Petsec Says 2005 Growth Strong Despite Hurricanes

Despite hurricanes Katrina and Rita shutting in Petsec Energy's Gulf of Mexico gas production for much of the past December half-year, the Sydney-based company reported solid growth in production, revenues, reserves and EBITDAX for the year ended December 31, 2005.

The Company has opened 2006 on a positive note with recent new gas discoveries in the Gulf, rising production, continuing high USA gas prices and another aggressive exploration outlook.

The most accurate gauge of Petsec's hurricane-ridden 2005 results - earnings before interest, tax, interest and exploration expenses (EBITDAX) from normal operations - jumped 48% to US$38.3 (A$50.3 million).

Available production from the company's offshore platforms in the Gulf of Mexico still increased by 14% to 6.5 billion cubic feet of gas equivalent, and combined with higher gas prices to generate a 39% increase in net revenue after royalties of US$45.5 million (A$ 59.7 million).

These stronger 2005 performances – achieved despite the production shut-ins – built on production and revenue increases of 27% and 30% respectively in 2004.

Net profit before tax in the latest year was down 17% to US$9.6million (A$12.6million) after expensing hurricane related ineffective gas hedges of US$4.6million and first-half exploration write-offs of US$8.5 million. Net profit after tax was US$9.5 million (A$12.5 million) compared with US$11.2 million (A$15.2 million) in 2004, (before a 2004 US$7.7 million income tax benefit upon reinstatement to AIFRS).

"Despite the setbacks from an unprecedented hurricane season, exploration success at our Main Pass 19 gas field have provided continued reserve growth for the company and position us well for further increases in production and cashflow in 2006," Petsec's Executive Chairman, Mr. Terry Fern said today.

"Main Pass 19 commenced production in January 2006 and is expected to be a significant contributor to growth this year, with further production from the successful wells in our current drilling program expected to be brought into production over coming months." Mr. Fern said.

Strong 80% growth in oil and gas Reserves

Petsec Energy's net proved and probable reserves in the USA at December 31, 2005 as estimated by independent petroleum engineers, were up 80% to 29.3 billion cubic feet equivalent (Bcfe) from 16.3 Bcfe at the end of 2004.

The Company's internal estimate of net proved and probable reserves in the USA at 31 December 2005 was 31.0 Bcfe - up 42% from 21.9 Bcfe last year. Its estimated reserves position in China remains unchanged at 7.5 Bcfe (1.25 million bbls of oil in the 12-8 West field), to give Petsec a total internal reserves estimate of 38.5 Bcfe.

Only results from the successful first well (drilled in Dec 2005) in Petsec's current four-well drilling program at Main Pass 19 are included above.

The second and third wells drilled in January 2006 also made commercial gas discoveries and the fourth well is currently drilling ahead.

Mr. Fern said the 2006 discoveries would add to Petsec's strong production outlook which, in the absence of any unforeseen interruptions, was set to increase substantially.

"Our significantly increased exploration budget in the current year provides scope for further solid reserves growth," he said.

"We expect to release further details regarding the company's 2006 exploration and development program over the coming weeks."