CVN 1.11% 22.8¢ carnarvon energy limited

CVN AGM Report (authorised by CVN)

  1. 167 Posts.
    As some of you are aware we canvassed BB's to add Shareholder weight to our own groups CVN holding and encouraged those who contacted me to authorise our rep as their proxie.

    Our rep reported back and everyone recieved this report last week, but were asked to keep it in house until we had it authorised by CVN as a true and accurate account of the AGM and the private discussions which followed.

    I have just recieved that authorisation and albeit there are no context changes, it has a few less grammar and spelling errors than the original..

    Before you read it, give some thought as to how useless a rabble of screaming Shareholders are, in comparison to a single organised voice carrying reasonable clout.

    Hope you CVN holders enjoy, it's good reading

    Regards Barney:-

    I was welcomed by Len and introduced to David Orth and Ken Tregonning.

    Len pulled me aside just before the meeting started and said they were withdrawing Resolutions 4 5 and 6 as they were not in a position to quantify the results of Phase II and therefore felt rewarding themselves should be put on hold until they had delivered tangible results and could categorically state that Phase II is a success.

    Some interested observers, nobody made any noise at meeting at all. Resolutions 1, 2 and 3 passed no problems.

    Chairman gave his speech. Len gave me type copy of Chairman’s speech. His speech basically outlined the events to date. One key issue is that they do not know how far the WB field extends north. 4, 5 and 6 extended their knowledge but as to how far it extends they now have no idea and it could add significantly to their reserves. They will announce reserve increases in 1st Q of 2003.

    Huai Phai and more northerly drilling of WB for Phase 3 will be 2Q 2003

    N6 jet pumped first, N4 next and then N5. Pressure monitors have been put down N4 and this will give them good data for optimisation.

    Discussion with Ken Tregonning - E & G sands are better than any encountered before. F sandstone of N5 he discussed with the driller at the time it was being drilled and the drillers comment was it was the best sand for oil production he had seen in the whole of Thailand. Ken has a target of above 150 bopd for a steady flow.

    E and G will not be perforated and tested for a couple of months as they have to get the F sandstone stable flows correct to put in place royalties to Gemini. They do not want to rush in and test E and G and end up paying royalties on flow from those zones because they didn't define F well enough initially to be able to differentiate the flows.

    Cost of drilling 4, 5 and 6 was 500k US each. The balance of the 2 mill US was used for piping tankage heaters pumps etc etc,, every cent will be used as the quicker drilling and hence lower cost of 4 5 and 6 allowed them to get a few things on their wish list.

    They may in the future consider farming in to the L33/43 permit that PTE have, they have had discussions with PTE re this. Ken’s view was that L33/43 is more exploratory and they want to concentrate on getting production from what they have. They have also only scratched the surface of L44/43 - about 4 sq km of the 4000 or so (cant remember the exact figures). Ken’s view was that is in PTE's nature to ferret and root about looking for new discoveries, CVN want to focus on making the transition from spec oiler to producer. He did not discount a farm in to L33/43 in the future and PTE had left the door open for them.

    The flow rates will not be reported separately for the wells - they will be reported in one hit in a couple of weeks. Ken described the process and a simultaneous testing and results would be to hand for all of 4 5 and 6 at the same time.

    Wells currently producing are WBN2 and WBN3 (the fracced wells) 60 bopd combined, (they acknowledged fracs were dissappointing but gave them a much better understanding of the geology) , Si Thep 10 bopd, WB1 60 bopd but due for a workover and will get back to 90 bopd, WB1A 50 bopd and WBN1 Is currently being put into production since the award of PL2, by the way WBN1 was deliberately drilled outside the PL1 area to force the issue of PL2.

    The discrepancy between announcements of WBN2 initial free flows CVN 326 and PTE 136 according to Ken was the PTE didn't have a clue how to test it properly so the rate they released was wrong. Yes it did flow 326 initially when tested properly and so did most of the others and over time they have gradually decreased / declined to current rates. The reason they declined and the new ones wont in Ken’s opinion is the damage caused to them with the old drilling technique and the friable sand and clay in the F sandstone at the southern areas of W1 2 and 3. Why won’t the new ones decline? The new drilling technique and the fact that the sandstone is of remarkably better quality. Shell has also experienced this that some areas are crap for getting oil out and others are no problem. The problems with W1 2 and 3 would hopefully appear to be specific to that area and the different sandstone quality in that area. As I said above the sand coming out during the drilling process was called by the driller in discussion with Ken and the best sand he'd seen in Thailand for oil producing.

    Phase III being planned for 2Q 2003, David Orth said (and he’s more geological/geotech orientated as he joked with Ken that he was starting to sound like a dirt doctor) that he had now much higher hopes for the field to be better developed to the north and his opinion of prospects at Huai Phai has increased as well as a result of what they found in W4 5 and 6.

    Got a cold reception on options extension/replacement from Andrew Shelton the Chairman, they would prefer to issue new shares at a discount to raise funds for Phase III seemed to be the general idea, but longer term they expect to be self funding and with that money from within the operations for further extensions.

    I undertook and will send info to Len on extensions / replacements ie CMR/ OXR.

    Shell.. Ken said Shell had been surprisingly friendly. He used to work for Shell and said they are a hard nosed operator who don't do much unless there is a buck in for them. The drilling crew and Schlumberger logging crew are both on permanent contract to Shell and you do not get them unless Shell says so? Shell has also opened up their wharehouse to PTE and said take what you want and we’ll charge you at cost? So Ken said do they have an ulterior motive for being so nice or was it just that they can defray a few costs of the drill rig which Shell would have been paying for whether they used it or not so why not lend it to PTE and get a few dollars in the door. He said make your own mind up? Ken did have diner with the Shell Thailand GM last Thursday though and he showed interest in how they were going in WB and they agreed that that central plains area held great potential and Ken also said that Shell’s fields were coming to end of economic life and they could be on the look out for other assets.. Shell have agreed to let them have the drilling and logging crews for Phase III next year so if there is any corporate activity it may not be till later when reserves and production capability are a bit better defined.

    I tried to raise the issue of using adjectives to liven up the releases and they are not interested, they will report the facts, in their mind they have ground to recover from the reputation CVN used to have as a spec oiler and they now want to be a respected oil producer not prone to exaggeration but stating pure facts. So we aint gonna see embellished ASX releases.

    The main thing that comes out of all this is Ken’s belief backed by drilling and logging that the F sandstone in the W4 5 and 6 areas is significantly different and of better quality than the southern W1 2 and 3 area sandstone and therefore the decline in well output should not occur here anywhere near the same extent as with W1 2 and 3 and that the E and G sands are better again than the sandstone and appear to be oil bearing from all their logging? Also that they have scratched the surface and the extension of the north field could significantly extend reserves. Shell is keeping an eye on what’s going on?

    I was the only one who stayed around and came with any prepared questions, David and Ken were very open and honest not exactly guarded but certainly not prone to exaggerate either, I got the feeling they expect good things but like most oil men have had their share of disappointments and problems to resolve so do not get carried away counting their chickens before they have hatched.

    It was a very worthwhile exercise?
    Sorry it took a while but I got my ring hanging out at work.


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