Venture Posts Half Year Results, Reviews North Sea Operations
Venture Production has posted its half year results for the six months ended June 30, 2009. Venture is a UK independent oil and gas company operating in the UK and Dutch sectors of the North Sea. Venture's strategy is to acquire, develop and bring into production discovered but undeveloped oil and gas fields, collectively known as 'stranded' reserves.
- Production volumes up 16% to 52,988 boepd (2008 - 45,534 boepd).
- End Q1 proven and probable reserves up 12% on year end total to approximately 240 MMboe.
- Five out of seven commercially successful gas exploration appraisal wells in 2009 -- Cygnus (x2), Kew, Carna and Marram.
- Five significant development projects due on stream prior to end of 2011.
- Chestnut P2 well brought on stream in first quarter.
- Active drilling program for next 12 months -- 10 wells planned targeting 239 MMboe of unrisked reserves.
- Revenue up 14% to £274.7 million (2008 - £240.5 million).
- Long standing hedging program limited impact of commodity price decline.
- Pre-tax profit of £105.2 million down 7% (2008 - £113.2 million).
- Profit for the financial period of £54.1 million down 1% (2008 - £54.7 million).
- Operating cash flow £143.6 million down 20% (2008 - £180.5 million).
- Total capital expenditure of £145.1 million (2008 - £124.5 million, including asset acquisitions).
- Portfolio management -- partial sale/farm-out to Nuon will improve risk-reward and highlights value.
- NOGAT pipeline acquisition improves economics for northern Dutch sector assets.
- Strong financial position -- well placed to fund existing investment program and capitalize on new
- acquisition opportunities.
The first half of 2009 has seen strong production performance across all areas of our business and the joint Eris/Ceres gas field developments remain on track for first gas production for mid-to-late fourth quarter. With planned shut-downs occurring as usual in the third quarter, Venture continues to expect modest production growth in 2009 over 2008 levels, as previously indicated.
Commenting on the results, Mike Wagstaff, Chief Executive of Venture said, "The first half of 2009 has seen strong performance across all areas of Venture's business in a challenging corporate and operational environment. We have seen record production performance driven by the new fields which we brought on stream during 2008 combined with good reservoir and facilities uptime performance and costs in line with expectations. Despite the fall in oil and gas prices we have experienced since mid-2008, our financial performance has benefited from our long standing commodity hedging program.
"Our 2009/10 drilling program has got off to an excellent start this year with five out of seven wells drilled proving commercially successful and we have made significant progress in moving our key development projects forward. Over the next 12 months we have an active and exciting drilling program which has the potential to continue to add materially to our reserves base. Venture has a strong financial position which gives us the ability to continue both to develop our own asset base as well as give us the flexibility to make further acquisitions."
At June 30, 2009, Venture had interests in a total of 92 license blocks in the UK and Dutch sectors of the North Sea containing 48 proven oil and gas fields. Of these, 21 are currently in production, five near-term developments are ongoing and the remainder provide future upside potential and long term sustainability. These fields are located in five discrete production hubs; the "A" Fields and the Greater Markham Area ('GMA') gas production hubs in the southern North Sea ('SNS') and the "Trees," Greater Kittiwake Area ('GKA') and 'New Oil' oil production hubs located in the central North Sea ('CNS').
The key drivers of the growth in production this year have been the Chestnut oilfield which came on stream in September 2008, as well as contributions from the Grouse oilfield and the Stamford gas field, which both came on stream in December 2008. Across all hubs we have seen good facilities uptime and reservoir performance with a marked improvement from the GKA in particular.
"A" Fields and Other UK Gas
Good production performance has continued from Venture's SNS "A" Fields gas production hub. During the first half of 2009, "A" Fields produced at an average rate of 13,376 boepd, 25% of Group production (2008 - 17,814 boepd and 39%). The decrease in production was the result of anticipated natural decline and an extended production shut-in of the Alison field. However, both Annabel (Venture - 100%) and the Saturn Unit (Venture - 22%) have continued to perform in line with expectations.
During the first half of 2009, Venture participated in the drilling of two successful appraisal wells on the Cygnus gas field (Venture - 48.75%). The results from these wells have exceeded pre-drill expectations and proved up the eastern part of the field so confirming Cygnus to be one of the largest undeveloped gas fields in the North Sea. The operator, GdF Suez, estimates gross recoverable reserves for the eastern part of the field alone to be approximately 500 Bcf.
