building....???, page-11

re: building....strong Just in case you missed MY point too - Bay Courant production was planned to start Feb - SGT to spud soon and Welder can't take too long to go the last couple of thousand feet.

HIGHLIGHTS
UNITED STATES OF AMERICA
Fourth quarter oil and gas sales amount to $517,473.
Robust production commences from Hollywood Discovery at Lake Long, Louisiana.
Discovery at Bay Courant (Louisiana) – Production planned Feb 2005.
South Grosse Tete (Louisiana) well planned for Feb 2005.
Langford 25 re-entry (Texas) completed and back on production.
US Drilling Fund shows interest in Eagle Prospect, California.
Activity set to recommence on Rainosek Project, Texas
New acreage acquired in Deep gas play at Clear Branch Field, Louisiana.
CHINA
Pre-feasibility study recommends JV proceed to full study and oil field development
planning of 12-8 Field, Beibu Block 22/12 Offshore China.
Exploration planned in the vicinity of the 6-12-1 oil discovery.
AUSTRALIA
Trefoil 1 confirmed as commercial discovery in T18P Bass Basin (Offshore Tasmania).
Improved data likely to have positive impact on prospectivity of WA-254-P
Stokes Bay #1 well rescheduled for July 2005.
AUSTRALIA
WA-254-P - OFFSHORE CARNARVON BASIN,
10.71% (parts 1, 3 and 4), 11.25% (part 2)
(OPERATOR - APACHE ENERGY LTD)
The Operator, Apache, has undertaken, in conjunction with PGS, the reprocessing of a new
3D seismic data set over the permit that may lead to further drilling opportunities. The
reprocessing by PGS utilises more modern processing techniques.
Initial investigations by Apache indicate the improved data set including AVO/offset
technology is likely to have a positive impact on prospectivity in the block. A Joint Venture
Meeting has been rescheduled for March 2005 to address this work and will include a review
of the Little Joe Prospect and the Sage oil discovery. Given the finite life of the nearby
Legendre Oilfield facility the momentum to drill new prospects is building.
WA-254-P was renewed on the 3 May 2001 for a further term of five years and comprises 4
graticular blocks (321 square kilometres).
FAR Ltd Quarterly Report 31 Dec 2004 Page 2
T18P, BASS BASIN, OFFSHORE TASMANIA, (0.09375% Overriding Royalty)
(OPERATOR ORIGIN ENERGY)
NEW FIELD DISCOVERY CONFIRMED
FAR is the holder of a 0.09375% royalty interest over Bass Basin (Offshore Tasmania) Permit
T18P where the Trefoil-1 wildcat well was drilled and production tested during the quarter,
confirming a new gas-condensate field discovery.
According to reports lodged with the ASX, a significant volume of gas has now been
proven at Trefoil. The most likely “in-place” resource has been reported to lie in the
range of 200 to 300 billion cubic feet of gas and 14 to 21 million barrels of liquids.
ASX reports state the nearby Yolla field has been designed to allow the easy tie-in of
Trefoil. The White Ibis gas and condensate field (also within T18P) is a potential “add
on” in an overall development. Several exploration prospects within T18P have also
reportedly been upgraded.
The royalty interest was created by a Deed of Assignment and Grant of Royalty dated 19
March 1986 made between First Australian Resources NL et al and Amoco Australia Petroleum
Company (“Amoco”) and South Australian Oil & Gas Corporation Pty Limited (“SAOG”)
pursuant to which a participating interest in T18P was assigned in exchange for an over-riding
royalty interest.
The Deed establishing the royalty interest was registered by the relevant authority under the
Petroleum (Submerged Lands) Act on 23 March 1986. The overriding royalty is based on a share
of gross production net of Government royalty and resource rent tax.
FAR has notified each of the current participants of the royalty interest and is awaiting
confirmation of acknowledgement. FAR is in receipt of correspondence from SAGASCO (now
Origin Energy Resources Limited, Operator of the T18P joint venture) accepting liability in
respect of its obligation under the Deed.
As a royalty holder FAR does not receive information on activities within the block other than for
data lodged with the ASX.
