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Australian firm rebounds with cautious Gulf plays Petsec Energy went through bankruptcy, shows $17 million profit for 2003 Allen Baker Petroleum News Contributing Writer
In Australian company whose U.S. arm went through bankruptcy four years ago is now rebounding, with earnings of $22.7 million (Australian) for 2003, or $16.9 million in U.S currency.
Petsec Energy Ltd. has been drilling low-risk wells in the Gulf of Mexico and so far has been successful in pulling its operation up by the bootstraps.
“The goal was to access reserves and catch flows with minimum capital expense,” says Ross Keogh, president of Petsec Energy Inc., the U.S. subsidiary. “We were targeting lower-risk, less capital-intensive situations. We pretty much hit what we targeted.”
In addition, Keogh notes, “we benefited from the high prices in 2003 as everybody else did.”
Petsec Inc., which is based in Lafayette, La., went into bankruptcy reorganization in 2000, and came out of that process with just a handful of properties. But all of the debts were discharged, the corporate structure remained intact, and the Australian parent company had some cash to start afresh, he said. The Australian firm is in Sydney.
The company was able to bid on leases issued by the Minerals Management Service, and picked up some promising property in March 2002 in West Cameron block 343. A start with three wells Three wells were drilled in 2002 from the West Cameron 352 platform in the Gulf some 50 miles off Louisiana in about 60 feet of water, with one targeting West Cameron 352 and two into West Cameron 343, just to the north. Petsec is operator and has a 75 percent working interest.
The wells encountered a total of nine hydrocarbon-bearing sands with a total of 268 feet of net gas pay in three separate prospects. Those wells started producing at the beginning of 2003, and healthy prices for natural gas gave the company a base to expand, noted Petsec’s CEO, Terry Fern, in Sydney.
Even with those discoveries, 2002 was a losing year, to the tune of $4.4 million AUS, with a net cash drain of $3.2 million AUS. The company had just $2.3 million AUS in cash at the end of that year.
Then came a strong $27.5 million AUS in cash flow for 2003, from $38.7 AUS million in revenues. The company sold 4.4 billion cubic feet of gas at an average price of U.S. $5.60 per thousand cubic feet, and nearly 19,000 barrels of oil for the year.
Much of that came from the three original wells, plus two more West Cameron wells drilled in September and brought into production in October of last year. The five wells averaged 26 million cubic feet daily in December.
The success gave investors some optimism, and the company placed 12.8 million shares in December, raising $8.9 million (U.S.) New drilling site Branching out a bit geographically, the company drilled Vermilion 258 No. 1 and No. 2 in December 2003 and January of this year. The No. 1 well reached a depth of 11,584 feet, finding 85 feet of net gas pay. The second well also was a success, hitting 42 feet of pay.
Petsec is now working on a production platform for the two wells, and figures to have that in operation by the middle of the year. The two wells are expected to flow 15 million to 25 million cubic feet daily. Both are expected to start producing in the middle of this year. The platform is designed to handle 45 million cubic feet.
Petsec has a 100 percent working interest in Vermilion 258, as well as nearby Vermilion 257 and 246. The leases are about 70 miles off the Louisiana coast. Further afield With a foundation in the Gulf, Petsec is drilling closer to Australia in its next move, two to five wells being drilled in the Beibu Gulf off China, probably starting next month. Petsec has a 25 percent working interest there, in a partnership with operator Roc Oil of Australia. The block is about 36 miles off the southern coast of China, northwest of Hainin Island in water 80 to 130 feet deep.
The China National Offshore Oil Corp. has a right to participate for a 51 percent working interest, says Keogh, but will reimburse the original investors for their share of the development costs. Petsec earned its 25 percent interest by participating in March 2002 in the drilling of another well in the Beibu Gulf.
“It’s an exciting opportunity,” Keogh says. “It’s higher risk than what we’re drilling here in the Gulf.” The first well will test a prospect that has the potential of containing several tens of millions of barrels of recoverable oil, while the second one is estimated to hold 20 million to 30 million barrels. The area is about five miles along strike from recent new substantial discoveries in the Weizhou Formation by CNOOC. Hopeful future Petsec is ready to expand its presence in the Gulf, and could drill a couple more wells later this year if there’s enough money for it. Keogh says Petsec is planning to put on the order of U.S. $20 million into the Gulf this year. The company holds leases in Main Pass 89 and Highland 33, as well as the West Cameron and Vermilion acreages.
Petsec has an overriding royalty interest in Ship Shoal 184 and 191, which provided 259 million cubic feet of gas and more than 16,000 barrels of oil last year, so there’s also some revenue coming from that source.
“We’re still capital-constrained to some extent,” Keogh says. But he says the company is hoping to move off the “pink sheets” where speculative ventures are traded, and that could lead to better financing opportunities. The company trades in the U.S. markets as PSJEY.PK.
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