Eng., Vice President, Commercial of the Company. Within the meaning of NI 51-101, Mr. Lederhouse is a qualified reserve evaluator but is not independent in respect to the Company. The estimates were prepared in accordance with the procedures contained in the Canadian Oil and Gas Evaluation Handbook.
26th UK Offshore Licensing Round
In April 2010, Antrim participated in the 26th UK licensing round building on the success already established in the Greater Fyne Area. The results of our bids are expected in the second half of 2010.
Antrim signed a Conditional Letter Agreement with Valiant to sell a 30% interest in Causeway in March 2010. In return, Antrim will receive up to $21.75 million contributed to the development costs of bringing the field to production startup. Completion of the transaction is subject to several conditions, including sanction of the FDP by DECC. As part of the transaction, Antrim will transfer related tax losses and has transferred operatorship of the field to Valiant. Valiant will endeavor to finalize a revised FDP with respect to the development of the Causeway Field for submission to DECC during 2010. Following completion of the transaction, Antrim will retain a 35.5% working interest in the Causeway Field.
Antrim's interest in Argentina has shifted with a greater focus on its core assets in Tierra del Fuego (Antrim 25.78%). An eight well drilling program in Tierra del Fuego, designed to increase gas and NGL production from the Los Flamencos gas field, commenced in late February 2010. Of the five wells drilled to May 12, 2010, two were cased as gas wells that flow tested at rates of 2.5 and 10 million cubic feet per day plus liquids. The most recent well has been drilled and logged with preliminary analysis indicating that it will also be cased for gas production. Two wells were plugged and abandoned after failing to encounter reservoir quality sands.
The Company has applied for "Gas Plus" pricing incentives for new gas that will be produced from the wells being drilled in 2010. If approved by the federal authorities, this will permit Antrim to sell its gas in the higher-priced industrial market on the mainland.
Additional export capacity from the Tierra del Fuego area is anticipated later this year with the completion of a 600 million cubic feet per day capacity gas pipeline across the Straits of Magellan that will tie into the national gas network accessing the high demand Buenos Aires Province. Antrim, as part of a larger Tierra del Fuego consortium of companies, has contributed to the construction of the new pipeline through the purchase of interest bearing bonds.
Antrim has sold its non-operated 40% working interest in Puesto Guardian effective January 1, 2010, for consideration in the form of a $1.4 million non-interest bearing promissory note. The Puesto Guardian Field was reaching the end of its economic life and the purchaser will retain responsibility of all abandonment and environmental remediation work on the concession.
Effective February 25, 2010, Antrim relinquished its non-operated 70% working interest in Medianera and its non-operated 70% working interest in Tres Nidos Sur. Medianera production, as previously reported, was shut-in in February 2009. Well abandonment and seismic and drilling obligations on the properties have been assumed by the operator of both concessions.
Antrim's strong financial position which includes unrestricted cash available of $29.4 million and no debt provides Antrim with financial and operational flexibility.
With the expectation that Causeway will be funded to production and with the intention to acquire a development partner for Fyne, Antrim's other North Sea activity will be weighted towards adding value by exploring for new hydrocarbons and appraising existing discoveries.
The Company will also concentrate on the high value production assets in Tierra del Fuego with a view to increasing production in a rising price commodity market. The Antrim team intends to grow the Argentine operation primarily through new in-country opportunities using the cash flow from existing Argentine operations.
Antrim is also considering other global exploration opportunities.
Antrim views the bilateral strategy as central to its corporate development, balancing longer term and capital-intensive investments in the UK North Sea with shorter investment cycle on-shore exploration and production opportunities.
Antrim's daily production in Argentina is expected to average approximately 1,800 net boepd in 2010.
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