Release: Continental Energy announces Yapen Block carried interest in perspective
Tuesday, December 10 2002 - 11:04 PM WIB
Continental Energy Yapen Ltd. President, Richard L. McAdoo said in Jakarta: "With our farm out of interest in the Yapen Block our cash requirements are now zero for the foreseeable future in this high potential but high cost drilling area. Under the terms of our farm out our 10% participating interest share of all exploration costs and expenditures is carried by and paid on our behalf by PT Exspan. PT Exspan's obligation to pay our costs continues through such time as there is an approval of any Plan of Development or 'POD' by Indonesian concession regulatory authorities for the commercial development of the first discovery made in the Yapen Block.
"The POD is prepared by us and submitted to the regulators. The POD consists of a detailed development and exploitation work program and budget which must demonstrate the economic feasibility of a commercial development of the oil or gas field for which the POD is submitted. Oil or gas reserves described in the POD must be independently certified by an internationally recognized firm of professional consulting geologists and engineers. Under most conditions it would take at least one discovery well plus as many to 3 to 5 additional successful appraisal wells to substantiate and prove-up sufficient oil and gas reserves to justify a commercial field development and obtain POD approval.
"Exploration well costs in the Yapen Block are expected to average US$ 7 Million each depending upon drilling depth and water depth. Given a scenario of exploratory drilling success of 1 successful well per three wildcat wells drilled and the need to drill as many as 3 to 5 appraisal wells on any discovery it is reasonable to conclude that at least 6 to 8 wells will likely be drilled prior to any POD approval. This corresponds to an accumulated total drilling cost of $42 to $56 million excluding any additional costs of seismic, engineering, planning, geology or other such costs.
"In monetary terms alone the carry directly saves the Company its 10% share of the drilling costs which it otherwise would have had to expend. More importantly the carry provides for sufficient exploration wells and appraisal wells to make a discovery and take the lion's share of any geological risk out of a development project prior to the Company having to put up additional capital."
Continental Energy is a small oil and gas exploration company focusing its efforts on discovering major reserves in Indonesia where it owns interest in production sharing contracts for two exploration properties, the Yapen and Bengara-II Blocks, covering 3 million acres and a third development property for exploitation of the Bangkudulis Oil Field.(*)