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re: check out roc corp file release CEO John Doran
Absolutely. In a nutshell - production risk has replaced development risk, which is
usually the case with new deep water fields.
There’s a lot of information available. That may sound as if it’s a good thing – and
it is in many ways – but it actually makes reserve recalculations more complex and
very time consuming. It is certainly frustrating for all parties – market investors and
participants alike – that there’s no up to date guidance for Chinguetti reserves and a
market vacuum has been created. The irony is that most observers apparently
expect a reserve downgrade.
The Chinguetti Field, which started production in late February 2006, only sustained
a target production rate in excess of 70,000 BOPD for a short period before
declining to 40,000 BOPD by mid-May. The decline was due to different factors in
each of the six producing wells - gas production, early water arrival and/or limited
productivity depending on the nature of the particular well and the way it was
completed in the reservoir. On a more positive note, since early June the rate of
production decline has slowed and the production capacity has been maintained
generally between 32,000 to 38,000 BOPD.
While the early decline was significantly faster than predicted and the more recent
stabilisation of production is encouraging, the overall assessment of the impact on
recoverable reserves – when completed - is expected to be negative although the inplace
oil estimate may remain close to original forecasts.
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The Operator, Woodside, is reviewing the performance data in order to explain the
decline with one of the potential key factors being a less continuous reservoir sand
system than had been previously assessed. The Operator has advised the Joint
Venture that it is not in a position to provide updated reserves at this time. ROC
relies on the Operator's assessment and with a 3.25% equity in the field there isn’t
much point in ROC undertaking a full independent assessment at this time.
However, based on the production and reservoir performance to date, ROC would
not be surprised if Chinguetti’s 123 MMBO 2P reserves were reduced by 25 to
50%. This view still assumes that Phase Two of the Development Plan - which
involved the drilling of infill wells and was integral to the original reserve estimate
and production forecasts - is implemented and is successful.