Valiant Preps for 'Most Active Year' with 6 Exploration Wells
Valiant provided the following operational update and details of its planned exploration and appraisal program in 2012.
- DECC consent to Causeway FDP received, first oil targeted for mid-H2 2012
- Up to six exploration wells during 2012 of which five are set to spud during H1
- Small net cash position at year end, 2012 investment program financed from existing resources and operating cash flow
- Production guidance for 2012 of 7,000 to 8,500 bopd
On December 23, 2011, the Department of Energy and Climate Change ("DECC") informed the Company that it consented to the proposed Causeway Field Development Plan. The rig Borgsten Dolphin (mid-water semisub) has been booked to complete the existing production and water injection wells in the field and first oil remains on-track for the middle of the second half of 2012. The capital costs net to Valiant for the Causeway development are $120 million, including the $21.75 million associated with the purchase of Antrim Causeway (N.I.) Limited which held a 30% stake in the field. Causeway represents Valiant's first operated development.
Valiant is planning its most extensive exploration and appraisal drilling campaign ever in 2012 which will include up to six wells targeting total best estimate prospective resources of 190 mmboe net to the Company (30 mmboe excluding the Handcross prospect).
Following adverse weather conditions offshore, Valiant now anticipates that the Sedco 711 semi-submersible rig will arrive to drill the Orchid prospect (Valiant, 30%) in the middle of the first quarter. Orchid is a dual target, four-way dip closure at Tertiary and Chalk level located in Block 29/1c the UK Central North Sea. Gross prospective resources associated with the entire Orchid prospect are estimated by Valiant to be 30 mmboe (net 9 mmboe).
Valiant has recently reached an agreement to acquire a 10% stake in Blocks 211/11b and 211/16b containing the Timon prospect from Agora Oil & Gas (UK) Limited, subject to DECC approval, in return for carrying a share of the cost of the exploration well. Timon is an Upper Jurassic channelized sand play similar to the Cladhan and Tybalt discoveries located in the UK Northern North Sea ("NNS") and anticipated to spud during the first quarter using the rig WilHunter (mid-water semisub). Gross best estimate prospective resources are estimated by Valiant to be 30 mmboe (net 3 mmboe).
As part of the Causeway development campaign during the first half of 2012, Valiant has secured an additional slot on the Borgsten Dolphin which the Company intends use to appraise the Tybalt discovery (Valiant, 80%) in the UK NNS. The potential appraisal program, which would include a contingent test, is designed to prove up commercially exploitable volumes. Gross best estimate prospective resources are estimated by Valiant to be 7 mmbbls (net 6 mmbbls), excluding associated gas, from this appraisal campaign with the potential for further upside from future appraisal activity in the event of success.
Valiant has also been informed by Sterling Resources, operator of the Cladhan South prospect (Valiant, 30%) located in the UK NNS, that a letter of intent has been issued to use the Sedco 704 to drill the prospect in the first half of the year. Cladhan South is an upper Jurassic channelized sand play immediately to the south of the existing Cladhan discovery. Gross best estimate prospective resources are estimated by Valiant to be 13 mmboe (net 4 mmboe) with Valiant's cost carried through the initial well (subject to an agreed cap).
The Tryfan prospect (Valiant, 33.33%), located in the UK NNS, remains drill ready and the operator, Apache North Sea Limited, is now seeking a rig for mid-2012 having chosen to avoid drilling during the winter weather period. Tryfan is an Eocene stratigraphic channel-sand play which benefits from a fluid characterized, seismic amplitude response with gross prospective resources estimated by Valiant to be 24 mmboe (net 8 mmboe).
Valiant continues to seek a deep water rig to drill the Handcross prospect (Valiant, 90%), located in the UK West of Shetlands, during 2012 and is currently pursuing a number of leads. Continued tightness in the global deep water rig market has caused significant postponement of exploration drilling in the West of Shetlands and the Company has begun discussions with a number of other operators to look at ways of attracting an additional rig into the area. Handcross remains Valiant's highest impact near term well with gross best estimate gross prospective resources of 180 mmboe (net 162 mmboe).
The Company also continues to evaluate opportunities to build on its exploration program over the next 12 to 18 months, including further growth in Norway following its successful entry during 2011.
Valiant ended the year with a small net cash balance with investment outflows broadly matching operating cash flows in the second half of 2011 and some capital expenditure payments deferred into the first half of 2012. Valiant has recently met the conditions for the Causeway field to be accepted into its borrowing base covenant and the Company continues to have substantial undrawn headroom under the facility.
As announced at the end of 2011, the Company's production guidance for 2012 is 7,000-8,500 bopd supported by on-going investment into the Don Fields and production from the Causeway development. With an extensive investment program during the year, the Company has recently put in place oil price swaps for the next twelve months of approximately 800,000 barrels at an average price of $105/bbl to help support these capital expenditure levels.
The Company's 2012 investment program is anticipated to be around $260 million and will be funded from existing resources and operating cash flow.
Peter Buchanan, CEO, commented, "Operationally, 2012 is set to be the most active year in Valiant's history with up to six exploration wells drilling, two development wells on the Don Fields and production from the Company's first operated development, Causeway. This program exposes our investors to significant potential upside on top of the solid foundation built up over the past few years. We look forward to working together with all of our stakeholders in what promises to be an exciting period for the Company."