EP 104 AND RETENTION LEASE R1 - CANNING BASIN - 8% INTEREST
WEST KORA APPLICATION – CANNING BASIN – 12% INTEREST
(OPERATOR – GULLIVER PRODUCTIONS PTY LTD)
Empire Oil and Gas NL has advised the proposed Stokes Bay-1 well, a follow up to the
original Point Torment discovery, has now been rescheduled to the third quarter of 2005. An
agreement provides for LNG International Pty Ltd to purchase natural gas from the Point
Torment Gas field in Retention Lease R1 in the onshore Canning Basin.
The Point Torment structure has estimated potential recoverable reserves of 80 BCF gas and
6-12 million barrels of oil. FAR has indicated it may increase its interest in the planned
Stokes Bay No 1 well pending the final make up of participants in the well. The well has
been rescheduled for mid 2005.
EP 104 occupies an area of 740 sq km with the current term expiring on 10 November 2004.
Retention Lease R1 occupies an area of 250 sq km and was awarded on 29 August 2003 for a
term of five years. These tenements plus the West Kora Application contain the Point
Torment and Valentine Prospects and the West Kora oil discovery which is currently shut in.
FAR Ltd Quarterly Report 31 Dec 2004 Page 3
OFFSHORE CHINA
BEIBU GULF BLOCK 22/12 - 5% working interest
OPERATOR: ROC
During the quarter a pre feasibility study was conducted on the viability of developing the
12-8 West and 12-8 East oil fields in the southern part of the Block.
The study was delivered to the Joint Venture during January 2005 and recommends the
commencement of a full feasibility and oilfield development plan (ODP) that could see first
production in 2007 from the 12-8 West area. Further work is also proposed on the 12-8 East
field, a candidate for production at a later date as infrastructure is developed within the
Block.
Whilst the feasibility and ODP will determine the final 12-8 West field configuration, early
modelling suggests the field may be developed using multi lateral wells on artificial lift from
an un-manned platform tied into an annexe on the existing Wei 12-1 Platform connected by
pipeline to facilities at Weizou Island (refer schematic).
Oil in-place has been estimated by the Operator as follows:
Field Name Mean Estimate
Wei 12-8 West 39 mmbbls
Wei 12-8 East 90 mmbbls
Future Exploration: New geological models calibrated to wells drilled during 2004 suggest
a cluster of prospects in the northern part of the block. These prospects are in the vicinity of
the Wei 6-12-1 discovery, which was made by the Joint Venture in March 2002 and which
confirmed that the oil in this part of the block is of significantly less viscous than that found
in the 12-8 East Field.
FAR Ltd Quarterly Report 31 Dec 2004 Page 4
Based on 3D seismic, supported by amplitude and AVO anomalies, this cluster of prospects
is currently estimated by the Operator to have an unrisked recoverable reserve potential in
the order of 40 to 50 MMBO. The proximity of this cluster of prospects to existing
infrastructure encourages the view that this part of the block warrants further exploration.
Under the terms of the contract one exploration well is required during 2005, however the
final drilling program and number of wells will depend on rig availability and other factors.
In the event of a commercial development within Block 22/12, the interests held by the
current joint venturers may reduce on a pro-rata basis by up to 51% assuming that the China
Offshore Oil Corporation (“CNOOC”) exercises its right to participate up to a 51% equity
level in the development.
Block 22/12 is situated approximately 60 km off the coast of China, northwest of Hainan
Island, and covers an area of 456 sq km (less relinquished area). Water depths are shallow,
ranging from, approximately, 10 metres to 40 metres. Within the Block there are several
undeveloped oil accumulations. The Block is supported by good infrastructure and lies
adjacent to the 12/1-1 Oil Field. A pipeline to the Weizhou Island Oil Terminal, 10 km to the
north, passes within 5 km. Block 22/12 is covered by 421 sq km 3D seismic acquired during
2002.
FAR Ltd Quarterly Report 31 Dec 2004 Page 5
UNITED STATES OF AMERICA
The Company views the USA, particularly the gulf coast area, as the key to building a
production and reserve base. FAR continually reviews new opportunities generated by a
strong network built over more than a decade of doing business in Texas and Louisiana.
