2/2/04 Victoria Petroleum Plans An Aggressive 14 Well Exploration Programme In 2004 And Has Made A Start In California And The Surat Basin In Australia When things were slow in its native Australia a couple of years back, junior explorer Victoria Petroleum diversified to the US. The company became involved in concessions in the once prolific San Joaquin Basin in California and the nearby Salinas Basin. There was also a trade investment in Wyoming.
There was some exploration drilling in the Eagle Pool Basin in the San Joaquin Basin but not a lot came of the project. Although the company had assembled a lot of acreage, not just in the US but also back home in Australia, by the end of 2002 Victoria Petroleum was short of drilling success. Since then, early 2003 in fact, the company achieved its first production through its involvement in the Jingemia discovery onshore the Perth Basin, Western Australia.
Now, the company is revisiting the US. Earlier this month drilling started on the West San Antonio No 1 well in the Salinas Basin. The West San Antonio prospect is a multiple target oil prospect interpreted to have the potential to contain up to 24 million barrels of recoverable oil and 56 billion cubic feet of gas in the target Miocene Sands, if oil and gas are present.
Although Victoria Petroleum (Vicpet) considers the West San Antonio No 1 well to be exploratory in nature, the potential for oil to flow from the target horizons is considered encouraging in view of the strong oil shows observed in a down dip 1959 well, drilled six hundred metres to the south east of the West San Antonio No 1 location. Further encouragement for the presence of oil in the West San Antonio Prospect area is provided by adjacent production of 500 million barrels of oil from the San Ardo, field 15 kilometres to the north.
The drilling started on January 16, 2004 and it was planned to take 24 days to reach the target depth of 2,042 metres. Vicpet has a 5 per cent working interest in the West San Antonio well with private American interests holding the balance. If successful it is unlikely to be a company maker, but it does represent a spreading of risk, as they say, and it would make a nice addition to the company’s existing output.
2003 was a year when things started to come right for Vicpet. It began with the Jingemia-1 discovery well onshore the Perth Basin, Western Australia. Initially, early in 2003, Vicpet was in for 130 barrels of oil a day. There have been more wells including Jingemia-2, and Jingemia-3 and 4, all of which means that Vicpet, with just over 5 per cent of the action after the sale of some of its interest for A$300,000 to other partners, is now due about 200 barrels a day. This might not sound a huge amount but, as we keep saying, all things are relative in the oil business Vicpet is a small company. Onshore oil can be quickly monetised. Given it can sell the oil for US$25 a barrel but lift it for just US$ 6.25 all in, Vicpet reckons it can earn A$2 million in free cash flow a month which is significant for the company.
The cash flow is nice but the real excitement for Vicpet is the potential upside in value, which could come from the aggressive 14 well exploration programme in which it expects to be involved in 2004.
Apart from the California well there are projects in a number of Australian basins. In the Perth Basin on Permit EP413 where Vicpet has its 5 per cent interests there are more wells on Jingemia starting this month
In the Carnarvon Basin, Western Australia, the company has a 13 per cent interest in the WA-261-P permit. Drilling is expected to start in February on the Vesta Prospect, which is targeting 23 million barrels of oil. The operator here is Apache and Vicpet will have to pay some A$270,000 towards drilling costs. Later in the year there is the Champion prospect targeting 27 million barrels.
There has been a farm out of three wells in the Surat Basin, Queensland, where drilling was due to start testing potential recoverable reserve targets of 16 million barrels of oil with the North Giligul well. In April there is the North Juan well looking at 4 million barrels.
The most prospective of all however seem to be the wells planned in the Cooper Basin in central Australia. Other small companies like Beach Petroleum and Cooper Energy have done well here following the basin’s opening up from Aussie major Santos’s near monopoly on the territory. Vicpet suffered a disappointment with the Eucalyptus-1 well on Permit PEDL 88, which came up dry. But it has substantial amounts of the action, like 40 per cent on two wells on PEDL 104, which are targeting 18 million barrels and 9 million barrels respectively. These are expected to happen in March or April. After that there are wells on PEDL 111 and PEDL 115.
Again, the amounts of oil involved do not sound huge in the global scheme of things. Not all the wells are going to come good. But they are cheap to drill and easy to bring to market. Vicpet started the year with A$400,000 cash in the banks and around A$6.5 raised from a placing. A lot of this will be spent on drilling. But, as John Kopcheff points out, the company only needs to be involved in a discovery of 4 million net and the asset value could be around A$0.04 a share, which is a long way north of the current share price.
VPE Price at posting:
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