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re: not a bad report Molopo Australia Limited Registered Office: Level 14
A.B.N. 79 003 152 154 31 Queen Street, Melbourne
Victoria Australia 3000
Telephone: (61 3) 9620 2812
Facsimile: (61 3) 9620 2804
27 July 2005 Page 1 of 10
ASX Companies Announcement Platform (ASX Code: MPO)
SYDNEY NSW 2000
QUARTERLY ACTIVITIES REPORT
FOR THE QUARTER ENDED 30 JUNE 2005
Highlights:
• Three new development wells add to gas production at the Mungi gas field in Qld;
• Two new appraisal wells commence production testing at Bindaree/Harcourt in Qld;
• MOU signed with Ergon to supply Mungi gas from 2007;
• US gas project added to portfolio;
• Shareholder purchase plan raises $0.8m;
• Horizontal well at Mungi demonstrates excellent gas flows.
PROJECT REVIEW
Mungi Gas Field, PL94 (25% interest, northern portion) – Bowen Basin, Queensland
Molopo’s revenue from gas sales over the period was $319,300 compared to sales of $274,900 in the previous quarter. The majority of gas sold went to Origin Energy under existing gas sales agreements, with a small amount sold to Queensland Cotton’s local cotton gin plant.
Molopo’s share of gas production from the Mungi coalbed methane (“CBM”) field in Queensland for the quarter was 44.2 terajoules (“TJ”). Molopo delivered 114.7TJ to Origin and Queensland Cotton during the quarter, with shortfall gas supplied by Energex.
Molopo’s share of gas production increased during the quarter as gas from three new development wells, Mungi 14, 16 & 17, were brought on line. The overall field production at 30th June was around 1,359,000 standard cubic feet per day (scfd), representing a 7.3% increase when compared to the end of the last quarter, and is expected to increase further as dewatering of the three new wells continues. This will reduce the requirement to purchase additional gas to meet contract obligations and thereby improve margins.
The Company’s share of production from the new wells is 50%.
The Mungi 2 horizontal well continued to exhibit strong production over the quarter and was producing around 234,000scf/d by June 30th. The production from the Mungi 2 well comes from only one of five productive seams, offering strong evidence of the superior performance of horizontal wells to vertical frac wells in the Mungi coals.
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As a result of this performance and the production results obtained from thirteen Mungi fracced wells, a reserves review has been initiated, based on the future programmes utilising and expanding upon lateral completion technology similar to Mungi 2. This may result in a reserves upgrade, particularly when the improved production and slower decline rates, and increased gas recovery of these wells, is taken into account.
Molopo and its partner Helm, currently have plans to drill several new multi-lateral completion wells at Mungi as soon as practicable. However rig availability has resulted in delays that may mean drilling will not commence until the December quarter. In an effort to secure a rig for this work, a revised and simpler lateral design is proposed, to allow drilling contractors with smaller and more readily available rigs to tender for this work. However, sourcing a larger rig for development drilling next year is not expected to be as difficult.
While it is likely that Origin will act as Operator for the lateral programme, they have elected not to participate. This will entitle Molopo to 50% of the gas from these wells.
Mungi is independently credited with total reserves of 51 petajoules (“PJ”), of which 25PJ are in the 2P (Proven & Probable) category, although reassessment of both reserves and Joint Venture reserve estimates are likely as production results from new and existing wells are analysed.
Harcourt/Bindaree Gas Prospects – PLA210/ATP564P (25% interest) Bowen Basin, Qld
Towards the end of the March quarter, both Bindaree 01 and 02 vertical fracced wells commenced production testing. Initial high water production rates are encouraging and gas production is expected as water levels in these wells declines. Water levels in both wells are still very near the surface.
The Bindaree Prospect is considered an extension of the Mungi Field and lies on the northern boundary of PL94 between Mungi and Harcourt. Molopo and its Joint Venture partners have applied for a Petroleum Lease (production licence) covering 178km2 to the immediate north of PL94. The production licence application area encompasses both the Harcourt and Bindaree Prospects. It is expected that the two Bindaree wells will be tied into the Mungi gathering system should the Petroleum Lease be granted and production results warrant.
