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west cameron flow rates...for miningnut

  1. 1,317 Posts.
    Hi Miningnut,

    I spoke to Ross Keogh in Petsec's Louisiana office last night about the flow rates from West Cameron asking him specifically if it is all down hill (natural decline) from here. He made the point that current flow rates represent the pressures in the currently producing sands. As these sands deplete so the pressure and flow rates drop.

    But when they do recompletions, the next sands could well flow at higher rates than the current ones, certainly intially, so flow rates can go back up. Going forward then production rates will vary according to the sands produced. In other words it is not as though this is one big reservoir which will naturally decline as it is depleted.

    In fact the field comprise 15 sands of which three have now been produced out so there are twelve more to go. And of that twelve five are currently producing.

    The platform 's capacity is 40 mmcf a day or about 24 mmcf net to Petsec. While I don't expect that rate will ever be achieved in the future life of West Cameron it is possible that current rates will be exceeded if they have good producers in future sands.

    I suppose the most important consideration is how much gas is there and not how fast the gas comes out of the ground. Although obviously the faster the field is depleted the quicker PSA earns dollars.

    But the gas is there and is not going anywhere except up the pipes so whatever is recoverable in the sands will be produced eventually. The 2 P reserves estimate before the recent discoveries was around 12 bcf so if the new wells have added another 3 bcf then West Cameron should be a great cash cow for Petsec for at least another two years at extraction rates of 5 bcf a year.

    It was interesting to ring the US office and now be told by the automatic operator that there are about 8 extensions one can be connected to, including reservoir engineer, production engineer etc. When I rang earlier this year it was very much a three man operation. Looks like they are building back the staff which is great to see. Maybe admin costs are going to be back at $5 million a year!

    It looks now too, as though Vermilion will be drilled in December and not November. Not surprising, slippages like this seem to be the norm with the oilers. I asked Keogh if there had been any drilling on V258 subsequent to the Forest Oil discovery in 1988.

    The point of the question was to see if there was a possibility the Forest Oil discovered sands had been depleted by drilling/production elsewhere in the lease. Apparently there has been no activity at all since Forest Oil was there.

    Doesn't mean to say the gas is still there of course but you would think after lasting for so many tens of thousands of years it might have made it through the last 15 !!! The first well when drilled will be to confirm the Forest Oil discovery. The 3D they have over the lease must give them a certain amount of confidence.

    So looks like there will be a six to eight week delay before there is any further drilling activity. And China and Vermilion will likely be drilled about the same time. (And gee, isn't China starting to look good cf. comments in FAR's quarterly report this week?)

    Not sure what will happen to the share price inthe interim but could be a bit of "buy early sell before spud" interest, particularly as PSA has two programs commencing at about the same time. You would have to think that would excite a bit of interest.

    But first we have the quarterly out this week and hopefully the introduction of the new web site. The quarterly is bound to disappoint those looking for a continuation of the June half's strong revenues but it should be a good result never the less.

    I am hoping they will have at least as much in the bank as they had at the end of June ($14.6 million) if not more.

    Lastly to save me doing a separate post. Given today's Henry Hub spot price of US$4.80 and allowing for production costs of 50 cents ( and PSA¡¯s hedging of 5mmcf at US$4.87 until the end of October), at a daily production rate of 17 mmcf (including Ship Shoal) I estimate that Petsec will make a net operating profit (ie. profit after production costs) of around A$103,900 in the 24 hours from 24 to 25 October from its operations in the GOM. Add that to the previous two days net profit of $211,730 and

    that is $315,630 or more than a quarter of a million dollars in free cash flow in THREE DAYS!

    Think about it!

    Cheers, JBC
 
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