Pan Orient updates Indonesia operations
Thursday, August 29 2013 - 12:40 AM WIB
Citarum PSC onshore Java (Pan Orient operator and 97% ownership)
Capital expenditures of $11.2 million in the first half of 2013 were associated with the continued drilling operations at Jatayu-1 and Cataka-1A.
The Jatayu-1 exploration well had commenced drilling in March 2012, suspended in September 2012 due to drilling difficulties and recommenced drilling in December 2012 utilizing slim hole drilling equipment. A severe overpressure gas zone encountered created an unacceptable level of well control risk in early January 2013 and drilling stopped above the primary target formation. Formation water present in gas zone suggested no commercial potential in the section that had been drilled above the primary objective. The well was abandoned in January 2013.
The Cataka-1A well commenced drilling in early December 2012, suspended in January 2013 due to numerous drilling rig issues and recommenced drilling in May 2013 with a new drilling rig, well design and personnel. The well encountered numerous intervals of severely tectonically fractured shale that were highly unstable and given the drilling difficulties encountered to date and the low probability of reaching the final objective in the Paragi limestone zone, the well has been abandoned.
Exploration drilling to date at the Citarum PSC has been very technically challenging and has not led to commercial discoveries. Pan Orient announced in July that the Company was initiating a farm-out process to seek a partner for continued exploration of the Citarum PSC. The Citarum PSC has significant prospectivity for commercial quantities of crude oil and natural gas, including the defined Cataka and Jatayu prospects, within a region of existing infrastructure and a large deficit of natural gas supply relative to demand, good fiscal terms and an attractive large cost recovery pool.
Pan Orient's has decided to discontinue drilling at the Citarum PSC and to initiate a farm-out process for continued exploration of the Citarum PSC. This results in the future value of the Citarum PSC dependent on the success of exploration drilling operations through the intended farm-out arrangement. As such, the Company is reducing the carrying value of the Citarum PSC exploration and evaluation assets to zero and is recording an impairment charge as at June 30, 2013 of $86.3 million for the exploration and evaluation assets of the Citarum PSC as at June 30, 2013. The Cataka-1A well was drilling until the end of July and drilling costs incurred after June 30, 2013 of approximately $3.5 million will result in an additional impairment charge in the third quarter of 2013.
Batu Gajah PSC onshore Sumatra (Pan Orient operator and 77% ownership)
On January 16, 2013 an additional 1,730 square kilometers (gross) of exploration lands were relinquished at the Batu Gajah PSC, to hold 793 square kilometers (gross).
Capital expenditures in the first half of 2013 of $18.2 with $4.7 million for drilling of the Shinta-1 exploration well, $4.5 million for the Buana-1 appraisal well, $7.9 million of the 400 square kilometer 3D seismic program which commenced in the second quarter and will continue into the third quarter and other capital expenditures of $1.1 million.
The Shinta-1 exploration well encountered sub-commercial oil in the primary Lower Talangakar sandstone target and was abandoned.
The Buana-1 well was an updip appraisal of the North Tuba Obi-1 well drilled in 2011 and results suggested the Buana-1 and the North Tuba Obi-1 fault compartments are not in communication and the natural gas accumulation encountered in the Lower Talang Akar formation of the North Tuba Obi-1 well in 2011 is limited and sub-commercial. The Buana-1 well continued drilling unsuccessfully to a total depth of approximately 3,800 feet, as required by the Indonesian oil and gas regulator and within the secondary basement reservoir objective, and was abandoned.
Based on drilling results in the western portion of the Batu Gajah PSC during the first quarter of 2013, the decision was made to defer the planned Kemala-1 exploration well until after acquisition and interpretation of the 400 square kilometer 3D seismic program is completed.
The major activity in the Batu Gajah PSC for the remainder of 2013 is to complete acquisition and evaluation of the 400 square kilometer 3D seismic program which is focused on the eastern half of the PSC. The estimated cost of this program is $15.8 million, of which $7.9 million was recorded in the first half of 2013.
South CPP PSC onshore Sumatra (Pan Orient operator and 77% ownership)
Capital expenditures were $4.5 million in the first half of 2013 with $4.2 million for the 227 kilometer 2D seismic program which was completed in May 2013 and $0.3 million for capitalized general and administrative expenses and other capital expenditures.
After the evaluation of the seismic program results, the Company has decided to relinquish the South CPP PSC. As part of the relinquishment, it is expected that the Company is required to pay the Government of Indonesia for unfulfilled firm commitments in the amount of $2.8 million, and this amount has been accrued for as at June 30, 2013. As a result of the intended relinquishment the Company is reducing the carrying value of the South CPP PSC exploration and evaluation assets to zero and the Company is recording an impairment charge of $13.3 million for the exploration and evaluation assets of the South CPP PSC as at June 30, 2013.
East Jabung PSC (Pan Orient operator and 100% working interest)
At the East Jabung PSC on-shore and offshore Sumatra capital expenditures of $1.2 million related primarily to the initial costs of the 430 kilometer 2D seismic program which is expected to be completed by year-end at a total cost of $5.5 million.
Capital expenditures in Indonesia of $16.6 million in the second quarter of 2013. During the first six months of 2013 capital expenditures in Indonesia were $35.1 million with $11.2 million at the Citarum PSC, $18.2 million at the Batu Gajah PSC, $4.5 million at the South CPP PSC and $1.2 million at the East Jabung. For the first six months of 2013, capital expenditures were $18.9 million for exploration drilling, $13.1 million for seismic programs, $2.3 million for capitalized general and administrative expenses, and $0.8 for other exploration expenses. (end of excerpt)