As it is likely that the Harcourt 2 well is producing from only one of four possible seams, various lining options are still being considered to optimise production from this lateral.
The Harcourt SIS lateral well is located approximately 10km to the north of the Mungi Field. The Harcourt/Bindaree area is credited with total reserves of 63 PJ, of which 24 PJ are in the 2P category. Should Harcourt production testing demonstrate commercial flow rates, the field could be developed as a progressive northern extension of the Mungi/Bindaree Fields.
Timmy Gas Prospect - ATP602P (25% interest), Bowen Basin, Qld
During the March quarter the Timmy 1 well was placed back on pump, following the installation of liners in both Timmy laterals. Unfortunately however, the test had to be temporarily suspended due to pump failure. A workover is planned to replace the pump and place this well back on line in the next couple of months. This delay is frustrating, as initial production testing of the unlined laterals yielded higher water production rates than either the Mungi or Harcourt laterals. This was considered a positive indication for potentially higher gas flow rates.
The Timmy Prospect covers an area of approximately 17,000 acres and is located to the south of PL94. No reserves have been established at Timmy, but the Joint Venture’s most recent estimate suggests the prospect could contain recoverable gas volumes of up to 137 PJ.
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Gloucester Basin, NSW – PEL 285 (25% interest & Project Manager)
The Gloucester Basin permit is located approximately 100km north of Newcastle and covers an area of 1,050km² (reduced from 1,308km2 following relinquishment of 4 blocks) with over 200km² of prospective coal measures. The initial focus of the two Joint Venture partners is on a 5km2 area referred to as the Stratford Prospect, which has an estimated 90PJ of gas in-place.
PEL285 expired on the 15 April. Molopo and its Joint Venture partner applied for renewal and were successful in extending the licence term to 15 April 2008. A 25% relinquishment of the existing area was a requirement of the renewal.
During the March quarter, following a review of all options in light of rig availability, it was decided that the best way forward for vertical fracced well, Lucas Molopo Gloucester 03 (LMG03), was to replace the existing PCP (progressing cavity pump) with an ESP (electrical submersible pump). The ESP has been ordered, and will be run in the hole in mid-August. This will avoid problems associated with recurrent tubing wear as a consequence of a dog-leg in the well.
Pumping in LMG03 was initially suspended last year despite encouraging gas production rates, when gas and water production was noted from a number of old coal exploration boreholes up to 300 metres away. Despite the delay, the obvious connection of the coal boreholes to LMG03 over such a short time frame and particularly given the small pressure reduction in LMG03, is an indicator of very good reservoir permeability and connectivity.
The LMG03 well was completed across four coal intervals representing a net coal thickness of up to 23 metres and was producing in excess of 280,000 cubic feet/day of gas despite the water level only being 80 metres below the surface. The lowermost target seam in this well occurs at 405 metres from surface.
LMG03 is one of two production wells drilled in the Gloucester Basin permit, as part of the Phase 1 work programme. The second well, LMG01 awaits intersection by LMG02, a horizontal or lateral well. In combination, these wells are generally referred to as a surface to in-seam (SIS) completion, and options are currently being considered on the best way to complete LMG02 and commence production testing from LMG01.
Clarence-Moreton Basin, NSW - PEL 13 & 426 (100% interest)
During the March quarter, Eastern Star Gas Limited (which is earning an 85% interest in both PEL’s) continued with planning, line permitting and approvals for a seismic acquisition programme.
Eastern Star Gas has advised Molopo that it is awaiting clarification from the NSW DMR on the effects of land title changes before proceeding with the work program. This delay may result in the work program for the current period rolling over into the next period. Such a postponement will require ministerial approval.
Mason County – West Virginia
Molopo announced a move into the energy market in the United States following the completion of a series of agreements covering a large gas project in West Virginia. The project contains multiple oil and gas targets in sandstones, shales and coal. Gas in the leases is currently being produced from the Ohio Shale zone.
