Roc Oil Says Cliff Head Development Remains on Track
Roc Oil says that the development of the Cliff Head Oil Field remains on track for first oil production in 1Q 2006. Production start-up is currently expected during 1Q 2006 with full field production due to be achieved shortly thereafter.
Recent project milestones include:
- The jacket for Cliff Head "A" platform was installed on site in late December 2005.
- Construction and pre-commissioning of the topsides for the Cliff Head "A" platform has been successfully completed in Malaysia. Sail-away is expected later this week, with a scheduled arrival at the Cliff Head site in late January 2006.
- Drilling of the planned five producing wells and two water injection wells has commenced with the batch drilling of the 30 inch and 20 inch conductors completed in late December 2005.
- The Ensco-67 drilling rig commenced batch development drilling of the 12-1/4 inch hole sections of the five oil production and two water injection wells in late December 2005. Drilling and completion activity is expected to finish in early April 2006.
- On completion of drilling at Cliff Head, the Ensco-67 drilling rig will be utilized to drill exploration wells in nearby WA-286-P and TP/15 exploration permits.
- Construction of the onshore Arrowsmith Production Facility is now 85% complete and commissioning work has begun.
- A Cliff Head oil sales contract was executed in December 2005 between BP and all the parties to the Joint Venture under which all of the crude oil production for the life of the field will be sold into BP's Kwinana Refinery.
When the Final Investment Decision was made in March 2005, an A$227 million budget, including contingencies, was agreed. In late 2005, the Joint Venture announced that it had expanded the scope of the project to include drilling an additional well, at a cost of approximately A$12.5 million, to access and produce an additional one million barrels of oil which took the budget to A$240 million.
Subsequently, weather, operational and equipment delays, mechanical revisions and rising industry costs of materials and services have resulted in an increase in overall costs of approximately A$25 million (ca 10%).
Commenting on the progress to date, ROC's CEO, Dr John Doran, stated that:
"We hate cost overruns. We derive no comfort from the fact that they are becoming the norm in many parts of the resource sector. It's all very well talking in the abstract about the rising cost of goods and services but it hits home when you realize that, for all practical purposes, the increased Cliff Head budget will – on a post-tax basis - reduce ROC's net present value by about A$3.8 million, equivalent to two cents per share."
The Cliff Head Joint Venture participants are Roc Oil (WA) Pty Ltd as operator with 37.5%; AWE Oil (Western Australia) Pty Ltd. with 27.5%; Wandoo Petroleum Pty Ltd with 24%; ARC Energy (PB) Limited with 6%; IECO Exploration and Production with 5%.
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