ann- first quarter impacted by moomba incident 28 April...

ann- first quarter impacted by moomba incident 28 April 2004
First quarter impacted by Moomba incident
Santos Limited today reported lower production, sales volumes and revenue
for the opening quarter of 2004, principally attributable to the 1 January 2004
incident at Moomba.
Total production for the three months ended 31 March 2004 was 9.7 million
barrels of oil equivalent (mmboe) compared with 13.0 mmboe in the previous
corresponding period.
Sales volume was down from 13.6 mmboe to 10.0 mmboe while total sales
revenue dropped to $256.4 million from the record quarterly revenue of $362.5
million in the first quarter of 2003.
The latest March quarter reflects a 2.9 mmboe negative impact of the 1
January 2004 incident at the Moomba plant in South Australia.
“These reduced March quarter results are in line with the Company’s previous
guidance to the market and, as expected, are due primarily to the impact of
the Moomba plant incident,” Santos’ Managing Director Mr. John Ellice-Flint,
said today.
“As has been well documented, our full-year production will be down in the
current calendar year, including the effects of the Moomba setback.
“Despite the depressed quarterly figures, we remain confident of building
annual production to record levels over the next few years,” he said.
Since the end of the latest March quarter, full gas processing capacity has
been achieved from the Moomba plant.
Further repair work remains on schedule to fully restore natural gas liquids
production for the second half of July.
Mr Ellice-Flint said the Company continued to focus on developing its strong
line-up of growth projects.
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Significant progress on growth projects during the March 2004 quarter
included:
• The Bayu-Undan liquids project achieved the milestone of first lifting of
condensate on 30 March.
• The Mutineer-Exeter oil field development (Santos 33.4%) where two
major milestones were achieved; delivery of sub-sea wellheads into
Dampier and commencement of conversion of the MT Airway into a
Floating Production and Storage Off-take in Singapore.
• In the Casino gas field in the Otway Basin, the project proceeded to
Front End Engineering and Design studies.
• The strategic marketing alliance with BP for the marketing of Santos’
crude oil and natural gas liquids.
During the latest March quarter, Santos also announced an agreement with
Sunov Petroleum to acquire Novus Petroleum’s Indonesian and Cooper Basin
assets, conditional on Sunov’s current offer for Novus being successful.
Mr Ellice-Flint said Santos was working towards approval of three significant
new growth projects in coming months, namely the development of the: -
• John Brookes gas field offshore WA
• Casino gas field offshore Victoria, and
• Oyong/Maleo gas fields offshore East Java
FOR FURTHER INFORMATION PLEASE CONTACT:
Media enquiries: Investor enquiries:
Graeme Bethune Mark Kozned
Santos Limited Santos Limited
(08) 8218 5157 / 0419 828 617 (08) 8218 5939 / 0407 747 908
Santos stock symbols: STO (Australian Stock Exchange), STOSY (NASDAQ ADR)
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STOCK EXCHANGE ACTIVITIES REPORT FOR
QUARTER ENDING 31 MARCH 2004.
(Unless otherwise indicated, all comparisons are made against 2003 first quarter)
1. SALES AND PRODUCTION
Total production for the first quarter of 2004 was 9.7 million barrels of oil
equivalent (mmboe) compared with 13.0 mmboe in the previous
corresponding period.
The main reason for the lower production was the incident at the Moomba gas
plant in central Australia, with a decline of 2.9 mmboe directly attributable to
the incident during the quarter. Estimated lost production in the first quarter
directly attributable to the incident was 12.4 petajoules of sales gas, 0.1 million
barrels of oil, 0.3 million barrels of condensate and 50,000 tonnes of LPG.
Production outside of the Cooper Basin declined by 0.4 mmboe as lower gas
and oil production occurred due to natural field decline and cyclones in
Western Australia.
Santos has previously forecast that total annual production will decline by
around 3.8 mmboe in the current calendar year due to the Moomba incident.
Total sales revenue for the first quarter was $256.4 million compared with
$368.7 million in the previous corresponding quarter. The decline in sales
revenue is largely due to the Moomba incident but was also adversely affected
by the appreciation in the Australian dollar.
