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18 Jun 2009 07:00
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Thursday,Β 18Β June 2009
MERIDIAN PETROLEUM plc
("Meridian" or "the Company")
Operations Update
Meridian Petroleum (AIM : MRP), the oil and gas exploration and production company with producing assets in theΒ USAΒ and exploration licences inΒ Australia, announces an update on the Company's current activities.
DevelopmentΒ Update
EastΒ LakeΒ VerretΒ ("ELV"),Β Louisiana,Β USA
As previously announced, the latest Competent Person Report on ELV by DOR Engineering (as at 1 January 2009) showed Total Proved Reserves of 2.629 bcf of natural gas and 360,000 bbls of oil. Over 60% of these proved reserves are currently undeveloped and, over the remainder of this year, the Company plans to implement a drilling programme to bring a substantial proportion of these reserves on-stream. Two wells have already been identified (McKerall B-9 and McKerall 1 sidetrack) and further locations are being evaluated
McKerall B-9Β Well
TheΒ primary target for theΒ McKerall B-9 wellΒ isΒ proven undeveloped ("PUD"),Β gross naturalΒ gasΒ reserves of 3-5 bcfΒ inΒ twoΒ potential producing zonesΒ atΒ depthsΒ of around 11,000 feet.Β Our evaluation has also highlighted substantialΒ possibleΒ oil reservesΒ both at this depth and atΒ around 10,400 feet.Β
In order to drill the well,Β a new drilling and production unit needed to be formed,Β and this was submittedΒ at a State ofΒ LouisianaΒ public hearing on 28 May 2009, with approval expected shortly.Β MeridianΒ will beΒ the operator for the well, withΒ an initialΒ 23% working interest, and will shortly be requesting partner approval of drilling expenditure of just under US$3 million. Partners have 30 days to confirm their approvalΒ and if any partners decide not to consentΒ the Company will increase its working interest,Β potentially to over 50%.
The McKerall B-9 well isΒ considered to beΒ the most attractive PUD location at ELV, withΒ initial grossΒ productionΒ potential assessed at overΒ 3Β mmcfd.Β The Company is already planning for completion of the well and production through the existingΒ ELV processing facility.Β Completion costs are currently estimated at around US$2.8 million. At the increased working interest level,Β Meridian's total expenditure is estimated at someΒ US$3 million and the Company is currently in discussion with Macquarie Bank on the optimum approach for funding the well.Β Β
McKerall 1 Sidetrack
The McKerall 1 well is currently producing around 20Β barrels of oilΒ per day ("bopd")Β and 125,000Β cfd of natural gas.Β MeridianΒ has a 45% working interest in the well.Β Gross reservesΒ currentlyΒ in production are less than 15,000 bbls of oil and minimal quantities of gas, butΒ theΒ sidetrack of the well isΒ intendedΒ to accessΒ significant, up-dipΒ PUDΒ oilΒ reservesΒ which should be producibleΒ at aΒ higher rate with less water.Β
In order to drill the sidetrack, the existing well will be permanentlyΒ abandonedΒ and this decision will require 100% approval from existing partners, which cannot be guaranteed. The Company is currently in discussion with partners to obtain this approval,Β or alternatively to acquire their interests,Β and ifΒ we can achieve full agreement in a timely manner,Β there is theΒ potential to drill the well immediately following on from McKerall B-9, which wouldΒ result in considerable savings on rig mobilisation costs.
AustraliaΒ
The Company has received initial feedbackΒ onΒ the processing of the 3D seismicΒ data on PEL 82. Data processingΒ remains on schedule for completion by the end of June and very detailed processingΒ is currently being undertaken toΒ filter out any 'noise' around the data and ensure a high quality end product.Β Initial interpretation will begin shortly and will continue through July.Β Processing so far has revealed a significantΒ improvement in theΒ amount of workable data at target depths compared to the old 2D data, which will enable better mapping of the potential reservoir structures andΒ clearer identification ofΒ otherΒ features such as fault trends.
Although it is too early to judge the outcome of the 3D interpretation, aΒ number of potential drilling partners haveΒ now been contacted, opening up the opportunity for more detailed discussions once theΒ fullyΒ interpreted 3D data is available in the third quarter.
ProductionΒ Update
ELV,Β Louisiana,Β USA
The strong March production at ELV, highlighted in the previous update, has continued through April and May with net gas production of 33.4 mmcf and 33.8 mmcf respectively.Β Net oil production was 1,327 bbls in April and 1,325 bbls in May.Β
Average daily rates of production were 230 and 224 barrels of oil equivalent per day ("boepd")Β in April and May respectively.Β In terms of net production, ELV has been the Company's largest producing asset since March 2009 but,Β with much lower costs than the sour gas Orion field, it has been the Company's major cash generatorΒ since before the endΒ of 2008.
The average gas price received for ELV production over the April/May period was US$3.70/mcf.
The Company's hedging contracts delivered profits of US$268,000 in April and US$175,000 in May.
Orion 36 Well,Β Michigan,Β USA
Average gross daily gas production wasΒ 1.72Β mmcfd in MayΒ andΒ has averaged 1.55Β mmcfd so far in June.
Net production toΒ MeridianΒ in MayΒ (based on a Net Revenue Interest of 54.589%) wasΒ 29.1Β mmcf of gas andΒ 977Β bbls of liquids.Β This equates toΒ aΒ production rate ofΒ 188Β boepd.Β
Current flowing well-head pressure is in the range of 140-145 psi.Β Since production start-up in August 2007, Orion has produced 2.17 bcf of gas up to the end of May 2009, 90% of projected recoverable reserves,Β and both production levels and well-head pressures have performed almost exactly in line with theΒ independentΒ projections of RPS Energy.Β The Company expects to be able to physically produce the well down to pressures ofΒ 20 -25 psi,Β although continued low gas prices combined with the relatively high operating costs may make it uneconomic to do so.Β On that basis the Company expects Orion to be shut-in sometime during Q4 of this year and provision for any associated costs was made in the 2008 Accounts.Β The Company is currently evaluating options to maximise the cash generation potential of Orion over the rest of 2009.
The average price for Orion gas sold in MayΒ was US$4.04/mcf.
Stephen Gutteridge, Chairman of Meridian, said:
"The further development of the proven reserves at ELV is an attractive project with substantial targets and low drilling risks. It has taken time to complete the various unitisation and partner consent processes, but, subject toΒ finalisingΒ funding,Β we expect to commence drilling the McKerallΒ B-9 wellΒ no later thanΒ August. Depending on our working interest level, this well alone is projected to increase ourΒ ELVΒ netΒ production by 60%Β toΒ 150%, and together with the potential for higherΒ USΒ gas prices this winter, this would substantially enhance our existing,Β positive cash-flows."
For further information contact:
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Meridian Petroleum |
+44 (0) 207 811 0140 |
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Stephen Gutteridge, Chairman |
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|
Evolution Securities |
+44 (0) 207 071 4300 |
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Robert Collins, Adam James,Β Tim Redfern |
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Financial Dynamics |
+44 (0) 207 831 3113 |
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Ben Brewerton/Ed Westropp |
Ed Childers, the Company's Chief Operating Officer, who meets the criteria of a qualified person under the AIM guidance note for mining and oil and gas companies, has reviewed and approved the technical information contained in this announcement.
- Ends -
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