PETSEC ENERGY LTD
Petsec Energy (PSA) Interim Results Conference, August 2008. Speaker: - Terry Fern, Chairman & CEO.
Thu, 28 Aug 2008 01:00PM
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Mr Terry Fern
Thu, 28 Aug 2008
01:00PM Australia/NSW
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PETSEC ENERGY LTD (PSA)
ASX code: PSA
Website: http://www.petsec.com.au/
Industry: Energy
Principal Activities:
Oil & gas exploration, development and production; Investment in mineral exploration, development and production; General investment.
Address:
1 Alfred Street, Goldfields House, Level 13
SYDNEY
NSW
Phone: (02) 9247 4605
Fax: (02) 9251 2410
Executives & Directors
Mr Terry N Fern , Chairman, Director, CEO
Mr David A Mortimer , Non Exec. Director
Dr Peter E Power , Non Exec. Director
Mr Craig Jones , Company Secretary
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Company ASX Announcements
Company ASX announcements can be viewed on the ASX website.
Announcements from the preceding six months are shown below.
Please refer to the relevant stock exchange if any of the above information is incorrect
PETSEC ENERGY LTD (PSA) Events
Australia/NSW
PETSEC ENERGY LTD (PSA)
| Pipeline Maintenance to cause Temporary Shut In of CA 31/32 | Wed, 19 Nov 2008 |
| Third Quarter Report period ended 30 September 2008 | Thu, 23 Oct 2008 |
| Third Quarter Release correction | Thu, 23 Oct 2008 |
| September Quarterly Results Teleconference | Tue, 21 Oct 2008 |
| Appendix 3X | Tue, 21 Oct 2008 |
| Miles Timber No 1 Well Test 1.7 MMCFD and 170 BOPD per day | Fri, 17 Oct 2008 |
| Appointment of Non Executive Director | Tue, 14 Oct 2008 |
| Petsec production increases to 27 million cubic feet of gas | Tue, 14 Oct 2008 |
| Petsec awarded two new leases North Padre 929 and 934 Gulf o | Tue, 23 Sep 2008 |
| Post Hurricanes Production Update | Thu, 18 Sep 2008 |
Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.
PRESENTATION BY TERRY FERN, CHAIRMAN & CHIEF EXECUTIVE OFFICER OF PETSEC ENERGY (PSA)
“Interim Results Conference”
http://www.brr.com.au/event/40026
THURSDAY, AUGUST 28, 2008, 1:00 PM.
PSA Thank you. Good morning, ladies and gentlemen, and welcome to Petsec Energy Limited Conference Call to discuss the company's half-year financial
10 report and Appendix 4D for the six months ended 30 June 2008. I will speak to certain key aspects of the 4D, and then I will open the call to questions. And I have Senior Management with me, and they will share the questions.
Now to start, Petsec Energy achieved a robust and a very much improved
15 operating results for the six months ended 30th of June. These results are tempered only by disappointing drilling programs both in China and in the USA. Production of 7.8 Bcfe was up 139% from the 3.3 Bcfe produced in the first half of 2007.
20 This production was in line with management's expectations and reflects the significant contribution from the acquisition made last year and the commencement of production from the Mobile Bay discovery that we made last June and later in the previous year.
25 Net revenue after royalties of US$68 million was up 152% from the US$27.2 million made in the first half of 2007, and EBITDAX, that is cash flow, was US$54.2 million that was up 188% from 27.2 million in the previous year. The substantial increase in both revenues and EBITDAX reflect the much higher production that we achieved in the first half.
30
Net cash flow from operations of US$55 million was up 179% on the first half of 2007. This strong cash flow was used to repay US$36.2 million of debt. This is well in advance of bank requirements. Such as net debt, that is debt less cash on hand, was 41.1 million in the 30th of June, and this cash flow
35 was also used to fund 20.3 million of exploration and development.
Now exploration and development expenditure covered drilling of two wells in Beibu Gulf. That was the 6.12 West and East, which as you know were not successful. The drilling of four wells in the USA, two of these were successful.
40 They were the Dickel and Crown Royal wells of Moonshine, and both of those have been completed for gas and condensate production.
And we drilled an unsuccessful well at West Cameron 379 offshore and we found gas but not sufficient to complete in 200 feet of water. And we also had
45 a disappointing well at Triple Play, which we reentered from the well we drilled last year and again, we found a little gas but insufficient to warrant development.