As previously advised, Santos and its joint venturers maintain business
interruption and property damage insurance. The claim is progressing
normally. The estimated 2004 financial impact, based on a 45 day waiting
period for Business Interruption cover plus Property Damage, remains A$25 to
A$30 million net profit after tax and A$35 to A$40 million of operating cash
flow.
Sales Gas and Ethane
First quarter sales gas and ethane production fell from 53.3 PJ to 39.7 PJ.
Cooper Basin production declined to 23.8 PJ (down 11.7 PJ) reflecting the
impact of the Moomba incident and reduced gas demand from South
Australian electricity generators. Onshore Otway Basin production decreased
to 1.4 PJ (down 2.0 PJ) as the final stages of the accelerated production
program exploited the identified reserves.
In line with the lower production, total sales volumes and revenue from sales
gas and ethane for the first quarter fell, with sales volumes declining by 21% to
41.2 PJ and sales revenue down 21% from $164.4 million to $130.0 million.
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During the quarter water was unexpectedly produced from the Baleen 3 well,
the producing well in the Baleen field. Production targets and customer
nominations are still being met from the Patricia 2 well, the producing well in
the Patricia field. Technical work has indicated that it is most likely that a well
work-over in the second half of the year will rectify the Baleen 3 well.
Crude Oil
Oil production during the March quarter decreased by 18% compared with the
fourth quarter of 2003, due largely to lower Cooper Basin and Carnarvon
Basin output. The Moomba incident resulted in Cooper Basin production
declining by 0.1 million barrels. In the Carnarvon Basin, production from
several fields was affected by two cyclones with the major production declines
occurring in the Legendre field (decline of 18% or 0.1 million barrels to 0.4
million barrels) and the Stag oil field (down 23% or 0.2 million barrels to 0.7
million barrels). Stag production in the December quarter was increased due
to the inclusion of 0.3 million barrels, or two quarters, of Globex share of
production, following settlement of the Globex acquisition.
Sales volume for crude oil was 25% lower than in the fourth quarter of 2003
due to lower overall production and the timing of liftings. Sales revenue from
oil decreased by 23%, from $126.9 million in the fourth quarter of 2003 to
$97.6 million in the first quarter of 2004. The average realised oil price for the
first quarter of 2004 was A$42.35 (US$30.98) per barrel after hedging, 2%
higher than the 2003 fourth quarter of A$41.47 (US$30.06), although 15%
below the A$50.13 (US$30.41) per barrel realised in the first quarter of 2003,
due to the appreciation of the Australian dollar.
Condensate
Condensate production was 0.5 million barrels, 42% down on the 2003 first
quarter mainly due to preferential production of leaner gas from Cooper Basin.
This strategy was adopted in order to enable increased gas production during
the repair of the Moomba Liquids Recovery Plant.
A key event during the quarter was the production of 35,900 barrels (Santos
share) of condensate from Bayu-Undan.
Group condensate sales volumes decreased by 43% to 0.5 million barrels and
revenues were 54% lower at $21.7 million due in part to a 20% fall in the
realised price to A$45.19 from A$56.49 per barrel.
LPG
LPG production was impacted by the Moomba incident and fell 91% to 4,700
tonnes compared with the 2003 first quarter. Sales volumes were down 78%
and sales revenue decreased by 83% to $7.1 million for the latest quarter.
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2. EXPLORATION
Expenditure on exploration was $24.8 million in the first quarter of 2004.
Santos spudded two wildcat wells during the quarter and completed the drilling
of two wells spudded late in the fourth quarter of 2003. Three of the four wells
encountered hydrocarbons.
