Niko's Total Production Up 122% Exiting Third Quarter 2009
Niko Resources has reported its financial and operating results, including consolidated financial statements and notes thereto, as well as its management's discussion and analysis, for the three and six month period ended September 30, 2009, the second quarter of Niko's fiscal year. The operating results are effective November 11, 2009.
- Niko reports quarterly funds from operations of US $47.9 million, the largest in its history.
- D6 gas production completed 223 days of 100 percent uptime demonstrating flawless commissioning and execution.
- D6 gas production increased to 118 MMcf/d in the quarter, which is a 77 percent increase over the previous quarter. D6 gas production on November 11, 2009 was 161 MMcf/d. The Company has signed gas sales contracts totalling 191 MMcf/d and expects to add significantly to this total before the end of November.
- The scope of work under Phase I of the D6 gas development is complete.
- Commerciality proposal filed for the R series in the D6 block and an integrated development plan for all gas discoveries is being conceptualized.
- Successfully drilled the AJ2 appraisal well in the southern and deeper parts of the NEC-25 Block. Results from all wells including the recent AJ2 well are being incorporated to generate an integrated development plan for all discoveries to maximize cost efficiency.
- In Indonesia, Niko has been selected as the successful bidder and executed a letter of intent for three additional exploration blocks covering an area in excess of 17,000 square kilometres. Niko will have a 50 percent interest in each block and will operate two of the three blocks.
- In Trinidad, Niko signed an agreement whereby it will have a 26 percent interest and operate the 2AB shallow water block offshore Trinidad.
- Niko acquired an additional 10 percent interest in the Qara Dagh block in the Kurdistan Region. As a result, the Niko will hold an aggregate 37 percent net working interest in the production sharing contract.
Gas production from the D6 Block commenced in April 2009 and has increased Niko's total production by 122 percent compared to total production prior to start-up. Primarily as a result of D6 gas production, average Company-wide production for the year ending March 31, 2010 is expected to increase to around 245 MMcfe/d, which is a 187 percent increase over fiscal 2009.
Oil production from the MA field in the D6 Block was shut-in from March 22, 2009 to April 25, 2009 for the hook-up of the Phase II subsea facility and connection to the floating production, storage and offloading vessel. Production in the quarter increased 25 percent to 10,600 bbls/d (1,060 bbls/d working interest to the Company) from 8,500 bbls/d (850 bbls/d working interest to the Company) in the previous quarter. Sales during the quarter averaged 13,230 bbls/d (1,323 bbls/d working interest to the Company) as inventory levels were reduced in the quarter. Oil production is targeted to reach 25,000 bbls/d (2,500 bbls/d working interest to the Company) before March 31, 2010.
Gas production from Block 9 in the quarter was 99 MMcf/d (66 MMcf/d working interest to the Company). The Bangora-3 well was put on-stream in June 2009 and a work over was conducted in September 2009 to complete an additional sand. The well is back on production and current production from the block is in excess of 120 MMcf/d (80 MMcf/d working interest to the Company).
D6 Block -- Dhirubhai 1 and 3 Gas Development: The scope of work under Phase I of the gas development project has been completed including completion and tie-in of all 18 planned wells. Contracts have been signed for the equivalent of approximately 1,910 MMcf/d (191 MMcf/d working interest to the Company) and the customers are currently taking approximately 1,610 MMcf/d (161 MMcf/d working interest to the Company).
D6 Block: The BA2 well was not drilled to the planned total depth due to complications while drilling. Options to re-drill this well or a twin well are being evaluated. The Company expects exploration drilling on numerous prospects within the block will take place in the coming year.
D4 Block: The initial interpretation of the data within the 3,600-square-kilometre 3D seismic survey acquired has identified several areas of interest, which will be fully analysed as part of the ongoing evaluation. Processing and interpretation of the data are expected to be completed in time for the Company to begin drilling in the second half of calendar 2010.
