Cue Energy Resources Ltd (CUE) has attracted market interest after flagging the start of production at MR9 on the Maari field, offshore Taranaki Basin, New Zealand.
However, the share price has showed little movement despite encouraging signs of increasing revenue.
Cue has a modest stake in the Maari field which is now flow testing after which the well is expected to provide incremental oil production to that of the existing five production wells in the main Moki Formation reservoir.
The participants in the Maari field are Cue with 5 per cent, OMV NZ Ltd (operator) 69 per cent, Todd Maari 16 per cent and Horizon Oil 10 per cent.
Cue's New Zealand net share of oil production for the half year from the Maari field was 200,815 barrels.
The development drilling on the Maari field was completed and the shallower M2A oil development well successfully drilled and completed.
The Manaia-1 oil appraisal well was successfully drilled from the Maari platform to a measured depth of 7,945 metres, a New Zealand record, and the lower completion installed.
These two wells increase Cue's net proved and probable oil reserves by 475,000 barrels
Following the successful drilling campaign, the ENSCO 107 jack up drilling was demobilised from the Maari field and later returned to Singapore.
During the half year, Cue increased its exploration presence in New Zealand when it obtained 20 per cent interests in high-potential permits PEP51313 and PEP51149 in the Taranaki Basin.
Last week Cue Energy disclosed it made a profit of $8.4 million for the December half year in contrast to a deficit of $16.7 for the same period last year.
The profit was primarily as a result of increased production receipts.
In Papua New Guinea, Cue's net share of oil production from the SE Gobe field for the half year was 22,440 barrels.
The average oil production rate for calendar year 2009 was about 4,600 barrels of oil per day (Cue's share was about 150 barrels of oil per day).
It did not have any hedging arrangement in place during the half year.
Acquisition of a 60km 2D seismic survey over the Barikewa gas field was successfully completed.
Negotiations began to sell SE Gobe gas to the PNG LNG project.
In Indonesia, Cue's net share of oil production for the half year from the Oyong field was 109,179.
Gas production began from the Oyong field on October 1.
Cue's net share of gas production for the half year was 647 million cubic feet.
A plan of development for the Wortel gas field was approved by BPMIGAS towards the end of the half year.
Front-end engineering and design studies are expected to begin early this year and a financial investment decision is expected in mid 2010.
Back in Australia, WA-389-P, where Cue holds a 100 per cent interest, interpretation of the new 3D data strongly enhanced the potential of the very large Caterina gas prospect.
Cue began a farm-out campaign for the permit with significant interest from a number of companies.
WA-360-P, MEO irrevocably committed to drill the Artemis-1 well and as a consequence, Cue has reduced its equity in the permit to 15 per cent in return for a free carry through the drilling of the well.
SHARE PRICE MOVEMENTS
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Shares of Cue Energy yesterday eased 0.5c to 19.5c. Rolling high for the year is 29.5c and low 19c. Earnings per share is 60c and price earnings ratio 32.5. The company has 693.3 million shares on issue with a market cap $13.1 million.
Back in July Cue completed a non-renounceable 1-for-5 pro-rata entitlement offer.
Successful applications were received for 64,455,713 shares at 15c per share raising about $9.67 million.
Last November, chairman Richard Tweedie gave shareholders a brighter picture of the year ahead.
First oil production began from the Maari field and at the beginning of October gas production began from the Oyong field.
In addition, successful wells were drilled into the M2A sand of the Maari field and to the Manaia oil discovery.
Production has begun at M2A has begun production and Manaia is expected early this year.
During the year Cue maintained oil production volumes (331,260 bbls in 2009 versus 333,242 bbls in 2008 and forecast 600,000 bbls in 2010), but because of the dramatic downturn in oil price, production income reduced from $38 million to $30 million in 2009.
Gross profit in 2009 was a respectable $21.9 million.
After allowing for amortization and depreciation expenses, operating profit before tax was $6 million versus the record $11.7 million profit for the previous year.
However, after writing down exploration expenditure in Indonesia and in PNG, Cue recorded a net loss of $20.9 million.
The impairment right downs were for one-off expenses and directors do not anticipate impairments of this magnitude in 2010.
BACKGROUND
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Cue Energy Resources is an oil and gas exploration and production company with a focus on SE Asia and Australasia.
It was listed on the ASX in 1995.
The company has petroleum assets in Papua New Guinea, Indonesia, New Zealand and Australia.
In Australia Cue has an interest in; T37/P (50 per cent) and T38/P (50 per cent) in Tasmania; AC/RL7 (20 per cent), WA359P (20 per cent), WA360P (20 per cent), WA361-P (20 per cent), WA389-P (100 per cent), WA409-P (50 per cent) in the Carnarvon Basin, offshore Western Australia.
In July 2008, farm-inee MEO committed to drilling of the Zeus -1 well and announced a further eight contiguous wells that could be drilled in WA-359-P, WA-360-P and WA-361-P.
In New Zealand the company has a 5 per cent interest in PEP 38413 and PEP 38160 in the Taranaki Basin. The interest was acquired in March 2005.
The permit contains the Maari oil field with P50 recoverable oil reserves of 45-50 mmbbls.
Cue also has a 20 per cent interest in PEP 38494.
At the end of the fiscal year 2009, CUE had sold 77,978 bbls from the Maari oil field.
In Papua New Guinea Cue has a 5.57 per cent interest in the South East Gobe Field project (PDL 3) and 3.29 per cent in the SE Gobe Unit, located in central Papua New Guinea.
The company also holds exploration interests in the Papuan Basin through PDL3 (5.57 per cent), PRL9 (14.9 per cent), PPL 190 (10.95 per cent) and PRL8 (10.7 per cent).
The company's share of oil production from the SE Gobe field as at June 30, 2009, was 55,681 bbls.
In Indonesia Cue has a 15 per cent interest in the Sampang Production Sharing Contract (PSC) located in Eastern Java which includes the Oyong field.
For the June quarter 2008, 1.7 million barrels of oil had been produced out of the estimated gross proved and probable (2P) reserve of six million barrels.
The estimated proved plus probable plus possible (3P) reserve is 10 million barrels.
As at June 2009, oil production from the Oyong field generated cash flow for the year of $19.9 million (197,601 bbls).
Cue Energy aims to continue to grow through hydrocarbon exploration and production.
CUE Price at posting:
19.5¢ Sentiment: Hold Disclosure: Held
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