First Quarter Exploration Activity
Well Basin/Area Target Licence Santos
Interest (%)
Well Status
Jeruk 1 East Java,
Indonesia
Oil/Gas Sampang PSC 50.00 P&A
Torres 1 South Texas Gas West Mercedes
Prospect
25.00 P&A
Hebe 1 Cooper/Eromanga
SWQ
Gas ATP 259 P 83.26 C&S G
Corsair 1 Cooper/Eromanga
SWQ
Gas ATP 259P 83.26 P&A
The Jeruk 1 well in Indonesia reached a total depth of 5,027 metres. An open
hole drill stem test of the Kujung carbonate objective flowed oil and water
emulsion (up to 80% water) at a rate of 4,700 barrels per day, 0.3 million cubic
feet of gas per day and 470 barrels of water per day. The well was plugged
and abandoned after failing to reach total planned depth of 5,250 metres due
to mechanical failure, which did not allow evaluation of the lower section of the
primary objective. Follow-up appraisal activity is being considered.
The Torres 1 well located in the Wilcox/Vicksburg/Frio trend in Texas, USA,
encountered an encouraging gas column but was plugged and abandoned
after well control problems prevented further deepening of the sidetrack well.
The Torres 1A re-drill spudded on 17 April.
In the Cooper Basin two gas exploration wells were drilled during the quarter
with one of the gas wells being cased and suspended as a future producer.
During the quarter a total of 1,666 kilometres of 2D and 123 square kilometres
of 3D seismic was acquired.
Seismic Acquired
Permit Area/Basin Type Km/Km2
Nth Bali 1 East Java 2D 983
Blackhorse East Texas 2D 450
Cougar Texas State Waters 2D 233
PEL 114 Cooper Basin 3D 123
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Forward Exploration Drilling Schedule:
The drill schedule for the remainder of 2004 is set out below:
During the first quarter significant progress was made in formalising future
exploration with rigs contracted for the high impact wells in the third and fourth
quarters of 2004. Santos is currently in negotiation with Transocean for the
use of the semi-submersible rig, Jack Bates, to drill Amrit in the fourth quarter.
Well Basin/Area Target Upside Resource
Potential (mmboe)
unrisked
Santos
Interest
Expected Spud
Date
Torres 1A South Texas Gas 4 25.00% Drilling
Agung East Java Oil 551 100.0% Third
Pohon Kutei Basin
(Popodi PSC)
Oil/Gas 220 20.0% Third
Stilton Cooper Gas 9 60% Third
Yangtse Cooper Gas 9 60% Fourth
Ormuzd Cooper Gas 10 60% Fourth
Cougar Texas State Waters Gas 71 45% Fourth
Montegue Cooper Gas 8 60% Fourth
Melville Bonaparte Gas 615 100% Fourth
Callister Otway Gas/Oil 62 80% Fourth
Woodbine East Texas Gas 8 30% Fourth
Papalang Kutei
(Papalang PSC)
Oil 529 20% Fourth
Raksasa Kutei
(Popodi PSC)
Oil 359 20% Fourth
Amrit Otway deep-water Oil/Gas 730 33% Fourth
Charlemagne Carnarvon Oil 52 33% Fourth
Plasma 60 Cooper Gas 8 60% Fourth
Blackhorse East Texas Gas 36 45% Fourth
3. DELINEATION AND DEVELOPMENT
Delineation and development expenditure was $146.3 million in the first
quarter of 2004.
Delineation Activity
In the Carnarvon Basin, two wells were drilled near the Mutineer-Exeter field,
Bounty 2 (WA 191 P Santos 33.4%) and sidetrack Bounty 3. Bounty 2
encountered oil within the secondary objective but subsequent appraisal by
Bounty 3 demonstrated that the volumes are insufficient for commercial
development at this stage. However this objective has potential in other
structures adjacent to the field.
In the Cooper Basin, five oil wells were spudded during the quarter. Of the five
wells drilled, 3 were cased and suspended, one plugged and abandoned and
one well was completed as a water well. No gas delineation wells were
spudded during the quarter and one gas well spudded in the fourth quarter of
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2003 was plugged and abandoned. The Reg Sprigg 3 well drilled in March
flowed oil at close to 3,000 barrels of oil per day from two separate zones and
gas at 9 million standard cubic feet per day.
