Salamander Energy plc issues the following Interim Management Statement (IMS) for the period from 1 January 2013 to 17 May 2013.
- Group production averaged 14,100 boepd in year to April 30th; production during May averaging 17,100 boepd.
- Group annual average daily production forecast maintained at 12,500 – 15,500 boepd.
- Eight development wells completed and on-stream on Bualuang Bravo platform (offshore Thailand). First oil flowed from T2 reservoir, performance is ahead of expectation, reserve upside under review. Additional T2 drilling now scheduled.
- Atwood Mako jack-up rig to leave platform in June to begin G4/50 exploration drilling.
- More than 60 G4/50 prospects and leads identified. EIA submission for first 20 prospects filed with Thai authorities.
- North Kutei exploration (offshore Indonesia) yields oil & gas discovery at South Kecapi flowing at 6,000 bopd, and high pressure wet gas at North Kendang. Bedug-1 drilling continues.
- Strategic partner brought into the Kerendan project (onshore Indonesia).
- Four development wells completed on Kerendan gas field, flow tested at combined 40MMscfd, comfortably in excess of the 20MMscfd DCQ of the first Gas Sales Agreement.
- Preparations for drilling the West Kerendan and Sungai Lahei prospects, c.900 Bcf targeted.
- Signed two new licenses in Greater Kerendan area – North East Bangkanai and West Bangkanai PSCs. Acreage position increased over sevenfold, further growth opportunities captured.
Production and Development
Development of the Bualuang field continued with drilling from the newly installed Bualuang Bravo platform leading to a sharp rise in production. Investment into the processing facilities and power generation modules for the field continues.
Eight development wells have now been completed and brought on stream from the Bravo platform and field performance year to date has been ahead of expectation. Seven wells were drilled into the Miocene-age T4 sandstone reservoir, the main producing unit in the field. Included in the programme to date has been a single well completed in the T2 reservoir unit, which underlies the T4. This well has been delivering 3,000 bopd of dry oil since start up. This is a substantially higher production rate than the T4 wells, and is more than double pre-drill expectations. A second T2 producer is currently planned to be drilled before the rig is moved off the Bravo Platform to drill exploration prospects in G4/50. Of the 33.6 MMbo of 2P reserves booked for the field at the beginning of the year, only 2.6 MMbo were associated with reservoirs outside the T4. Reserve bookings will be reviewed in light of the reservoir performance.
Average daily production year to date from the field is 11,300 bopd. Average daily production from the field during May 2013 has been 14,300 bopd.
The initiatives to reduce the long term operating costs of the field remain on track. Construction of the power modules and processing facilities is c. 51% complete and they will be delivered to the field by 1H 2014. Furthermore, an agreement has been signed with Teekay Offshore to take the Navion Clipper on a ten year contract commencing in 2H 2014; the vessel is awaiting conversion to a Floating, Storage and Offloading Unit (“FSO”). These initiatives are expected to deliver operating cost savings of up to 30% per annum from mid-2014 onwards.
Development of the Kerendan field continued during the period, with the drilling and completion of four producing wells in the Kerendan reservoir. The development wells are being acidized and tested. To date the wells have been tested at a combined rate of 40 MMscfd, demonstrating that the reservoir can comfortably deliver in excess of the 20 MMscfd Daily Contracted Quantity (“DCQ”) in the current Gas Sales Agreement with buyer PLN. The field is forecast to come on-stream in mid-2014. Gas pricing and volumes are the subject of on-going discussions between the buyer PLN, Salamander and the Indonesian regulatory body.
During 1Q 2013, the Group secured a strategic partner for the Bangkanai PSC by agreeing to farm out a 30% interest to PT Saka Energi (“Saka”), the upstream affiliate of PGN , the Indonesian transmission & distribution utility. In exchange for this interest, Saka will make a cash payment of $27 MM, carry $30 MM of Salamander’s forward development costs and pay a promote on the forthcoming exploration drilling in the block.
