Harvest Natural Resources Reviews Second Quarter E&P Activities
Harvest Natural Resources has provided an operational update for the second quarter 2009.
EXPLORATION AND PRODUCTION PROGRAMS
Petrodelta delivered 2.0 million barrels of oil, or an average of 22,057 BOPD, and 1.3 billion cubic feet (BCF) of natural gas to PDVSA Petroleo, S.A. for the three months ending June 30, 2009, as compared to 1.2 million barrels of oil or an average of 13,600 BOPD, and 3.0 BCF of natural gas to PDVSA Petroleo, S.A for the same period in 2008. Petrodelta oil production increased 15 percent over the 2009 first quarter average of 19,200 BOPD.
During the second quarter of 2009, the world market price for the quality of oil produced by Petrodelta averaged approximately $53.39 per barrel, or 90 percent of the price for West Texas Intermediate. The natural gas price received by Petrodelta is contractually fixed at $1.54 per thousand cubic feet.
Petrodelta Development Activities
Petrodelta reduced its rig count to one rig for most of the second quarter with the focus being on the drilling of two appraisal wells in the El Salto field. Petrodelta drilled and completed three development wells in the Temblador field in the second quarter of 2009, with an average initial production rate per well of 1,200 BOPD. Since Petrodelta started development drilling in the Temblador field in late 2008, oil production has increased from 1,200 BOPD to an average rate of 6,100 BOPD during June 2009. During this period, five successful wells have been completed.
In addition, two successful appraisal wells were drilled in the El Salto field which is currently undeveloped. The El Salto No. 30 well was successfully drilled, logged and cased and will be tested in the future. The El Salto No. 31 well was drilled and completed and is currently testing through temporary facilities at a rate above 1,400 BOPD.
The drilling program and field improvement activities in the prior quarters and early second quarter resulted in average production rates of 22,057 BOPD during the second quarter of 2009. The temporary reduction in rig count, appraisal program, and production facility outages resulted in a current production level of 20,500 BOPD. Additionally, PDVSA has recently failed to pay on a timely basis certain amounts owed to contractors that PDVSA has contracted to do work for Petrodelta. In addition, PDVSA has recently failed to pay on a timely basis certain amounts owed to Petrodelta with which Petrodelta pays its contractors. Not making timely payments to contractors makes it more difficult for Petrodelta to obtain the services of contractors, which difficulty is having an adverse effect on Petrodelta's business.
United States -- Gulf Coast -- West Bay
During the six months ended June 30, 2009, operational activities in the West Bay prospect, one of the two initial prospects of our AMI, included the interpretation of 3-D seismic, site surveying, and preparation of engineering documents. Interpretation of 3-D seismic data on the project was completed in second quarter 2009 and resulted in the identification of a revised set of drilling leads and prospects for the project.
Harvest expects to firm up plans for initial drilling on the project during the third quarter 2009, with the expectation of initial drilling on the project in early 2010. For the six months ended June 30, 2009, we incurred costs of $1.4 million for seismic interpretation, surveying, preliminary engineering and permitting.
Western United States -- Antelope
During the six months ended June 30, 2009, operational activities in the Antelope project primarily focused on continuing leasing activities, concentrating primarily on Allottee leases administered by the Bureau of Indian Affairs. Harvest and our industry partner currently hold 58,000 acres on the Antelope project, or 35,000 acres net to Harvest's 60 percent interest upon earn-out. Other operational activities included surveying, preliminary engineering, and permitting preparations for a deep natural gas test well. The Permit to Drill the Bar F #1-20-3-2 well was approved on May 27, 2009, and drilling commenced on June 15, 2009. The well is currently estimated to reach total depth in September 2009. During the six months ended June 30, 2009, we incurred $7.6 million for lease acquisition, seismic program planning, surveying, permitting, site preparation and drilling costs. The expected remaining 2009 budget for this project is $9.5 million.
Indonesia -- Budong-Budong
Processing of the seismic data acquired in 2008 was completed in second quarter 2009 and current activities comprise interpretation of this data and well planning. It is expected that the first of two exploration wells will spud in the fourth quarter of 2009. In accordance with the farm-in agreement, we expect to fund 100 percent of the well expenditures to earn our 47 percent working interest up to a cap of $10.7 million; thereafter, we will pay in proportion to our working interest. During the six months ended June 30, 2009, we incurred costs of $1.0 million for the 2-D seismic processing and interpretation and well planning. The projected 2009 project expenditures (net to us including our funding commitment) for the exploratory well drilling are $8.1 million.
Oman -- Qarn Alam
On April 11, 2009, Harvest signed an Exploration and Production Sharing Agreement ("EPSA") with the Sultanate of Oman for the Al Ghubar/ Qarn Alam license block, Block 64. The Company will have a 100 percent working interest in the EPSA during the exploration phase. Oman Oil Company will have the option to back-in for up to a 20 percent interest in the block after the discovery of commercial quantities of natural gas.
The 3,867 square kilometer (955,600 acre) block is located in the gas and condensate rich Ghaba Salt Basin in close proximity to the Barik, Saih Rawl and Saih Nihayda gas and condensate fields. We have an obligation to drill two wells over a three year period with a funding commitment of $22.0 million. We expect to spend $4.8 million in 2009 for signature bonus, processing and interpretation of existing 3-D seismic and drilling preparations. Through June 30, 2009, we incurred costs of $2.2 million for signature bonus and training fund.
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