$44.2 Million Raised on ACOR's Longtom Well
Australian-Canadian Oil Royalties (ACOR) reports that the Joint Venture Partners of the offshore VIC/P54 permit Australia have successfully raised $44.2 million. A portion of the capital raised will enable the operator to rapidly progress the commercialization of the Longtom Gas Field, which is located offshore southeastern Australia.
The Longtom field contains an estimated 320 BCF of recoverable gas. The Longtom-3 well is expected to drill in May/June of 2006 at an estimated drilling and completion cost of approximately $A35,000,000. ACOR's overriding royalty interest (ORRI) under VIC/P54 is located in the prolific Gippsland Basin. VIC/P54 consists of 155,676 gross acres.
The operator reports that it has identified un-appraised reservoir sands in the Longtom structure with the potential to more than triple the current estimated 320 BCF of recoverable reserves. The sands were highlighted by the application of AVO (amplitude verses offset) geophysical technology. AVO technology has been highly successful in recent gas exploration and appraisal wells in the neighboring Otway Basin.
The Longtom gas field was discovered by BHP in 1995 but was considered sub-commercial (70-120bcf) at the time due to the lack of maturity of the gas markets and the interpreted reservoir quality. A 386-plus meter gas column was intersected in the Emperor Formation in Longtom-1.
Longtom-2 was drilled in late 2004. A 400-plus meter gas column was confirmed within the structure. The lower-reservoir section in Longtom-2 flowed at a stabilized rate of 18-19 mmcf/day over a 12-hour period--an excellent result confirming the commercial potential of the previously untested lower reservoir section in Longtom.
The upper reservoir section did not flow gas to surface--two third-party engineers confirmed a subsurface test valve did not open; hence the well could not flow against the closed valve. A core from the upper reservoir section was taken and analyzed, confirming an excellent reservoir section highly capable of flowing gas. No gas-water contact has been intersected at Longtom to date, suggesting deeper reservoir potential exists.
Contract Signed To Sell 320 BCF Of Gas On ACOR's ORRI Under VIC/P54
The Longtom Gas Sales and Toll Processing Agreement with a large major oil company will enable the operator to process and sell up to 350 BCF of gas of gas over 12 years (with an option for additional 91 BCF of gas) from the Longtom Gas Field located in Bass Strait on ACOR's ORRI under VIC/P54 through the major oil company's existing Patricia Baleen facilities near Orbost in Victoria. The Longtom Gas Sales Agreement is conditional on the successful completion of the Longtom-3 appraisal well, and the operator is confident that this will be achieved.
The company anticipates that Longtom will prove to be a substantial resource capable of delivering significant long term cash flow and value for ACOR. The gas from the Longtom gas field will be processed through the nearby Patricia Baleen gas processing facilities located on the south coast near Orbost in Victoria. Processing the gas at Patricia Baleen will considerably reduce the operator's field development costs. It also has the additional benefit of utilizing existing infrastructure thereby reducing project technical risk and environmental impact.
Upon a successful completion of Longtom-3, the first gas is
anticipated to flow from the Longtom Gas Field in mid 2008.
Preliminary engineering studies suggest 2 wells (Longtom-3 and 4) will
be sufficient to drain the contracted 320 BCF gas. Further development
wells would be required for reserves beyond this. The wells will be
completed sub-sea, connected via a manifold and piped 12 kilometers to Patricia
Baleen facilities. The major oil company will process and purchase the
gas from this point. The gross estimated capital expenditure is
expected to be approximately A$160 million, including the cost of
drilling and completing the Longtom-3.
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