The Cygnus partnership is pursuing a phased development of the field which could ultimately involve up to six platforms and 16 production wells for the entire field. The first phase of the field development will involve a single normally unmanned platform in the central part of the field, with two production wells tied back to nearby infrastructure. The operator is integrating the results of the most recent appraisal wells into development planning for the second phase of development of the eastern part of the field and the operator has also proposed drilling two additional appraisal wells in the western part of the field during the first half of 2010.
In March 2009, Venture completed drilling the successful Carna exploration gas well (Venture - 56% unitized interest). This well has proved to be a commercial stand alone gas discovery with expectations of estimated net gas in place (‘GIIP’) ranging from 95 to 185 Bcf. Additionally the confirmation of productive reservoir sands in Carna increases the attractiveness of five potential follow-on exploration prospects in the surrounding Greater Carna Area. These other prospects, whilst as yet undrilled, are expected to contain an additional aggregate net GIIP ranging from 104 Bcf to 390 Bcf. Carna is the first exploration well drilled on acreage acquired as part of the acquisition of WHAM Energy plc in 2007.
Venture plans to continue the development of this acreage with an exploration well on the high risk-high reward Morpheus exploration prospect (Venture 100%) in late 2009 or early 2010. Venture is also continuing the processing and interpretation of the new 3-D seismic shot survey over the Andromeda prospect area in 2008 and currently plans to drill an exploration well on the Andromeda exploration prospect (Venture - 100%) in 2010. As part of the recently announced partial sale and farm-in transaction Nuon will farm-in to a 30% interest in both the Morpheus and Andromeda prospects by paying a disproportionate cost of an exploration well on each prospect.
The Andrea well (48/15b-10) (Venture - 100%) was drilled using the NJR on June 6, 2009 and reached a total measured depth of 10,200 feet on July 16, 2009. The well was designed to test the Leman sandstone with gas being discovered in the upper sands. Indications are however that the reservoir is tight and is unlikely to flow without stimulation. The well has now been suspended pending further analysis of well logs and core samples. The potential of the Andrea gas discovery for commercial development will now be assessed, although any development of Andrea would most likely be in conjunction with the nearby Ensign field.
The NJR is currently drilling an appraisal well on the Annabel East field extension (Venture - 100%). In the event of success, the Annabel East well could provide a material addition to reserves in the Annabel field and would be tied back into the Annabel subsea facilities.
During the first half of 2009, work on the combined Eris/Ceres (Venture - 54%/90%) gas fields development project has continued. Commercial terms for transportation and processing have been finalized and offshore tie-in activity is continuing with first gas production anticipated before year end.
In July 2009, Venture commenced drilling the first of two exploration and appraisal wells in the East Irish Sea ('EIS'). The Marram appraisal well, (Venture - 70%) has proven gas in the eastern part of the field. The well reached a total measured depth of 2,020ft on July 9, 2009 and encountered a gross gas column of 469ft. Down hole samples were taken to confirm the gas quality and the initial analysis indicates that the gas quality is within the pre-drill expectation range and that the GIIP volume is also within the pre-drill range of expected outcomes. The nitrogen content in the down hole samples is material but other fields in the same area have been successfully developed with high nitrogen contents. A final evaluation will be completed during the second half of 2009 and potential development options are being reviewed. Earlier this week Venture announced that the Whitbeck exploration prospect (Venture - 70%) was a gas discovery but commerciality is still to be proven.
Greater Markham Area ('GMA') and Dutch Sector
The GMA production hub, which straddles the median line between the UK and Dutch sectors of the North Sea, contributed 15,915 boepd or 30% of Group total production (2008 - 11,989 boepd and 26%). This increase was the result of excellent performance from the two Chiswick gas production wells (Venture - 100%) and the start-up of production from the Stamford field (Venture 100%) in December 2008. Overall production performance from the hub has been good although production from Stamford has been below expectations.
Following the strong performance of the Chiswick field since it was brought on stream in 2007 Venture has recently completed a subsurface study on the field which has led to a significant increase in the estimate of recoverable reserves for the field. A second phase of the development of the field has now been sanctioned which could involve the drilling of up to five additional wells. The first two additional wells will be drilled during late 2009 and 2010 utilizing the NSM. In addition, in late 2008 Venture entered into a long term partnership arrangement with Schlumberger to provide a stimulation vessel to support Venture's SNS tight gas drilling and completion operations including Chiswick Phase II development.