But also the development, it paid for development of the Main Pass 19 oil storage platform that gave us 3000 barrels of oil storage. This allowed us to increase oil production in Main Pass 19 to over 300 barrels of oil per day and it allowed us to bring in Main Pass 18 gas and oil well to full production
5 capacity.
I will cover the development of the Dickel well now known as the East Laurent, the just culminated discovery of Moonshine. We acquired three more leases of the MMS lease sale of its West Cameron 631 and 636 and Eugene
10 Island 102.
And it progressed the overall development program for three oil fields, the 6.12/6.12 South and the 12.8 West fields in Beibu Gulf, China. These three fields contain recoverable oil between 29 and 37 million barrels. And as you
15 are aware, we have 25% interest in those fields. So that gave us earnings before interest, exploration write-offs, impairments, and seismic and tax of US$15.8 million, that was up 42% on the corresponding period of 2007.
As you know, four of the six wells that we drilled this year were plugged and
20 abandoned and that resulted in exploration write-offs of 14.2 million. This was stated in the two quarterly reports released earlier in the year that was 9.3 million for China and US$4.9 million for USA. This is detailed on Page 3 in the Appendix 4D.
25 We also had impairment provisions booked of 18.7 million, 7.9 million of that related to the Moonshine leasehold and seismic costs. One or two of the three wells drilled on the Moonshine project have found modest gas condensate fields. We have conservatively written down Moonshine to $3 million.
30
We made a provision of $6.4 million at Main Pass 20 that was for reserved write-downs. The B1 well started making water in July after the quarterly report and stopped making production. And there was 1.2 Bcfe in that field, but we believe that a remedial program on there will be uneconomic and as a
35 consequence, we made that provision. We also made a provision of US$4.3 million for Sunrise and East Laurent and a number of leases that we will soon relinquish.
As a consequence of these exploration write-offs and impairment provisions,
40 the company recorded a net loss after tax of 18.1 million that compares to a profit of 2.9 million in the corresponding half of 2007.
However, operating margins on a unit basis remain strong. Average net sales price received in the half increased 5% to $8.77 per Mcfe. EBITDAX margins
45 rose 20% to US$694 per Mcfe, and that represents a 79% operating margin. DD&A was US$4.92 per Mcfe that was up 108% on last year.
So that reflects the purchase of reserves that we made in November 2007. We paid $4.25 in Mcfe and higher industry-wide fining and development costs due to much higher steel and service costs experienced as of the last 18 months.
The EBITX margin, which is earnings prior to exploration and impairment
5 write-offs was US$2.02 in Mcfe. That was slightly down from the US$2.25 in Mcfe achieved in the 2007 half-year.
Now moving to Page 4 of the report, the proved and probable reserves at June 30, 2008, and as you know, we have independent reserves report on
10 our US efforts and we have relied upon past reports from the operation in China and the risk report that was issued the end of 2006 for our reserves in China.
We have 3.6 million barrels, that is 21.5 Bcfe for China and carry 34 Bcfe for
15 the USA. It is a total 55.5 Bcfe reserves at the 30th of June. Our independently estimated proved and probable reserves in the USA were slightly higher than ours at 34.7 Bcfe. And the calculated net present value of those reserves using US$8 in Mcfe, US$100 a barrel of oil and a 10% discount rate amounted to US$209 million. This is an interesting number
20 when you would compare to the current market capitalization of Petsec, which is just about US$57 million and an enterprise value of US$98 million when the net debt of 41 million is added to the market cap.
Perhaps this suggests to market these oil and gas prices you are likely to
25 have from current prices of 870 in Mcfe and $118 a barrel for West Texas Intermediate crude or in addition to, perhaps they think our 3.6 million barrels of oil in China are unlikely to be developed.
In the second half of 2008, the company's strong cash flows will continue to
30 be applied to rapid repayment of debt, to building our working capital capacity, to make further strategic acquisitions, and to fund exploration which if successful could have a substantive value uplift for the company.
We also expect to launch a final overall development program for the
35 development of Beibu Gulf. This is the 6.12 and 12.8 oil fields later this year and obtain development approvals from the Chinese authorities.
Production guidance for the entire year is 13 to 14 Bcfe slightly down on what we had given guidance earlier in the year because of Main Pass 270 being
40 shut-in because of third party pipeline issues but nevertheless, we should generate net operating cash flow in excess of US$85 million which was our proposition at the beginning of the year. Thank you, ladies and gentlemen.
PRESENTATION CONCLUDED
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