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quarterly report

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    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
    PUBLIC OFFICER







 
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