Novus Completes Purchase of Offshore Louisiana Assets

Novus Petroleum has completed the final transactions related to its acquisition of the 100% working interest (WI) in East Cameron blocks 317 and 318, offshore Louisiana and the 79% WI in Main Pass blocks 64 and 65, offshore Louisiana. Novus operates both assets from its Lafayette office.

The assets were acquired for a combined purchase price of approximately US$25 million. This represents a little over 70 cents per mscfe of proven reserves which compares favorable to the current gas price of ~ US$7.00/mmbtu (over A$9.00) and comparable recent transactions of over $1.20/mmbtu.

Gross production from the properties is approximately 10 mmscfd and 600 bopd and combined proved reserves are approximately 33.4 bcfe of which 88% are natural gas.

Novus CEO, Bob Williams’ comments: “This is a very good acquisition for Novus. It provides us with additional US reserves and production at a modest price and at a time of high commodity prices. We also see significant upside potential which we will pursue via exploration and exploitation programs during 2004.

“Since agreeing to acquire the East Cameron and Main Pass assets, Novus’ technical staff have wasted no time in generating plans to boost production from both areas, involving both high-tech engineering and the purchase of previously un-utilized 3D seismic. Several projects will exploit upside potential recognized during the evaluation and technical due diligence phases, but not fully appreciated by the previous owners.

“These include several shallow gas targets in the mainly oil producing Main Pass blocks and up to four additional targets identified in the East Cameron blocks, targeting between 18 and 25 bcf.

“We intend to implement these drilling projects in the coming weeks, adding to an already very active US drilling schedule at Padre Island and on the Sorrento Dome.

“In addition to the development drilling opportunities, including an acceleration well in East Cameron, Novus is evaluating the potential of enhanced recovery techniques such as the installation of compression at East Cameron and the reactivation of a previous waterflood program at Main Pass. A conservative estimate of the total oil in place in the Main Pass blocks is 40 mmb with just 12 mmb produced to date. If there is technical and economic merit in either of these approaches then it would have a material impact on the recoverable reserves.

“Generally our focus so far has been on the shallower exploitation style opportunities which can deliver near-term value. We should not ignore the further exploration upside that potentially lies in the deeper sands. Whilst we are not at a stage where a prospect could be drilled, the early indications from the seismic are positive.”

East Cameron 317/318
East Cameron 317 and 318 are located in the Federal Waters of the Gulf of Mexico, 97 miles offshore from the west coast of Louisiana. The water depth is 224 feet. There is a single unmanned platform in the block and production is currently sourced from three wells.

The field was first discovered in 1988 and commenced production in 1989. As of March 2003 cumulative production from the field has reached 67.5 bcfe.

Main Pass 64/65
Main Pass 64 and 65 are located in 26 feet of water offshore Louisiana. There are two main platforms on the field which are manned. Production is currently sourced from nine active wells.

The field was first discovered in 1981 and commenced production in 1983. Cumulative production from the field as of February 2003 was approximately 12 mmbbl oil and 29 bcf gas. Current production is around 620 barrels per day of oil and 111 thousand cubic feet per day of natural gas.

Novus has evaluated these purchases as part of a business arrangement with Darcy Energy, the parent company of Darcy Exploration which Novus acquired in October 2002. Darcy Energy retains the right to purchase up to 25% of Novus’ working interest in the properties within 12 months, at cost.