From our MD..., page-38

Just a few snippets from the CNE Transcript...



Both the S500 and the S400 reservoirs will be developed by water flooding and in terms of the oil the low viscosity, light nature, 32 API and low sulphur, less than 1%, leads us to believe that we will attract international markets and good pricing, probably close to parity to Brent.




The FAN SOUTH well we returned to the basinal play which was discovered by the FAN-1
well, again we found oil but the net pay and net reservoir were not quite up to our expectations.

And finally the last well in the programme was SNE North which had the most significant
results being a separate accumulation that found oil below the oil water contact in SNE field
and that will set us up for opportunities in the future.

Michael Alsford:

Picking up on a couple of points that James made on numbers, the equity check for SNE, your current equity stake, is quite high, you say about $150m per annum for a few years which will starve the business of cash to allocate to other projects.
I’m wondering, to your point about maximising return, so selling now you’re seeing undeveloped resources not going for full value in the market, so what is your thinking around the timing on selling down? Do you think you
can really maximise returns by selling down now or do you have to stay in through development to maximise the full value of SNE?

Simon Thomson:

On the first point there’s no intention of selling down now, just to be very clear. I mean everything in the company’s for sale at the right time and at the right price, but I think we want to ensure the flexibility is such that if there is the right kind of situation, and maybe it’s beyond FID and whatever else, then we’re in a position where we can sit across the table from
somebody and say we can afford to do this and they know that we can, and therefore we’re negotiating from a position of strength.

The end result of that would be in the event that we stayed in at the current equity level, absent of doing anything else in the portfolio then there wouldn’t be a lot of spare cash elsewhere, but that’s not a bad problem to have.


Paul Mayland:

On the recovery factors, nothing has really significantly changed, so recovery factors in the lower reservoirs are in the 30% range, 30% to 40%, and the recovery factors as we were explaining to another analyst really in the upper reservoirs is in the sort of 20s. But we’ve got to make sure that we contemplate that in terms of where the wells are drilled, because
obviously the oil in the 400 series extends over a large area and there’s sort of feather edges that need to be considered where probably development drilling won’t take place or directly under the gas cap. The recovery factor is applied across the areas that are drilled up in the phases of development. When you see some of the other numbers that may be reported in
terms of recovery factors it may be lower than the 20s, but that’s when it’s applied to the whole field.


Cheers Whisky