petnews article on vpe

Posted on the Empyrean thread in England yesterday. Partners in Eagle & Margarita.

http://www.petroleumnews.net/storyview.asp?StoryID=71860

New Year's resolution for reborn explorer

Monday, 22 January 2007


“PERTH-based explorer/producer Victoria Petroleum is heading into 2007 with all the enthusiasm of the reborn. By RICK WILKINSON


The company has already embarked on an 18-well program to run over the next six months and considers itself a good chance to increase its revenue from production by 25% to $10 million for the coming year.

Some of this input will come from activity in the company's US acreage, but the main game is in the Cooper/Eromanga Basins of South Australia and Queensland, according to managing director John Kopcheff.

There's a serious edge to his quip that, 23 years after the company's initial listing on the ASX, he does feel born again.

The reference is to VicPet's decision in October last year to reconstruct the company by consolidating its capitalisation in a one-for-10 share issue.

"Despite the fact that we had been successful in the last few years and had production revenues from Jingemia oil field in the North Perth Basin, from Ventura and Mirage oil fields in the Cooper/Eromanga and from Flour Bluff gas field in the US, we were being treated as a day-trading stock," he said.

"Our shares were around 2.2-2.3c. Traders would buy in big during a morning and sell out before the close if there was as little as a 0.1c rise over the day.

"We wanted to shake off that image and be viewed as a serious contender in the oil and gas business – hence the one-for-10 share consolidation.

"We also wanted to reward loyalty and introduced a free bonus option to shareholders of one-for-four shares held on January 31, 2007. These bonus options will be listed on the ASX and are exercisable over their three-year life at 25c each.

"Post-reconstruction we have 192 million shares on issue, a share price of 28c and a market cap of $44 million.

"That's a good initial result, but over the next 12 months our sights are set on improving our asset base to the point where it underpins a share price of 40c or more," Kopcheff added.

VicPet is pursuing its new 18-well program across much of its acreage in the US and Australia.

In the US, the company will participate in six shallow wells as part of the Margarita gas exploration program onshore Gulf Coast in Texas in an endeavour to increase production from 2-10 million cubic feet a day.

The attraction here is that gas prices in the US are still up around $US6.06 per thousand cubic feet – three times the price available for production in Australia.

"We have 20% of this project where targets in the Frio-Wilcox reservoirs range from 2 to 200 billion cubic feet of reserves. All the wells will be located on 3D seismic," he said.

"In Australia, the main focus is on oil and we will be in one well in each of the Perth and Surat Basins. That's the Freshwater Point prospect in EP413 near Jingemia and the North Cherwondah prospect in PL171, respectively."

But it is the Cooper/Eromanga Basin plays that represent the greatest upside. In the Queensland sector, VicPet has a 25% interest in the Wompi and Barta blocks making up ATP 752.

"We plan five wells in the next six months and all the prospects are adjacent to commercial oil and gas fields," he said.

"The Queensland program has already begun in the Wompi blocks with Marracooondah-2 now drilling. That will be followed back-to-back by Nora-1 and Gamma-1, all of which are on trend with the producing Watson and Watson South fields.

"In May and June, we will move into the Barta block with wells in the Vancouver and Cook North West prospects."

Kopcheff is also keenly awaiting results from several key Eromanga Basin wells in South Australia.

The most immediate is the Wilpinnie-4 evaluation of a previous Santos oil discovery in PPL93 east of Moomba. VicPet has farmed-in to the northern part of the Santos permit surrounding the Wilpinnie find.

"The well has a Jurassic-age Namur Sandstone target and has been drilled 17m updip and 200m north of Santos' discovery at Wilpinnie-3," he said.

"Wilpinnie-3 flowed at around 750 barrels of oil a day but, at the time, the structure was not considered large enough to support commercial production.

"We have since reviewed the seismic and can see no evidence of any faulting updip of the Santos discovery. Consequently we believe that there is potential for the structure, which we call Tomcat, to continue unimpeded into our permit PEL115.

"Wilpinnie-4 is therefore an important test. If the initial DST results are good, we will complete the well and run a longer production test for maybe a month to check the reservoir parameters.

"If that still looks good, we will want to drill our Tomcat-1 in PEL115 about 1km further updip from Wilpinnie-4.

"Santos has retained an option to farm-in to the Tomcat program," Kopcheff added.

The other South Australian area of high potential is to the northwest of Moomba in contiguous permits PELs 104 and 111 in which VicPet has 40% interest.

"The western half of these blocks contains a number of Mesozoic Eromanga Basin oil prospects and leads, the potential of which has already been enhanced by our Growler-1 oil discovery made in PEL104 last September," Kopcheff said.

"It is a Jurassic-age Birkhead Formation find which we plan to production test next month in conjunction with the drilling of Growler-2 appraisal.

"We also plan to spud the Wirraway-1 wildcat on trend 5km to the northwest in the same permit late this month. Success there will lead to follow-ups at Wirraway-2 as well as two other nearby prospects called Tigershark and Tigercat.

"In adjacent permit PEL111 to the northeast, we have another three similar Eromanga prospects (Ascender, Gannet and Warhawk) matured for drilling.

"They have the potential to hold between 4 and 10 million barrels of oil.

"At the moment there is no production infrastructure this far to the west, so trucking is the immediate transport option.

"However, if three or four of these prospects are successful and we can get a combined flow rate of 500 barrels a day, it may be worthwhile to establish a central production facility and then pipeline the oil to Moomba via the Fly Lake facilities."

Prospects in the eastern section of these same two permits are regarded as deeper Permian Cooper Basin gas/condensate plays, one of which (Catalina in PEL111 just north of the producing Fly Lake and Brolga fields) is earmarked for drilling in June.

"In this case, and for another six or seven prospects we have mapped in the Cooper Basin sector of PELs 104 and 111, we plan to farm-out the work program," he says.

Kopcheff is hoping VicPet's 2007 activity will lead to a total market capitalisation of close to $200 million by the end of the year, representing $1 per share.

He would like to see prospects and drilling programs throughout the portfolio contribute to that outcome, but he considers the Eromanga oil plays to be the key ingredient in bolstering the company's reconstructed status.”