Austral Pacific Begins Drilling on Cheal Well A6
Austral Pacific Energy Ltd. has announced that preparations are now complete and its A6 well is scheduled to start drilling in the next 24 hours. The well will drill through a secondary reservoir and into the primary target over the next 14 days. The well is being drilled from a surface location adjacent to the Cheal production facility and will be directionally drilled to reach the reservoir some 1000 meters to the west and to a depth of 1750 meters.
If the well is successful, it is modeled to add 320,000bbls of recoverable oil and 250 - 350 barrels of oil per day (bopd) to the field's current production rate in the order of 500bopd. At today's oil price (~$US130/bbl), and production rate, the field generates a revenue stream of over US$1.95m/ month. Success in this first of two wells could increase production to approximately 800bopd and the field revenue stream to $US3.1m/ month. Austral Pacific holds a 69.5% working interest in the field.
The A7 well is scheduled to follow the drilling and completion of the A6 well.
Austral Pacific has been actively pursuing its strategy to focus on its core assets of Cheal, Kahili and Cardiff; increase production and reduce costs through a series of steps that have been announced individually over the past month.
"We have successfully completed the monetization of our assets in Papua New Guinea; we have reduced the primary company debt from $US18.5m at year end to $US9m allowing the company to take on additional debt to benefit from the full upside of high oil prices," said Austral CEO Mr Thom Jewell. "The impact of closing out the hedge is an increase in Austral's revenue from Cheal from $US 0.68m/month to $US 1.4m/month and an increase in the margin per barrel from approximately $US40 to $US105."
"In a success case, the A6 well and A7 wells will increase production and further increase the per barrel margin by making more efficient use of the new production facilities."
Commenting on other announcements, Mr Jewell said he was disappointed in the apparent reaction by a few of the company's shareholders to its decision to reduce the number of exchanges from three to two with the voluntary withdrawal from the AMEX. He said, "All of our shareholders will be able to freely trade in the stock through the TSX-V or the NZX and the company will be able to significantly reduce the costs and compliance complexity of its business."
In other news, the longest standing member of the Austral Pacific board of Directors, Mr Ron Bertuzzi, has decided to step down. Mr Bertuzzi has been actively involved in the company since 1992 and served on the board from October 1992 until October 1996 and then again from March 1998. With the addition of Peter Hazledine in January 2008, the board remains fully functional in its strategic and fiduciary responsibilities.
"I have enjoyed working with Ron and I would personally like to thank him for his invaluable contribution over the past 16 years," Mr Jewell said.