Under an agreement with Dallas, Texas-based Foree International, Molopo will have a 50% interest in a 9,000 acre producing petroleum lease in Mason County, West Virginia that Foree has farmed-into. Central to the US expansion is Molopo’s success in generating more gas from coal seams by horizontal drilling as opposed to more conventional CBM fraccing methods.
The Mason County region is a relatively mature oil and gas province in which hundreds of oil and gas
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wells have been drilled. Base Petroleum has 37 oil and gas producing wells in the joint venture’s leased area which is not part of the farm-in. Gas sales arrangements have been made with Base Petroleum, who own and operate existing gas infrastructure in the region.
This arrangement still leaves open to Molopo and Foree significant targets in the fractured Ohio Shale, and allows appraisal and development by Molopo-Foree of all the oil and gas potential of the Berea, Oriskany and Newburg Sandstones, and the coal bed methane prospectivity of the Freeport coal seams.
Wells in the region are typically low pressure with modest production rates. Molopo will focus on whether the horizontal drilling techniques employed in Australia will substantially increase gas delivery in the three main objectives, the shallow sands, shales and particularly coals. The joint venture’s first appraisal well is likely to be drilled in the December quarter.
As part of the agreement, the new joint venture partners will also assess oil and gas opportunities in other selected regions of the United States and South Africa.
China - Liulin, Shanxi Province (50% interest)
No work was undertaken during the quarter. Post June 30th, Molopo announced that it had signed a Heads of Agreement to sell the Liulin project for $300,000 worth of cash and securities plus a US$0.125/gj production-based royalty. The completion of the sale will be subject to certain conditions precedent, including approvals from the China-based partners.
CORPORATE ACTIVITIES
Finance
During the quarter the Company placed 25,520,017 shares at $0.03/share under a Share Purchase Plan (“SPP”). The SPP raised $0.76m out of a maximum of $1.4m.
Management
Molopo’s Director of Operations, David Casey, will move from current employment conditions as an Executive Director of the Company, to an ongoing consulting arrangement and a Non-executive Director position on the Board.
Molopo will continue to benefit from Mr Casey’s contribution on an ongoing basis.
Yours faithfully,
Ric Sotelo
CFO / Company Secretary
Molopo Australia Limited
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Rule 5.3
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98.
Name of entity
MOLOPO AUSTRALIA LIMITED
ACN or ARBN
Quarter ended (“current quarter”)
003 152 154
30 Jun 2005
Consolidated statement of cash flows
Cash flows related to operating activities
Current quarter
$A’000
Year to date (.12..months)
$A’000
1.1
Receipts from product sales and related debtors
220
831
1.2
Payments for (a) exploration and evaluation
(b) development
(c) production
(d) administration
(568)
(620)
(511)
(298)
(797)
(1,504)
(971)
(1,247)
1.3
Dividends received
-
1.4
Interest and other items of a similar nature received
29
148
1.5
Interest and other costs of finance paid
-
-
1.6
Income taxes paid
-
-
1.7
Other
-
Net Operating Cash Flows
(1,748)
(3,540)
Cash flows related to investing activities
1.8
Payment for purchases of:
(a) prospects
(b) equity investments
(c) other fixed assets
-
-
-
-
-
-
-
1.9
Proceeds from sale of:
(a)prospects
(b)equity investments
(c)other fixed assets
-
-
-
-
-
-
-
-
1.10
Loans to other entities
-
-
1.11
Loans repaid by other entities
-
-
1.12
Other (provide details if material)
-
-
Net investing cash flows
-
-
1.13
Total operating and investing cash flows (carried forward)
(1,748)
(3,540)
Cash flows related to financing activities
1.14
Net Proceeds from issues of shares, options, etc.