Cauvery: The Khoja-2 well, which finished drilling in September 2009, was unsuccessful and was abandoned. The Company has received an extension to the exploration period to March 2011 in order to evaluate the technical merit of the block.
Hazira Block: The 30-square-kilometre transition zone 3D seismic survey is designed to explore for deeper oil and gas targets in the eastern half of the Hazira block. The survey has been merged with the offshore 3D seismic previously acquired providing 3D seismic coverage of almost the entire Hazira block. Evaluation of results is complete and a multi-well drilling program will be proposed to commence in the first calendar quarter of 2010.
NEC-25 Block: Approximately 1,000 square kilometres of 3D seismic have been acquired along the central portion of the northwest boundary of the previous 3D surveys. Drilling of the AJ2 well finished in July 2009 and discovered gas. An additional well, AJ3, will be drilled as a follow up to the successful AJ2 well.
The 2,000-square-kilometer 3D seismic program acquired during fiscal 2009 was shot to identify stratigraphic potential, resolve structural complexity and indicate the presence of hydrocarbons. Processing of the 3D data should be completed in the second calendar quarter of 2010 with interpretation and selection of drilling locations to follow.
Interpretation of the 7,600 kilometers of reprocessed 2D seismic is continuing. Further evaluation of the block is planned to commence in late 2009 including acquisition of a high-resolution multi-beam survey and a sea floor coring program intended to identify sea floor oil and gas seeps. Future work as prescribed in Phase II includes the acquisition of a 3D seismic program to be designed based on results of the 2D seismic reprocessing and the multi-beam survey. The Company expects to drill a well in the second half of calendar 2012.
The 350 kilometer 2D seismic program covering the entire block, including the surface structure that dominates the Qara Dagh block, has been completed, processed and interpreted. A drilling location has been selected and drilling is expected to commence in the second calendar quarter of 2010.
Niko has acquired interests in several blocks in deepwater offshore Indonesia. Indonesia has long been a prolific oil and gas producing nation with very large reserves; however, its deepwater areas have remained essentially unexplored. Most blocks have sea bottom oil and gas seeps and large structural features, and several have direct indication of hydrocarbons on seismic. The single well commitment per block will follow seismic acquisition and interpretation. The seismic program planned for each block is outlined below:
Block Planned Seismic
- Bone Bay; 3,000 kilometres of 2D
- Cendrawasih; 1,200 square kilometres of 3D
- Kofiau; 1,042 kilometres of 2D, 3,150 square kilometres of 3D
- Kumawa; 3,000 kilometres of 2D
- Seram; 3,500 kilometres of 2D
- South Matindok; 4,400 kilometres of 2D
- Southeast Ganal; 2,250 kilometres of 2D, 2,700 square kilometres of 3D
- West Sageri; 3,400 kilometres of 2D, 702 square kilometres of 3D
A 2,700 square kilometer 3D spec survey was completed in Southeast Ganal in September 2009 and a 702 square kilometer 3D spec survey is being acquired in West Sageri. Acquisition of 2D seismic in these blocks was completed in October 2009. New 2D seismic surveys are also planned for the Bone Bay, South Matindok, Kumawa, Kofiau and Seram blocks. A spec 3D survey is expected to commence in Kofiau in the calendar year.
In July 2009, the Company acquired the right to earn a 26 percent interest and operate the 1,605 square-kilometer shallow water block 2AB offshore Trinidad. Both the assignment of the interest and operatorship are subject to approval from the government of Trinidad and Tobago. The Company has minimum work commitments to acquire and process 864 square kilometers of 3D seismic and drill three exploration wells within three years.
During the three months ended September 30, 2009 operating expenses decreased to US$0.33/Mcfe from US$0.45/Mcfe in the previous quarter. Operating expenses were higher in the quarter ended June 30, 2009 due to the start-up costs related to the commencement of D6 gas production as production rates were ramping up. Operating expenses fell in the quarter ended September 30, 2009 and are anticipated to continue to fall on a unit-of-production basis once the D6 gas field is producing at designed capacity.
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