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October/November 2003 |
| Junior Focus – Strike Oil | |
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VIC/P44
and surrounding fields and infrastructure, Otway Basin.
Strike
Oil’s permits, Carnarvon Basin.
Reprocessed
Snark 3D seismic section showing BooJum and White Rabbit prospects, Carnarvon
Basin.
Altostratus
prospect with potential in the Stag Sand and Jurassic Athol Formation,
Carnarvon Basin.
Seismic
amplitude map showing similarity between Stag Field and Altostratus prospect,
Carnarvon Basin.
Strike
Oil’s and Comet Ridge’s CSG interests in NSW and Qld.
Seismic
section across Comet Ridge showing targeted coal measures,
Strike
Oil’s farmin to Arrow’s ATP683P and ATP 689P, Surat Basin.
Comet
Ridge’s recent farmin to OCA’s and Santos’s ATP337P, Bowen
Basin. |
Strike Looks To Hit Target With New Plays The next 12 months are shaping to be a crucial period for unlisted junior explorer, Strike Oil, in its drive to become a major petroleum producer. After selling its stake in the Casino gas discovery in the Otway Basin in mid-July, the Perth based company is now focused on developing its suite of conventional as well as coal seam gas plays around Australia. This will include drilling for oil in the Carnarvon Basin and developing its portfolio of coal seam gas assets in Queensland and NSW. It may also involve participating in the development of the Casino gas discovery if Australia Worldwide Exploration (AWE) elects to return 30% interest to Strike. Under the terms of the agreement, AWE will fully carry Strike's share of all costs in the permit including the expenditure associated with the Casino-3 appraisal well, estimated to be around $7.5 MM to $8 MM, the acquisition of new seismic, additional reprocessing and other permit expenditures. AWE then has the option to either retain the 50% interest in the permit by paying $22.5 MM or within 90 days return a 30% working interest to Strike. Jim Durrant, Strike's Executive Director, said the deal effectively funds the forward program and appraisal well until the end of this year. "While the deal removes upside potential in VIC/P44 if AWE elect to commit to the option, we considered that this is compensated for, in the terms of the deal, due to the high cost and risks associated with drilling and develop-ment in the region, and the likely scale of the remaining prospects." He added, "The deal allows Strike to now focus more effort and build its business around its Carnarvon Basin, Cooper Basin and coal seam gas assets, where drilling and development costs are more manageable and significant perceived value leverage exists." If AWE does return 30% of the project to Strike, Durrant said the company would have no problem funding its share of the development of the Casino Project, which would most likely be a sub-sea development with two wellheads connected to the shore. "It will be a combination of debt and equity", he said. "Money is always available for good projects and we have good supporters." Strike previously had farmed out the drilling of the discovery well to Santos, which earned a 50% stake and is now the operator of the permit. Casino-1 discovered a 47 m gas column in September 2002. The field was said to hold gas reserves in excess of 140 Bcf and was considered significant because of its proximity to infrastructure and ready markets in Adelaide and Melbourne. The follow-up Casino-2 well confirmed the presence of gas in a second overlying sand. The field is now clearly defined by AVO studies and a third well will be drilled in a down-dip position on the overlying sand with the objective to define reserves around 200 Bcf, sufficient to provide a robust project justifying a stand-alone development. In early September 2003, AWE announced it had sold half of its stake (25%) in the Casino discovery to Japanese trading house Mitsui. AWE said the sale was similar to the one it made with Strike Oil. In addition, Mitsui will assist in arranging project finance for AWE's share of the development. AWE said drilling of the Casino-3 appraisal well is scheduled for October. Confirmation that the gas discovery is commercial should be determined by the end of October. Strike's Durrant told PESA News that one advantage of the deal it had struck with AWE was that it avoids the dilutionary effect of a capital raising as the company prepares to drill two high leverage oil wells in the Carnarvon Basin later this year or early 2004. Strike