Exploration and Appraisal
In G4/50, the Group has continued to mature prospects from the 5,000 sq km of 3D seismic data on the licence and to date has identified over 60 prospects and leads. Exploration in G4/50 will commence in mid-June using the Atwood Mako jack-up rig. The initial programme will target the northeast and northwest areas of the block, where the Rayong and Surin prospects have been selected for drilling. Both prospects have multiple step-out drilling targets for follow up in the event of success.
Following the completion of substantial preparatory work, an application for EIA permits for 20 drilling locations on G4/50 has been submitted during May 2013. Approvals are expected during 2H 2013 when the Atwood Mako will return for an extensive exploration drilling programme targeting the central and southern areas of the block.
The North Kutei exploration campaign began with the South Kecapi oil and gas discovery, which flowed at 6,000 bopd on test. This was followed by the North Kendang exploration well which has been suspended before reaching planned total depth after encountering a high pressure wet gas kick on entering the first of the prognosed Upper Miocene sandstone targets. Operations are still in progress on Bedug-1, the final well in the current drilling programme and an update will be provided once drilling operations are completed.
The sub-surface conditions encountered during drilling of the North Kutei wells have resulted in operational challenges due to the presence of unexpectedly high pressures. In particular, the North Kendang prospect, where we have suspended the North Kendang-1 well, merits further drilling to determine whether a commercial volume of gas is present.
Having completed an extensive sub-surface and operational review of the North Kendang-1 well, we have concluded that there is a significant risk of not achieving our objective of testing the prospect fully and safely, without the use of specialist Managed Pressure Drilling (“MPD”) equipment. The time taken to import MPD equipment into Indonesia precludes an immediate return to North Kendang using the current rig. We remain encouraged by the initial results from the well and are currently exploring options to continue the programme as soon as possible.
The current campaign has yielded a large amount of new information about the petroleum system in the North Kutei basin. Updating and refining the regional geological model with drilling results will be invaluable in further high-grading the large number of prospects and leads identified across the acreage.
Further south in the offshore Kutei basin, the Group will be participating in the Tayum-1 exploration well which is due to spud shortly. The well is targeting 50 Bcf in a prospect adjacent to the Dambus discovery. The operator is carrying approximately 73 Bcf of contingent resources already existing in the block and success at Tayum could result in a commercial development.
In Greater Kerendan, the DrillCo-1 land rig is completing development drilling operations and will then move to drill the West Kerendan and Sungai Lahei prospects over the summer, once the preparation of the well pad is completed. Together, these prospects are targeting c. 900 Bcf of un-risked prospective resource.
Finally, the Group signed two new Production Sharing Contracts (“PSCs”) for the Northeast Bangkanai and West Bangkanai PSCs last week increasing the Group’s position in one of its core areas and representing a large tract of additional acreage that will provide further growth opportunities around the Kerendan gas field.
In December 2012 the Group announced that it had signed two new borrowing facilities totaling $350 million that extended the maturity of the Group’s financing, simplified the borrowing structure and lowered the cost of debt. Syndication of these facilities, which were significantly oversubscribed, was successfully completed in March 2013.
At 30 April 2013, total Group debt, including the $100 million convertible bond, was $403.4 million, total cash and funds were $117.4 million, and net debt was $286.0 million.
Chief Executive, James Menzies, commented:
“It has been a busy start to the year with rigs operating in all of our focus areas. Production is well ahead of budget and the strong performance of the first T2 well in the Bualuang field has given us the opportunity to move the Atwood Mako rig off the Bravo platform next month to start the much anticipated exploration drilling on the G4/50 license. The Kerendan development drilling has proven the deliverability of the reservoir and we are encouraged by the initial well results in the North Kutei. We look forward to further exploration drilling with eight wells planned during the rest of the year.”
+ 44 (0)20 7432 2680
James Menzies, Chief Executive Officer
Geoff Callow, Head of Corporate Affairs
+44 (0)20 7404 5959
Salamander Energy is an independent upstream oil and gas exploration and production company listed on the main market of the London Stock Exchange (Ticker: SMDR) and is a constituent of the FTSE 250 index. The Group is focused on growth assets in and around three core areas: Greater Bualuang, Gulf of Thailand; North Kutei, Indonesia; and Greater Kerendan, Indonesia. In each of these areas the Group has a material, operated position and a detailed understanding of the petroleum systems of the basin.