CUE ENERGY RESOURCES LIMITED 2003-04-08 ASX-SIGNAL-G
HOMEX - Melbourne
+++++++++++++++++++++++++ QUARTERLY REPORT FOR THE QUARTER ENDING 31 MARCH 2003 QUARTER HIGHLIGHTS
PAPUA NEW GUINEA
* Retention lease granted over Kimu gas field * Additional gas injection capacity commissioned in SE Gobe field * Increased oil production rate from SE Gobe field * Quarterly revenue from SE Gobe field was US$1,018,399
INDONESIA
* Heads of Agreement signed for the sale of all Oyong gas to PT Indonesia Power at Grati. * Oyong plan of development completed. * Oyong front end engineering design and environmental impact statement studies begun, pipeline and platform location surveys undertaken. * 1000km of infill 2D seismic acquired over candidates for 2003 wildcat drilling.
1. PRODUCTION
PDL 3 - SE Gobe Field, PNG (5.568892% interest) Operator: Santos SE Gobe Unit, PNG (3.285646 % interest, over lift interest 3.8565%) Operator: Chevron
Cue's oil production revenue received during the quarter from the SE Gobe oil field in PNG was US$1,018,399 and equated to 31,499 barrels. Cue did not have any hedging arrangements in place during the quarter.
At the end of the quarter, the SE Gobe field was producing at a rate of approximately 10,500 - 11,000 barrels of oil per day (Cue's net interest is approximately 405 - 425 barrels of oil per day).
In February 2003, additional gas injection compression was commissioned and has allowed increased oil production rate.
2. DEVELOPMENT ACTIVITY
Sampang PSC - Madura Strait, East Java, Indonesia (15% Interest) Operator: Santos
On 1 February 2003, a Heads of Agreement for a gas sale from the Oyong field was signed with PT Indonesia Power at Grati. The sale is for a minimum of 40 million cubic feet of gas per day, which will be delivered to Grati 60 km south west of Oyong, where Indonesia Power has an electricity generating facility. The payment for the sale, which is for all the gas reserves of the field, will be in US dollars.
The signing of the Heads of Agreement for the sale of the entire gas reserves of the Oyong field is a significant milestone for Cue, which has a 15% interest in the Production Sharing Contract through its 100% owned subsidiary Cue (Sampang) Pty Ltd.
The gas sale, with associated oil production is expected to provide Cue with cash flow over a period of several years and will compliment the revenue the company receives from the SE Gobe oil field in Papua New Guinea.
During the quarter, substantial progress was achieved towards the development of the Oyong field.
Front end engineering design and an environment impact assessment study began and pipeline route and platform location surveys were undertaken.
Negotiations proceeded on a Gas Sale Agreement which is expected to incorporate the terms of the Heads of Agreement
First gas production from the Oyong field is expected to begin in late 2004. The field will be developed using a single centrally located platform with both oil and gas being transported to Grati in a multiphase 14 inch pipeline.
Oil and gas will be separated and processed onshore, where the gas will be delivered to Indonesia Power and the oil stored for export.
FINANCE
During the quarter, Cue began discussions with potential lenders who had expressed an interest in project financing Cue's A$25 million share of the estimated approximately US$100 million gross capital cost.
BACKGROUND
Oyong was discovered in mid 2001 and has been delineated by the Oyong -1, -2 and -3 wells. The field has a 120 metre gas column underlain by a 38 metre oil column. The gas consists of mainly methane with approximately 1% carbon dioxide and no hydrogen sulphide. The oil is approximately 410 API with no sulphur. The field is assessed to contain approximately 90 billion cubic feet of recoverable gas and an initial, conservative recovery of 5 million barrels of oil from the 80 million barrels of oil that are estimated to be in place.
The gas is planned to be produced from 2 centrally located production wells and the oil from 2 or 3 horizontal wells. The oil will be initially produced at moderate rates to determine reservoir performance with additional horizontal wells being drilled as required. Additional oil reserves may be produced, depending on field performance.
The Sampang PSC also contains a number of attractive undrilled prospects, one of which is assessed to have the potential to hold in excess of 2 trillion cubic feet of recoverable gas. 1000km of infill 2D seismic were acquired over a number of prospects in early 2003. This data is currently being evaluated. Cue expects that the two most attractive prospects are likely to be drilled in the third and fourth quarters of 2003.
Negotiations continued on the application for a new licence (APPL229) over nine graticular blocks to the east of the PRL9 Retention Licence over the Barikewa field.
During the quarter, Santos studied several development options for the Bilip -1 discovery which straddles the boundary of PDL-4 and PPL190.
Bilip -1 which was drilled in late 2002, encountered 15 metres of gas overlying a 16 metre oil column with an oil water contact, in the Iagifu sandstone in the hanging wall (upper closure) of the Bilip structure.
During the quarter, the Minister of Petroleum and Energy, Papua New Guinea granted a five year Retention Licence (PRL8) over the Kimu gas field. Cue holds a 10.72% interest in the Retention Licence and in the Kimu field which has been estimated by the operator to hold recoverable gas volumes in excess of 1 trillion cubic feet (Cue net share approximately 107 billion cubic feet).
During the quarter, the Papua New Guinea Minister for Petroleum and Energy cancelled Petroleum Prospecting Licence PPL194 in the highlands of Papua New Guinea. The licence was held 100% by a Cue subsidiary, Toro Oil Company Pty Ltd. A geological survey was undertaken by Cue over the NW Wage anticline in the north west of PPL194 in order to determine whether structural closure was likely to be present. The results of the survey proved negative and further high risk exploration in the area could not be justified. A proposal to undertake exploration in the central area of the licence was not approved by the Minister.
Sampang PSC Madura Strait, East Java, Indonesia (15% Interest) Operator: Santos
In January 2003, approximately 1000km of infill 2D seismic were acquired over a number of prospects that are candidates for 2003 exploration drilling. Two wildcat wells are expected to be drilled in the third and fourth quarters of 2003.
EP 363 Carnarvon Basin - Western Australia (10% buy back option) Operator: Apache Energy
The Bob -1 exploration well was drilled in the permit in January 2003. The well encountered non commercial gas shows in Triassic sandstones and was plugged and abandoned.
A Knox PUBLIC OFFICER
CUE Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
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