Drillsearch delivered a strong operating performance in the December quarter against a backdrop of challenging conditions that affected the oil and gas sector globally.
Production of 0.79 million barrels of oil equivalent (mmboe) in the December 2014 quarter was 6% higher than the September quarter. Average daily oil production from the Western Flank Oil Fairway was 11,565 barrels (bbls) (Drillsearch’s 60% share 6,939bbls). With continuing strong output from the Western Flank and new wells planned to come online in the second half of FY2015, we are on schedule to deliver our production guidance of 3.0 to 3.4 mmboe.
In common with its peers, Drillsearch was impacted by a 40% decline in Brent crude oil prices during the December quarter, with the company’s revenue declining by 12% to $70.3 million. Despite this decline, our liquidity remains strong, with approximately $149 million of cash and $50 million of undrawn committed debt as at 31 December 2014.
"Our cash position and robust margins provide Drillsearch with a strong platform, otwithstanding difficult market conditions," stated Brad Lingo Managing Director of Drillsearch. "We began FY2015 with an active work program that has delivered considerable success in the first half, with a drilling success rate of 67%4, including three new wet gas discoveries and two new oil discoveries on the Western Flank, and a successful Bauer development campaign. Our capital expenditure in the first half was $97 million, reflecting a work program weighted towards the first half. We have completed 27 wells of a work program originally planned to include more than 40 wells, including completion of the final deep well in the ATP 940 work program for this year.
The impact of this program on the company's reserves will be reported in the next Reserves Update, which will be released with our Full-Year Results, in line with practice among several of our peers. In the Oil Business, Drillsearch and Beach executed a six-well development campaign at Bauer on the Western Flank that is expected to support oil production from the March quarter onwards. That campaign included the joint venture’s first pad drilling which delivered four wells at significantly lower cost.
Following that success, the joint venture has decided to bring forward an additional four development well pad drilling program, commencing later in the March 2015 quarter and aimed at maintaining production and improving operating flexibility.
In Wet Gas, Drillsearch made three new discoveries in the Western Cooper, Maupertuis-1 in the joint venture with Beach, and Varanus South-1 and Yarowinnie South-1 in our joint venture with Santos. In Unconventional, subsequent to the December 2014 quarter, they completed the fourth and final deep well in the current drilling campaign in ATP 940. Production testing of the first of the four wells – Charal-1 – commenced in the December quarter, with gas successfully flowed back to surface.