During the quarter new facilities were fabricated and installed to handle production from the
Middle Hollywood discovery at Lake Long (Louisiana), a new discovery was made in the
Bourg Sand at Bay Courant (Louisiana) and the Langford 25 #3H-TXV well was successfully
re-entered and extended in Hardeman County, Texas. A land rig was being sourced for the
upcoming South Grosse Tete Prospect (Louisiana) and a drilling fund has expressed interest
in drilling the Eagle Prospect (California).
The above activity is expected to result in a turn around in FAR’s production profile that has
declined steadily during the course of 2003 and 2004 from lower drilling activity in the USA
while FAR focussed on its China development. New production will also attract robust energy
prices prevailing in the USA early in 2005 approximating US6.50 per thousand cubic feet for
gas and US$49 per barrel for oil.
Lake Long Deep Project, Lafourche Parish, South Louisiana.
Production Commences From Middle Hollywood Discovery.
The 328 #1 well, Lake Long Field, Lafourche Parish, South Louisiana was turned to sales on
11 January 2005 and is currently producing at the rates up to 5 million cubic feet of gas per
day and 400 barrels of oil per day on a 9.5/64 inch choke at a tubing pressure of 6,750 psi.
This is a significant level of production which saw facilities within the Lake Long field
upgraded during the quarter to handle the additional volumes.
The 16,654 feet well was drilled during the later half of 2004 and was completed for
production from the Middle Hollywood Pay Sand Interval which logged 28 feet of net gas pay
(adjusted for well deviation). This
interval had not previously
produced within the field.
The SL 328 #1 represents the fifth
well in the Lake Long Field in
which FAR has participated, all of
which have resulted in commercial
production.
The drill data from the SL328#1
well is being integrated into the 3D
data base with preliminary
observations that Hollywood potential exists in two up-dip fault blocks. FAR has agreed to
participate in reprocessing seismic data to further define these additional prospects prior to
drilling around mid 2005.
FAR participated in the Lake Long Deep Test well by paying 5 percent of the well (before
completion) reducing to a working interest of 4.09375 percent (after completion). All
working interests are subject to State and other minor royalties. Other participants are non
listed entities, Kriti Exploration Inc and Palace Exploration Company both based in North
America.
FAR Ltd Quarterly Report 31 Dec 2004 Page 6
Bay Courant Project, Lafourche Parish, South Louisiana (FAR 20% participation)
Oil Discovery Confirmed.
During the quarter, the SL 17316 #1 well at Bay Courant was drilled to total depth of 12,852
feet and confirmed as an oil discovery in the Bourg Sand Interval at 11,800 feet which logged
approximately 12 feet of net pay. The operator has run 5 and 1/2 inch production casing in
the well and anticipates first sales of oil and gas within 60 days.
The Pelican, Duval and Dulac objectives came in structurally low to prognosis. Preliminary
post hole evaluation by the Operator suggests further potential remains to be exploited within
the field by additional development drilling, the timing of which will depend upon the
production performance of the #1 well.
A deeper Bay Courant structure, mapped on seismic, is also yet to be evaluated by a test well
at a crestal location. Known as the “Pr Zone” this play provides significant upside in the
deeper pressured sands similar in concept (although smaller) than FAR’s recent Lake Long
Deep test. Majors have expressed an interest in farming into the lease for a deep test.
(TODCO Barge Rig, South Louisiana, courtesy www.carlmaples.com)
A Permit application for pipeline construction has been lodged; a production barge has been
purchased and is being upgraded; plans are progressing to use the nearby Tennessee Gas
Pipeline (El Paso) and proposals have been put to several purchasers which should enable the
field to be selling oil and gas by late February 2005.
The Bay Courant Project is located in the intracoastal State waters, Lafourche Parish, South
Louisiana approximately 40 miles south-southwest of New Orleans and approximately 7
miles southwest of Golden Meadow.
FAR’s working interest at Bay Courant will reduce from 20 percent to 15 percent once payout
has been achieved. FAR is the only listed entity participating in the project with other
interests held by North American entities.
South Grosse Tete Project, Iberville Parish, South Louisiana (FAR 17% participation)
Grey Wolf Land Rig contracted.
FAR has concluded an agreement with Gruy LLC, of Dallas, Texas, to participate in the
drilling of the South Grosse Tete Prospect, located in Iberville Parish, South Louisiana,
approximately 15 miles southwest of Baton Rouge. Discussions are progressing with a
number of rig operators including Grey Wolf Drilling to commence a test well, however high
oil prices are placing heavy demand on rigs.
