Progress is being made on the Elk-Antelope project. Image courtesy Mark Gunn.

Progress is being made on the Elk-Antelope project. Image courtesy Mark Gunn.

PROGRESSION on the Elk-Antelope gas field and the offloading of major assets have InterOil well-placed as it looks towards “the most active year in its history”, according to chief executive Michael Hession.

The company celebrated the spudding of the Antelope-4 appraisal well in PR15 in September and welcomed a discovery at the Raptor-1 exploration well at PPL475 in November.

The successful appraisal and exploration news follows the sale of a 40% stake in PR15 to Total in March which boosted the company’s coffers by US$401 million, and the US$49.5 million sale of the Napa Napa refinery and other downstream businesses to Puma Energy in July.

Dr Hession said InterOil was maintaining its push to develop the Elk-Antelope drilling program.

“Papua New Guinea is emerging as one of the world’s most exciting new energy plays with Elk-Antelope having the potential to be one of the lowest-cost, most profitable LNG projects in the world,” Dr Hession said.

“Our focus continues to be on creating value from Elk-Antelope.”

InterOil’s transactions during the year left it with net profit of $353.9 million for the nine months to September 2014, though the company recorded a net loss of $16.9 million for the quarter.

“As we move into the most active year in our history, we are funded and focused to extract maximum value from our first-class assets,” Dr Hession said.

“With our drilling program, the biggest in Papua New Guinea’s history, we are adding value through exploration success and we continue our disciplined and methodical approach to high-grading our exploration portfolio.”

The spudding of Antelope-4 marked the beginning of the final phase of appraisal at the field, with the company announcing it was using new seismic data from the south of the field in conjunction with previous data to revise modelling in preparation for development work.

“This work is complementing studies by the PRL15 joint venture for development options for Elk-Antelope ahead of concept selection,” the company said.

Antelope-4 is the first of at least two appraisal wells planned for the field, with Antelope-5, the second appraisal well in the licence, expected to be drilled later this year.

The major exploration update during the quarter concerned a discovery at its Raptor-1 well in PPL475 in November, following earlier reports of gas and condensate f laring at the well during testing.

In an announcement on 6 November the company said it was continuing to test and clean up the well.

“The Raptor-1 well has been drilled to a measured depth of 4,032 metres below the rig rotary table,” the company said.

“The flow test is being conducted over an interval of around 330 metres of open borehole which includes around 200 metres of Kapau limestone, the target reservoir.

“The company is now planning to appraise the accumulation through additional seismic, followed by appraisal drilling and comprehensive long-term testing in 2015.”

In other appraisal news, Bobcat-1 at PPL476 was drilled to a final total depth of 3,208 metres after intersecting an interval of about 320 metres of Kapau limestone.

“Wireline logging operations are currently underway to determine the presence of hydrocarbons,” InterOil said.

The company also said the drilling suspension at Wahoo-1 in PPL474 would continue into 2015.

Drilling was suspended in July after the company encountered “gas and higher than expected pressures that could compromise rig safety”.

“Significant concentrations of methane, ethane, propane and butane had been recorded, and were believed to be entering the well bore from permeable zones above the predicted reservoir zone,” the company said.

Operations at Wahoo-1 will be resumed in 2015 following a detailed review of well engineering equipment and options, and once regulatory approval for any revised plans has been granted, the company said.

InterOil’s September quarterly report had the company’s total liquidity at $754.3 million, which included cash, cash equivalents and net receivables of $454.3 million.

“The company also has access to an undrawn $300 million credit facility led by Credit Suisse and repayable in December 2015,” InterOil said.

The company’s total expenditure during the quarter was $130.3 million, which included $55.9 million for exploration costs, $41.7 million for the company’s share buyback and $32.7 million for other costs including preparation for appraisal wells, seismic activity, equipment purchases, drilling inventory and corporate costs.

InterOil’s share of net capital expenditure for the company’s three exploration wells in the quarter was $55.9 million, of which $27.3 million was for Raptor-1, $7 million for Wahoo-1 and $21.6 million for Bobcat-1.

InterOil’s share of total net expenditure for the first nine months of 2014 for all three exploration wells was $150.9 million.

InterOil said it expected capital expenditure on drilling to reduce significantly next year as it moves from exploration to appraisal drilling.