In the Wilcox/Vicksburg/Frio Trend of South Texas, the Remmers 8 (Santos
69.0%) well, was successfully drilled and fractured and is currently flowing at a
rate of 1.5 million cubic feet per day (mmscf/d).
During the quarter Santos farmed out 16.666% of WA 264 P, which contains
the Corowa discovery to Beach Petroleum, with Santos retaining 50% equity
and Operatorship. A well is scheduled to be drilled late in the third quarter. If
the well is successful and establishes a commercial field the development
could be fast-tracked with the aim of first oil production in 2006.
Development Activity
The Mutineer-Exeter field development (Santos interest 33.4%) has
maintained planned progress and at end of the first quarter of 2004 was
approximately 30% complete and ahead of schedule. The first major
milestone of the year was the delivery of all the sub-sea wellheads in Dampier
and the mobilisation of the Drill Rig “Ocean Epoch” to allow the development
drilling campaign to commence in February. The second major milestone was
the arrival in the yard, on schedule, of the tanker MT Airway for Floating
Production Storage Off-take (FPSO) conversion works.
Development drilling commenced in the field on the conclusion of the
delineation wells Bounty 2 and 3. Progress on this drilling was hampered by
cyclone activity during February and March. Fabrication and manufacturing of
all sub-sea components and control systems are ahead of schedule in Europe
and the USA and all components are about to enter a phase of testing and
pre-commissioning prior to being delivered either to the FPSO conversion
shipyard for integration on the vessel, or to the offshore field for installation
later in the year. The field development plan and associated production licence
application has been formally accepted by the Department of Industry and
Resources and an offer of licences WA 26 L (Mutineer field) and
WA 27 L (Exeter field) has been given. First production remains on schedule
for mid-2005.
In the Timor Sea work continued on the Bayu-Undan liquids project (Santos
interest 10.6%). The milestones of first condensate production and the first
condensate lifting occurred on 12 February and 30 March respectively. The
next milestones are to commence with gas re-injection late April and ramp up
to full production towards the end of the third quarter. Work continues on the
well designs for gas production and gas re-injection to improve well
productivity, increase 2004 production and reduce project costs. During the
quarter the first injection well was successfully perforated ready for injection.
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Site activities for the Darwin Liquefied Natural Gas (LNG) plant continued,
including major concrete pours for the LNG Tank and compressor foundations.
The Bayu-Undan to Darwin pipeline continues to plan with some 37,400 joints
of pipe manufactured and tested, and approximately 23,000 joints having been
coated.
In eastern Queensland five Scotia wells successfully completed in 2003 were
bought on line during the quarter.
In the Cooper Basin, five gas development wells were drilled. All were cased
and suspended as future gas producers and five other wells were brought on
line. During the quarter, four oil wells were brought on-line.
In the Otway Basin construction of the Minerva gas plant and facilities
continued during the quarter with the offshore flow-line installation completed.
In February the Casino gas project joint venture approved environmental
impact and Front End Engineering Design studies to enable the accelerated
development of the project.
In East Java commercialisation of the Oyong oil and gas and Maleo gas
projects continued. In January a Heads of Agreement between the Madura
PSC participants and PT Perusahaan Gas Negara, Indonesia’s state-owned
gas distributor, was signed for the sale of the entire gas reserves of the Maleo
field.
4. BUSINESS DEVELOPMENT
Acquisitions/Divestments
During the quarter Santos entered into an agreement with Sunov Petroleum
Pty Ltd (Sunov) to acquire Novus Petroleum’s Indonesian and Cooper Basin
assets conditional on the success of Sunov’s offer for Novus. Subsequent to
the quarter end the Sunov offer had been extended to 20 May.
5. MOOMBA INCIDENT
After the gas release and subsequent fire in the Moomba Liquids Recovery
Plant on 1 January 2004, Santos has been working via a staged process to
bring supply of gas back to levels normal for this time of year. Stage 4 of the
program, achieving full sales gas production capacity of around 630 TJ/d was
completed ahead of schedule in late March. Plans for full reinstatement of
natural gas liquids production are currently underway with Stage 5 expected to
reach 65% of natural gas liquids production and 85% of ethane production in
the first half of May and Stage 6 to be at 100% of normal production for the
second half of July.
