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Tide Comes In For Beach Petroleum

Higher oil prices and doubling of production has seen Beach Petroleum announce a 178% increase in net profit for the past financial year.

Beach Petroleum reported a record profit of $7.95 MM for the year ended June 30th 2003. This compares with net profit of $2.86 MM in the 2002 financial year, $2.81 MM in 2001 and a $667,000 loss in 2000.

Beach also announced a 136% rise in revenue to $36.2 MM and pre-tax earnings of $11.2 MM, compared to $4.2 MM in the corresponding period last year.

"The company commenced the year with a record flow of oil at Sellicks-1 in the South Australian Cooper Basin and concluded by reporting a year of dramatic growth, with sales revenue more than twice the previous year's results", said Beach Petroleum Chairman, Robert Kennedy.

Kennedy added that the growth of activities within Beach in the 12 months to June 30th has been equally impressive. "It includes taking over as operator and full owner of the Bodalla Block oilfields in southwest Queensland, an extensive seismic and drilling exploration program in the Cooper/Eromanga basins, three new oil discoveries, and bringing two new fields into production", he said.

Beach spent $15 MM last financial year on exploration and development activities. In the first week of September, Beach spudded its fourth wildcat well, Brighton-1 (PEL 92), as part of an eight well exploration program being undertaken by Beach together with its joint venture partners.

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Major Increase in Churchie Gas Reserves

Production and recent testing have substantially increased the proven and probable (2P) recoverable gas reserves in the northern part of the Churchie gas field that was first discovered in 2001, according to Mosaic Oil.

Mosaic CEO, Dr Howard Brady, said confirmation of the gas reserves comes at a time when many major gas customers in the southeast of Queensland are looking at renegotiating long term purchase contracts to replace existing contracts well before their expiry date. "This upgrade provides critical data to support marketing of the Churchie gas field to major customers", he said.

Mosaic told the stock exchange that the basis of production and recent test data now reports a 50% increase of proven and probable (2P) recoverable gas reserves from 23 Pj to 34.3 PJ (approximately 29 Bcf). Possible reserves (3P) remain at 125 PJ (approximately 107 Bcf).

The interests in the Churchie field are Mosaic Oil NL 49% and Santos Ltd 51%. Churchie is located in PL 192 near the town of Surat in southeast Queensland.

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Otway and Sorrell Basins.
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Santos Builds Deep Water Acreage Portfolio

Santos Limited has expanded its deep water acreage in the offshore Otway Basin having been awarded its sixth operated exploration permit in the area.

Santos (50% and operator), in joint venture with independent US oil company, Unocal (50%), has been awarded exploration permit T/35P in the Tasmanian portion of the offshore Otway Basin. T/35P is located immediately adjacent to Santos' other offshore deep water permits in the Otway and Sorell basins.

Seismic work will commence in T35/P within the next 12 months and, subject to evaluation of the seismic data, one well could be drilled in the six year work program.

In addition, Santos was awarded two offshore exploration permits in the Otway Basin (VIC/51P and VIC/52P) and two offshore exploration permits in the Sorell Basin (T/32P and T/33P) by the Commonwealth Government in August 2002. Santos operates the VIC/44P permit in the offshore Otway Basin which contains the Casino discovery wells.

Santos is the operator of all six exploration permits in which it has interests in the offshore Otway and Sorell basins. Santos has already completed seismic work on the blocks awarded in 2002 and is seeking to drill the first wells in the area, targeting oil, within the next six months.

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Peter Dawson

Oil & Gas Explorers Come Dry In Equity Markets

Capital raised for new investment in Australian oil and gas exploration collapsed in the financial year just ended, according to leading accounting firm KPMG in their annual survey of capital raising.

KPMG Corporate Finance's 2003 capital markets survey found the amount of capital raised by companies in the energy sector dropped by 61%, from $688 MM in 2001-02 to $270 MM in 2002-03.

KPMG said the survey records the value of all capital raised through the Australian sharemarket, including initial public offers (IPOs), rights issues, placements, calls, dividend reinvestment and employee share plans.

Associate Director of KPMG Corporate Finance in Western Australia, Peter Dawson, said this year's figure included an $83.7 MM IPO by Worley Group, an engineering contractor to the energy sector. "Excluding funds raised by Worley further reduces the level of new capital raised for investment in oil and gas exploration to below $200 million for the financial year just ended", he said.