The Kew appraisal well drilled earlier this year proved gas in the northern section of the field with gas found in the Silverpit, Leman and primary Carboniferous reservoirs with Carboniferous GIIP volume higher than the pre-drill best technical case, but within the range of expected outcomes. The well, which was originally spudded in early December 2008 by the NJR had a number of operational challenges, including a side-track, was suspended for use as a producer at a later date. A field development plan utilizing existing local infrastructure is now being finalized. As well as confirming the development potential of the Kew discovery, the results of this well further supports the planned drilling of the nearby Wandsworth Carboniferous exploration prospect.
In 2008, Venture acquired operated interests in three undeveloped gas discoveries in Quads A and B in the northern part of the Dutch sector thereby expanding Venture's footprint in the Netherlands. The first of these discoveries, F3-FA (Venture - 58% estimated) has moved rapidly into development. The field development plan involves construction and installation of a self installed production platform ('SIP') with a single
production well tied into the regional transportation facilities. Construction of the SIP commenced during the second quarter at Heerema's fabrication yard in Vlissingen in the Netherlands and first gas production is expected during winter 2010/11.
In mid-June Venture announced a significant sale and farm down transaction with NV Nuon Energy involving a sale of a 15% interest in the producing Chiswick and Stamford field, a 25% interest in the Kew potential development and an exploration farm-in to Morpheus and Andromeda as discussed above.
In July, a small interest in the NOGAT gas pipeline and onshore gas processing terminal at Den Helder was acquired. This interest will ensure that future production from the F3-FA, A15a and B17a discoveries attracts a reduced export tariff. This will enhance field economics and give preferred access to capacity in the NOGAT system.
Greater Kittiwake Area ('GKA')
The GKA production hub (Venture operated - 50%) contributed 12,508 boepd or 24% of Group total production during the period (2008 - 9,995 boepd and 22%). GKA production volumes were ahead of expectations during the first half due to good oil and gas production efficiency along with strong reservoir performance from the Grouse, Goosander and Mallard fields.
Platform process throughput optimization continues and the now redundant Kittiwake Loading Buoy and Kittiwake platform drilling derrick were safely removed. Technical evaluations of several GKA near field Tertiary exploration opportunities were completed and are being proposed for drilling in 2010/11.
During the first half of 2009, the "Trees" production hub (Venture - 100%) produced at an average rate of 2,723 boepd or 5% of Group total production (2008 - 5,146 boepd and 11%). "Trees" production is returning to expected levels following resolution of host facility gas lift and water injection supply problems during the first half of 2009.
Activity on "Trees" has focused on subsurface work to refine our understanding of the "Trees" reservoirs and identify additional investment opportunities. In particular, on South Sycamore detailed drilling planning activities have commenced following the confirmation of economically attractive investments.
Other Central North Sea ('New Oil')
The New Oil production hub contributed 8,002 boepd or 15% of total Group production (2008 - nil). This was driven by the contribution from the Chestnut oilfield (Venture - 69.875%) which came on stream in September 2008 and by a small contribution from Halley (Venture - 40%)
Since the start-up of production on Chestnut, we have seen good well, reservoir, facilities and tanker offloading performance and in late March the second production well (‘P2’) which was drilled in 2008 was tied in and brought on stream. Venture are utilizing the subsurface technical expertise developed for Chestnut to look regionally for additional Chestnut like opportunities.
In August 2008, the previously shut-in Halley oilfield was restored to production on an extended well test basis. Since then, production has been erratic due to facilities constraints. However, in early 2009 Venture completed the negotiation of commercial terms for processing and transportation of production from both Halley and the nearby Appleton fields. This has enabled the Halley partnership to commit to drilling an
appraisal well on the field in late 2009 and to move forward development planning for the Halley/Appleton complex.
In addition, Venture plans to drill an appraisal well on the Acorn oil discovery (Venture - 100%) using the NTvL during the second half of 2009 to confirm long term commercial flow rates.
- Venture Production Shuffles Board (Sep 10)
- Venture Announces Board Changes (Aug 27)
- Venture Advises Shareholders to Accept Centrica's Offer (Aug 25)