FRESH from selling half its interest in its oil producing assets offshore Thailand, cashed-up Carnarvon Petroleum is hopeful of success in a North West Shelf exploration program to be led by project partner Apache Corporation.
Carnarvon chief executive Adrian Cook told Oil & Gas Australia the decision to sell half its 40 per cent interest in three Thai oil assets to Singapore-based Loyz Energy for US$33 million came after ailing production on the fields caused more headaches than rewards.
The company had taken a few years and enlisted the help of a new operator to get the blocks up to sale standard, he said – with the company retaining a 20% stake in the blocks and pocketing future production revenue of up to US$32 million, based on 12 per cent of Loyz’s field revenues.
“It really wasn’t until we thought we were getting on top of this that we could really put it out there for sale,” he said.
Just a week after first announcing the deal in December, production doubled up to 3,600 barrels of oil per day, helping the company to achieve net revenue of A$6.2 million on 59,383 bbls of oil sold, representing a 28% quarterly jump in output.
Now the junior has turned its focus to the imminent spudding of the Phoenix South-1 well, located in the geological zone known as the Roebuck basin which sits between the Carnarvon and Browse basins.
The well is effectively a step-out well from the gas discoveries made by BP on the WA 435 P field in the early 1980s – discoveries which were abandoned due to low gas prices.
Carnarvon holds 20 per cent in both WA 435 P and the neighbouring WA 437 P, equal to the stakes held by JX Nippon and Australia’s Finder Exploration, when compared to Apache’s 40% operating stake.
Late last year, Carnarvon announced that Apache had increased its farm-in commitment at Phoenix South-1 and Roc well by increasing the cap on each well from US$50 million to US$70 million. In return, Carnarvon and Finder Exploration extended Apache the option to purchase a 40% stake in two neighbouring permits.
The Phoenix South 1 well is set to be tested for the first time in late May or early June in a 60 day campaign, with a second well, referred to as the Roc well, contingent on the success of the first well.
Mr Cook said the likelihood was “pretty solid” that a second well would be drilled.
“The way I envision it is that we’ll have success on the first well which will take us to the second well, success on the second well will then take us to the appraisal program for which we would need to pay 20% of the dollars,” he said.
“If we were at that point, and there was that much success I think you’d find that we would dispose of Thailand.”
“The decision process there would be the performance of the field, the level of interest of future buyers, share price and buoyancy of capital markets.”
Holding on to the 20% stake in the Thai assets would help it retain cash while it pursued the Phoenix South 1 well, with Mr Cook insisting the company was not putting all its eggs in one basket.
“If it doesn’t work then we’ll have other activities coming which we’ll announce,” he said.
“We’ll be looking for more opportunities along the North West Shelf.”