"This is about one quarter of the annual exploration budget of the Australian oil and gas industry. This imbalance means large explorers will be relying on cash flow to fund exploration spending, while junior explorers without cash flow will be quickly drawing down their capital reserves."

Mr Dawson said the lack of investor support for the oil and gas exploration industry was highlighted by the fact that the sector produced only one IPO for the entire year. "The number and value of oil and gas explorer IPOs has declined every year for the past three years, from four IPOs raising $34.5 MM in 2000-01, to three IPOs raising $16 MM in 2001-02 to just one IPO, Sunshine Gas, which raised $3.9 MM in the year just ended."

Alison Kitchen, Chairman of KPMG's Energy and Natural Resources Group in Australia, said a combination of factors made it difficult for oil and gas explorers to raise funds last year, including poor equity market conditions and a flight to defensive stocks such as property and banks. "Australia's junior explorers, which are often the most innovative and adventurous in the oil and gas sector, are set for more tough times and this may be of detriment in the long run to Australia's energy production", she said.

Kitchen added that the oil and gas explorers can be expected to be under further pressure as the higher Australian dollar erodes the $US-denominated sales revenues of local oil producers. "Without a near term improvement in market sentiment, our smaller oil and gas explorers are heading for either a sharp reduction in exploration expenditure or a series of deeply discounted capital raising initiatives", she said.

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Agreement Paves Way For New Qld Gas Project

A $12.3 MM agreement between an emerging coal seam methane player and a Queensland government owned utility should pave the way for the commercial development of a new coal seam gas project in Queensland's Surat Basin.

Arrow Energy NL told the stock exchange that CS Energy will fund 95%, or $1.23 MM, of the appraisal costs of the Kogan North Gas Project. CS Energy can then take a 50% stake in the project by funding development costs up to a further $10.8 MM. Arrow will be the operator of the joint venture and will retain a 50% interest in the gas project, in which CS Energy already has a 5% stake.

Arrow said it was already successfully producing gas from the pilot project since Febuary 2003 and is aiming to supply CS Energy with 4 PJ of gas per annum from early 2005.

"Queensland's massive coal seam gas resources have the potential to deliver a significant portion of the State's gas supply requirements for industrial development and electricity generation. Arrow is now positioned to be a leading player in the development of these resources", said Arrow's Company Secretary, Paul Marshall.

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Nexus Awarded New Gippsland Basin Permit

Exploration junior Nexus Energy has been awarded the 135 km² petroleum exploration permit, VIC/P56, over the area previously gazzetted as V02-4 in the Gippsland Basin.

Nexus spokesman, Ian Tchacos, said the permit is a very prospective block in a world class oil and gas province, which boasts one of the highests exploration success rates in Australia.

"The permit is in close proximity to several significant producing oil and gas fields including Tuna, Flounder, Halibut, Blackback and Marlin, and is ideally located on the eastern margin of the basin in relatively shallow water", Tchacos said.

Tchacos said the permit has two large prospects at the prospective Top Latrobe reservoir level, which both have the potential to contain up to 60 MMbbl of oil reserves.

"A 3D seismic survey has already been acquired in 2000 over approximately 50% of the block by Esso/BHP Billiton Joint Venture as part of the large Northern Margin 3D survey", he said. "This data will be available to Nexus during the course of its primary (three year) work program and will assist the company to better define existing prospects in the permit prior to drilling."

Tchacos said Nexus intends to continue to focus on the Gippsland and Bonaparte basins as core areas for exploration.

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VicPet: Key Player In Cooper Basin

Junior explorer Victoria Petroleum has become a key exploration player in the South Australian Cooper/Eromanga basins after striking a deal with Australia Crude Oil Company (ACCO) Inc to buy its interest in five permits.

Under the agreement, Victoria Petroleum will take 100% of ACCO's interests in permits PEL 86, 87, 89, 111 and 115, which cover an area of 15,800 km². The deal, when added to Victoria Petroluem's existing land holding (PEL 104), makes the Perth based company's 16,900 km² second largest acreage holding in the basin after Beach Petroleum.

"While all permits are considered prospective for the presence of hydrocarbons, PELs 115 and 111 are considered particularly prospective", said Victoria Petroleum Managing Director, John Kopcheff.

Kopcheff added the company is planning to acquire seismic in PELs 104 and 111 later this year before kicking off a three well program in the first quarter of next year.

Kopcheff said money raised from a recent rights issue and its interest in the Jingemia oil fields will be used to fund the planned seismic and drilling programs.

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