FAR Ltd Quarterly Report 31 Dec 2004 Page 7
To expedite matters FAR has agreed with a proposal to commence building a location and to
drill and set conductor pipe, enabling the well participants to take advantage of the first rig
that becomes available. The well is presently scheduled for mid February 2005.
Under the agreement, FAR will pay for 17% of the cost of an 11,650 foot normally pressured
test of the Upthrown Bol Mex section of the Prospect, a three way faulted closure, lying to the
east of the Bayou Choctaw Northwest field, with estimated potential in the range of 3 to 5
million barrels of oil.
The prospect is supported by a combination of subsurface well control and 3D seismic
acquired in 1996. The cost of the well, a land based vertical hole, is estimated at US$1.4
million with a further $US0.5 million for completion and pipeline connection. Provided the
project is successful payout is estimated within 10 months.
The well will comprise the first phase of a three year program designed to evaluate additional
deeper seismically defined objectives at the Nonion Struma, Nodosaria and Deep Wilcox
intervals. Whilst the exploration risk increases with depth, this is more than offset by the
target sizes of the deeper objectives, namely:
Objective Depth (Feet) Potential Recoverable Reserves
Nonion Struma 13,000 12-15 BCF gas
Nodosaria 13,500-14,500 100 BCF gas and
5 million barrels oil
Deep Wilcox 16,500-17,500 350-500 BCF gas and
9-13 million barrels oil
Subject to a successful exploration outcome, a prospect of this magnitude has the potential to
make a significant impact on FAR’s reserve and production base particularly given prevailing
energy prices.
Gruy LLC has advised the Operator is Spartan Operating Company, a subsidiary of James
Smith and Associates, of Tyler, Texas. FAR’s interest will reduce to 12.75 percent once cost
recovery has been achieved on a project basis.
Langford 25 #3H-TXV Horizontal, Hardeman County, Texas
Well successfully re-entered, extended and placed back into production.
During the quarter FAR participated in a project to re-enter, sidetrack and extend the existing
Langford 25 #3H-TXV well to improve oil production.
The original Langford horizontal well had declined from over 108 barrels per day to 10
barrels per day after being drilled during July 2001 and penetrating a seismically defined
Mississippian mound of excellent porosity and permeability some 305 feet above the lowest
known oil based on existing well control.
After reaching a total depth of 8,736 feet measured depth (8,417 feet true vertical depth), the
project was delayed by very heavy rains that caused a mud build up at the location.
Subsequent to the end of the quarter the well was placed back on line, and, after a hot oil
treatment to overcome paraffin build up, is producing on pump at variable rates between 23
and 85 barrels of oil per day. The Langford lease is supported by a tank battery comprising
four (4) 300 barrel tanks to handle oil production.
FAR Ltd Quarterly Report 31 Dec 2004 Page 8
The closest analogue with a similar structure and drainage area is an Ensearch well in the
Apex Field that has produced 1.5 million barrels of oil from 185 feet of pay and is still
producing flat line. Independent geological reports suggest an oil column of the magnitude of
the Loveless-Langford well (305 feet of potential pay) should therefore recover a considerable
amount of oil leading to the decision to undertake the above program during the 4th quarter
2004.
FAR has an 18.25 percent working interest in the above program, the existing well and 80
acre production unit. Other interests are held by North American entities. The Operator is
Rio Petroleum Inc, of Amarillo, Texas.
Rainosek Project, Lavacca County, Texas
New Program set to commence in three weeks.
FAR has received a proposal for the uphole completion of the existing Rainosek-1 wellbore in
a series of thin potential Wilcox pay zones at 8,750, 8,550, 8,312, 8,130 and 8,105 feet. This
activity is expected to commence in three to four weeks. FAR has indicated it would
participate for its 21.57 percent interest (subject to a reduction if the original farmor of this
prospect participates, in which case this would reduce to 15.64 percent).
Following the above proposed completion activity a new well, Bender-1, testing eight pay
objectives between 5,850 and 8,105 feet has been proposed approximately 1,200 feet
southwest of the Rainosek-1 wellbore. FAR’s interest in this well would be 21.57 percent and
is not subject to the above referenced reduction).
