14 Nov 2012 08:32
CHAirman's review
Dear Shareholders,
Your Company has continued to make significant progress in evaluating the potential of the extensive, Eocene low permeability "tight" reservoirs in the Cambay Field, onshore Gujarat, India.
The Company's strategy in commercialising the Cambay Field "tight" reservoirs is to apply leading-edge "tight" reservoir evaluation, drilling and production technologies and techniques which have been developed in recent years in the rapidly expanding "tight" and shale gas industry in North America.
In October 2011 an independent international consultant, Netherland Sewell and Associates Inc. assessed significant Contingent and Prospective Resources for the Cambay Field "tight" reservoirs. Positive results were also obtained from the Cambay-76H "proof of concept" horizontal fracture stimulated well drilled during the year - the first well of its kind in India. Encouraging preliminary results from a flow test on the Cambay-73 vertical well also support the potential for commercial recovery rates. The Cambay Field continues to emerge as a potential major asset for the Company with the prospects of generating near term production and cash flows.
The Cambay Contract Area is a large acreage position and is located at the hub of India's largest gas distribution network close to the existing gas grid. The Indian gas market is expected to be one of the fastest growing in the world over the next two decades. The inherent advantages of gas over alternate fuels, has resulted in the demand for gas in India to consistently outpace supply and the gas deficit in India is expected to increase.
While operational difficulties prevented a flow test being conducted on the Cambay-76H well, the Company and its Joint Venture partner, Gujarat State Petroleum Corporation, intend to drill an offset well near to Cambay-76H to complete the "proof-of-concept" phase before proceeding with a pilot development. The Company is also currently seeking to enhance its technical and operational capabilities and recently announced the appointment of Michael Maloney as Chief Operating Officer, based in India.
During the year, the Timor Leste Joint Venture selected the Bazartete prospect to drill as the next proposed exploration well. The Company estimates that this prospect has the potential to contain 70.8 million barrels of mean prospective oil resources (on an unrisked, 100% basis) - or 7.1 million barrels of oil net to Oilex- with a 23% chance of success. The Company is currently seeking to secure a rig, has applied for an extension to the contract term on behalf of the Joint Venture and is addressing funding options.
After the end of the financial year the Company completed a fully underwritten renounceable rights issue with the assistance of Patersons Securities Limited acting as Lead Manager and Underwriter. A total of $7.1 million was raised before expenses, which will assist the Company in funding its share of drilling the Cambay offset well.
We look forward to successfully completing the Cambay offset well and reinvigorating our project mix over the coming year.
To assist us in this programme, we have recently announced the following key appointments :
·; Mr Michael Maloney appointed Chief Operating Officer based in India with primary responsibility being the development of the Cambay Field tight reservoir project.
·; Mr Andrew Pfaff appointed General Manager Operations, initially part-time and then full-time in India when approvals for the next phase of work at Cambay are received.
·; The appointment of a new Chief Finance Officer & Company Secretary based in Perth has been finalized and is expected to be announced at the end of this month.
There will also be some Board changes, as advised in the September quarterly report, With the core members of the team in place and the increasing focus on India, Technical Director Mr Ray Barnes has advised that he will be stepping down as a Director at the close of this Annual General Meeting and he will be available to the Company for assistance on specific projects. The Company is grateful for Ray's contribution to the Company during his 7 years with us, and we wish Ray well for the future.
The 2012 financial year has been a challenging year for the Company with the operational difficulties that we experienced on our India project and an with the uncertain global economy. On behalf of the Board I wish to record our appreciation for the continuing support and dedication of our staff, joint venture partners, contractors, local communities, shareholders and stakeholders during this difficult year, and we anticipate a better year for the Company going forward.
Mr MDJ Cozijn
Chairman
14 November 2012