prepares for Carnarvon Basin focus "In the event of a discovery, it can be readily commercialised due to the proximity of storage and offloading facilities on Airlie and Thevenard Islands." The Altostratus prospect is targeting four separate sands. The Cretaceous M.australis (Stag) sand objective is of a similar size to, and on trend with, the 50 MMbbl Stag oilfield. The slightly deeper Jurassic and Triassic target sand intervals are also on trend with the Tusk, Oryx, and Chamois oil discoveries in the same sands. According to Durrant, in the event of a discovery, it can be readily tied into the Stag or Wandoo facilities, or piped onshore. Strike is also the operator (with 40%) of a joint venture that was awarded a new exploration permit (WA 340P) in March, and the nearby TP/19 and EP421 (100%). "The mapped shallow Cretaceous leads are in part similar geologically to the nearby producing Stag and Wandoo oilfields, while deeper Jurassic and Triassic targets are similar to productive fields elsewhere in the Carnarvon Basin", Durrant said. "Work over the next three years will utilise remote sensing and seismic techniques to further evaluate the leads." Strike also has a 15% working interest in a joint venture exploring the northern adjacent WA 312P where the Wandoo Southeast prospect has been defined. Coal
seam gas: Critical role in future energy supply Against this backdrop of recent positive developments, Strike had been developing its CSG position during the low point in the cycle in readiness for the upswing that is now occuring in the industry", Durrant said. "Around three years ago we had the opportunity to bring Andy Lydyard over from the US. Andy had been running US independent, J.M.Huber's CSG business which was producing around 100 MMcfd at the time. This was an opportunity to bring someone with significant experience in coal seam gas into the company." Lydyard, a former petroleum geologist with Western Mining Corporation, said coal seam gas development in this country has had a checkered history with a number of false starts and the industry developing a reputation for overselling. However, he said a new breed of player has cropped up in Australia using innovate techniques as opposed to purely applying technology from the US. "I really take my hat off to the Australian players. They are focused on cost containment and using innovative technology", he said. Lydyard said Strike decided to adopt a low cost entry strategy into the gas saturated Walloon Coal Measures. "While companies such as Arrow Energy and Queensland Gas Corporation (QGC) had acquired a lot of territory, we knew that not everybody had the capital resources to play in what is an immense area", he said. "You can literally hide the huge San Juan and Powder River basins (both in the US) under this piece of acreage." "We wanted to avoid going in there and drilling everything. We wanted to see what other people were doing, collect the data and identify the projects we wanted to get involved in", he said. "Ultimately, we would like to end up with one or two good producing projects. We see the Comet Ridge project in the Bowen Basin and the Meenawarra Project in the Walloons play providing excellent potential to achieve this, which is very exciting for us." Comet
set to strike The main project is a sub block of ATP 337P on the northern Comet Ridge in the Denison Trough, Queensland. This project is on trend, and analogous with, the highly productive Permian coals of the Fairview and Durham Ranch CSG production projects, operated by US independent Tipperary and leading Australian CSG production operator, OCA. Comet Ridge Limited has an entitlement to earn a 40% interest in this area by funding the drilling of two CSG shallow core holes and one test hole in joint venture with OCA (30% – field operator) and Santos (30% – permit operator) Strike has a portfolio of other CSG projects, which it will place into Comet Ridge Limited. These include interest in the Walloon Coal Measures play in ATPs 683P and 689P with rights to earn up to 30% and 50%, respectively, by drilling additional shallow CSG core and test holes. This project, in joint venture with Arrow Energy, is on trend with nearby pilot projects currently underway, which have the potential to add significant near term value to these areas by proving the gas productivity of these coals. Comet Ridge will be drilling in both these projects in the next few months with the anticipation of selecting the location for 'pilots' to be drilled early in 2004. Initial funding for Comet Ridge Limited has been from Strike Oil. Additional equity raising by Comet Ridge is now planned to fund an accelerated ongoing program to prove gas reserves for early production from these projects. |