In addition to the forgoing planned activity, the Rainosek-3 producing well has undeveloped
potential behind pipe at the 7,410 and 5,850 sands which is likely to be undertaken during
2005.
Eagle Prospect, San Joaquin Basin, California
Eagle No 1 well (Mary Bellocchi Re-entry)
The Operator is seeking a US industry partner to carry out the drilling of the new Eagle-2 well
in the second quarter of 2005. The operator has advised strong interest from representatives
of a US Drilling Fund.
In mid 2001, Eagle 1, a horizontal well bore within the Gatchell sandstone reservoirs
intersected 131 metres of “pay” (net 91 metres) over the interval, 4,177 metres to 4,207
metres (30 metres) in the Upper Gatchell and 4,229 metres to 4,330 metres (101 metres) in the
Lower Gatchell. This pay exhibited good to excellent porosity and improved thickening
compared to the Gatchell sands in the adjacent vertical Mary Bellocchi 1 well which tested
223 barrels of oil and 820 thousand cubic feet of gas per day.
During 2004 interpretation of a newly acquired 13km seismic strike line in the Eagle Project
shot through the key wells on the Huron Nose gave strong evidence that the oil accumulation
tested by the Mary Bellocchi No.1 vertical well in 1986 and intersected in the 2001 Eagle
No.1 horizontal well appears to be not just a small structural accumulation but to have a
stratigraphic component which can be interpreted to be a stratigraphic trap of the order of 20
million barrels and 40 BCF on the high side.
The drilling of a new well somewhere between half and one mile northwest of Eagle No.1 on
this new seismic line would provide the ultimate confirmation of the forgoing interpretation
of a significant stratigraphically trapped oil field.
FAR Ltd Quarterly Report 31 Dec 2004 Page 9
Independent contractors now estimate that the cost to drill an initial vertical well to determine
the presence of Gatchell Oil Sand updip from Eagle-1 would be US$1.42 million. The all up
cost to case and test this well through the target oil horizon would be in the order of US$2.07
million thus significantly reducing the risk money to test the potentially significant updip
stratigraphic potential.
FAR has a 15 percent working interest in the Eagle Project and is likely to farm out some
portion of this interest to an incoming participant in any new well.
Clear Branch Field, Jackson Parish, Louisiana
FAR exercises right to acquire additional acreage over deep Cotton Valley play.
During the quarter FAR exercised its right to participate in acreage acquired by Cabot Oil &
Gas Corp (Cabot) in Sections 31 and 5, in Township 15 North, Range 1 West in the Clear
Branch Field. The acreage is considered “highly prospective” in both the Upper and Lower
Cotton Valley formation and lies in the middle of a very large exploration play. Cabot is
reported to have acquired 19,000 acres with section 31 in the middle. In addition Anadarko
has leased land within Section 5 and has drilled over 150 wells six miles to the north in
Vernon field.
Cabot is understood to be planning a 16,000 foot test well in adjacent section 32. Cabot has
expressed interest in farming into Section 31, where FAR and partners logged 50 feet of
Upper Cotton Valley pay in the Terry Ewing 1 well drilled in 2000 (not produced due to a
poor cement bond).
A new well to test both Upper and Lower Cotton Valley zones is expected to cost in the
vicinity of US$5 million to drill and complete and FAR will consider whether to participate or
farm out if a firm well proposal is made.
There is no assurance a well will be drilled in Section 31 however the leases are paid up for
three years and the case for a well to be drilled in that time is compelling.
FAR holds a 9.375 percent working interest in 400 acres over the prospective Cotton Valley
horizons within the field.
PRODUCTION
Gas sales during the quarter totalled 32.0 million cubic feet for an average of 0.35 million
cubic feet per day at an average price of US$5.84 per thousand cubic feet before production
taxes. Oil sales during the quarter totalled 4,235 barrels for an average of 46 barrels of oil per
day at an average price of US$50.96 per barrel before production taxes. Quarterly revenues
amounted to $517,473. Production is set to increase significantly from these levels with the
addition of production from Lake Long and Bay Courant.
FAR maintains a web site at www.far.com.au.
Enquiries: Michael Evans 61-8-9322-3939 email: [email protected]
.