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6. HEDGING
The table below details the hedge position as at 31 March 2004.
FORWARD HEDGING - As at 31 March 2004
2004 2005 & Beyond
Petroleum Liquids
Swaps (Mmbbls) - Tapis 2.329 -
Avg. price US$/bbl 28.71 -
Currency
Amount – US$ million 41 182
Avg. Exch. Rate – AUD/US$ 0.6159 0.6120
2004 First Quarter Activities Report
2004 2003 2003
March Dec March
Sales Gas and Ethane (PJ)
Cooper Basin 23.8 37.3 35.5
Surat/Denison 3.6 3.4 3.8
Amadeus 2.8 3.0 2.9
Otway 1.4 0.8 3.4
Gippsland- Patricia Baleen 0.7 0.6 0.0
East Spar 5.1 4.1 4.9
USA 2.3 2.6 2.8
Total Production 39.7 51.8 53.3
Total Sales Volume 41.2 52.9 52.4
Total Sales Revenue ($m) 130.0 166.7 164.4
Crude Oil (000's bbls)
Cooper Basin 599.0 740.9 618.7
Surat/Denison 18.3 19.0 20.5
Amadeus 60.3 69.3 68.3
Elang/Kakatua 69.0 101.0 112.3
Jabiru/Challis 52.0 57.5 63.9
Legendre 413.3 503.4 560.6
Thevenard 148.8 172.3 186.8
Barrow 213.6 220.7 239.5
Stag 652.0 843.7 607.2
Airle 0.0 0.0 0.0
SE Gobe 78.1 86.0 103.0
USA 53.0 53.1 44.8
Total Production 2357.4 2866.9 2625.6
Oil price (Avg $A/bbl) 42.35 41.47 50.13
Total Sales Volume 2304.4 3060.3 2304.2
Total Sales Revenue ($m) 97.6 126.9 115.5
Condensate (000's bbls)
Cooper Basin 161.0 527.4 513.3
Surat/Denison 2.0 1.2 1.0
Bayu-Undan 35.9 0.0 0.0
Otway 9.3 9.4 25.0
East Spar 241.6 196.5 241.4
USA 7.3 11.3 3.8
Total Production 457.1 745.8 784.5
Total Sales Volume 480.2 934.2 840.8
Total Sales Revenue ($m) 21.7 41.0 47.5
LPG (000 t)
Cooper Basin 4.7 57.8 54.5
Surat/Denison 0.0 0.0 0.0
Total Production 4.7 57.8 54.5
Total Sales Volume 15.4 71.1 68.9
Total Sales Revenue ($m) 7.1 27.9 41.3
TOTAL
Production (mmboe) 9.7 13.0 13.0
Sales Volume (mmboe) 10.0 13.6 12.7
Sales Revenue ($Am) 256.4 362.5 368.7
Quarter Ended
2004 First Quarter Activities Report
2004 2003 2003
March Dec March
Exploration
Australia 10.9 30.9 10.2
Overseas 13.9 23.4 12.5
Delineation
Australia 13.5 22.9 7.5
Overseas 3.2 10.0 0.1
Development (1)
Australia 125.1 141.4 90.4
Overseas 4.5 8.2 9.3
Total Explor & Dev Exp 171.1 236.8 130.0
(1) Includes construction and fixed assets expenditure
ABBREVIATIONS
PJ = petajoules
bbls = barrels
t = tonnes
boe = barrels of oil equivalent
mmboe = million barrels of oil equivalent
P&A = plugged and abandoned
P&S = plugged and suspended
C&S = cased and suspended
btu = British Thermal units
CONVERSIONS
Sales Gas & Ethane, 1 PJ: = 171.937 boe x 10³
Crude Oil, 1 barrel: = 1 boe
Condensate (Naphtha), 1 barrel: = 0.935 boe
LPG, 1 tonne: = 8.458 boe
Quarter Ended