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.
3. EXPLORATION ACTIVITIES
PDL 3 - Papuan Basin, PNG (5.568892% Interest)
Operator: Santos
No exploration activity took place during the quarter in the SE Gobe
licence.
PPL 189 - Papuan Basin, PNG (14.894% Interest)
PRL 9 - Papuan Basin, PNG (14.894% Interest)
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.
PPL 190 - Papuan Basin, PNG (10.947% Interest)
Operator: Santos
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.
PRL 8 - Papuan Basin, PNG (10.72% Interest) (formerly PPL 193)
Operator: Oil Search
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).
PPL 194 - Papuan Basin, PNG (100% Interest)
Operator: Cue Energy
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
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