780
780
1.15
Proceeds from sale of forfeited shares
-
-
1.16
Proceeds from borrowings
-
-
5
1.17
Repayment of borrowings
-
-
1.18
Dividends paid
-
-
1.19
Other (provide details if material)
-
-
Net financing cash flows
-
-
Net increase (decrease) in cash held
(968)
(2,760)
1.20
Cash at beginning of quarter/year to date
3,012
4,797
1.21
Exchange rate adjustments to item 1.20
-
-
1.22
Cash at end of quarter
2,044
2,044
Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related entities
Current quarter
$A'000
1.23
Aggregate amount of payments to the parties included in item 1.2
32
1.24
Aggregate amount of loans to the parties included in item 1.10
-
1.25
Explanation necessary for an understanding of the transactions
Per 1.23 Payments made to entities associated with a director pursuant to (i) payment of consulting fees, (ii) payment of salaries & director’s fees, (iii) an administration contract between Molopo and the related entity, and (iv) rental of offices.
Non-cash financing and investing activities
2.1
Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
None
Non-cash financing and investing activities (continued)
2.2
Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest
1. None
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available
$A’000
Amount used
$A’000
3.1
Loan facilities
None
none
3.2
Credit standby arrangements
None
none
Estimated cash outflows for next quarter
(Not committed)
$A’000
6
4.1
Exploration and evaluation (excludes JV partner contributions to project)
1,063
4.2
Development (excludes JV partner contributions to project)
64
Total
1,127
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.
Current quarter
$A’000
Previous quarter
$A’000
5.1
Cash on hand and at bank
705
795
5.2
Deposits at call
1,299
2,177
5.3
Bank overdraft
0
-
5.4
Other (security deposit held by bank)
40
40
Total: cash at end of quarter (item 1.22)
2,044
3,012
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Changes in interests in leases
Tenement reference
Nature of interest
(note (2))
Interest at beginning of quarter
Interest at end of quarter
6.1
Interests in mining leases relinquished, reduced or lapsed
NONE
6.2
Interests in mining leases acquired or increased
NONE
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number
Number quoted
Issue price per security (see note 3) (cents)
Amount paid up per security (see note 3) (cents)
7.1
Preference +securities (description)
7.2
Changes during quarter
(a) Increases through issues
(b) Decreases through returns of capital, buy-backs, redemptions
7.3
+Ordinary
securities
343,969,633
(fully pd)
343,969,633
-
-
7.4
Changes during quarter
(a) Increases through issues
(b) Decreases through returns of capital, buy-backs
25,520,017
-
25,520,017
-
$0.03 (3 cents)
-
$0.03 (3 cents)
-
7.5
+Convertible debt securities (description)
7.6
Changes during quarter
(a) Increases through issues
(b) Decreases through securities matured, converted
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7.7
Options (description and conversion factor)
122,480,622
1,500,000
(incentive)
1,500,000
(incentive)
2,000,000
(incentive)
2,000,000
(incentive)
500,000
(incentive)
500,000
(incentive)
122,480,622
0 (unlisted)
0 (unlisted)
0 (unlisted)
0 (unlisted)
0 (unlisted)
0 (unlisted)
Exercise price
$0.10
$0.05
$0.10
$0.05
$0.10
$0.05
$0.10
Expiry date
30 June 2007
30 April 2006
30 April 2006
30 April 2007
30 April 2007
30 April 2008
30 April 2008
7.8
Issued during quarter
500,000
(incentive)
500,000
(incentive)
0 (unlisted)
0 (unlisted)
$0.05
$0.10
30 April 2008
30 April 2008
7.9
Exercised during quarter
-
-
-
7.10
Expired during quarter
2,925,000
2,925,000
0 (unlisted)
0 (unlisted)
$0.20
$0.25
30 April 2005
7.11
Debentures
(totals only)
7.12
Unsecured notes (totals only)
Compliance statement
1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Law or other standards acceptable to ASX (see note 4).
2 This statement does give a true and fair view of the matters disclosed.
Sign here: ............................................................ Date: 30 June 2005
(CFO / Company Secretary)
Print name: Ric Sotelo
Notes
1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining
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tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
3 Issued and quoted securities. The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.
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