PPC.L Regulatory News (PPC)

13 Nov 2007 09:47

Meridian Petroleum PLC13 November 2007 13 November 2007 Meridian Petroleum plc ("Meridian" or "the Company") Operations Update Meridian Petroleum (AIM: MRP) announces an update on its operations in theUnited States. Orion 36 The Orion 36 well continues to perform strongly. The Company is gaining valuableexperience in the operation of the complex de-sulpherisation facilities on thesite, and a greater awareness of costs and the optimisation of productionprofiles. Following our last update on 17th October 2007, we continued to increaseproduction to 3.7 mmcfd with wellhead pressures of 800 psi. The Company and itsoperator maintain the view that the well can produce significantly more thanthis, but for various reasons outlined below, it has not yet pushed productionbeyond this level. The processing facility utilises two large Sulfatreat towers which are used toeliminate the H2S in the gas stream. Regulatory and operational proceduresrequire that the material in these towers is closely monitored and changed atregular intervals. Prolonging the life of this material will keep costs down andconsequently from late October we have been testing the rate of deterioration inthe Sulfatreat at different flow levels between 1 and 3.5 mmcfd. As a result ofthese tests, average production since then has been around 2.5 mmcfd and at thislevel of production wellhead pressure has increased to some 1100 psi. We are nowof the view that the first change-out of the sulfatreat material will take placewithin the next 2 weeks. Since start-up on 24 August 2007 the Orion 36 well has produced some 180 mmcf ofgas and over 2500 bbls of natural gas liquids (NGL). Average daily gas production rates by month (allowing for downtime) for the lastquarter at Orion were: August 1.55mmcfdSeptember 2.55mmcfdOctober 3.15mmcfd Production of NGL has steadily increased since start-up and is now averagingaround 50 bbls/day. These liquids are of reasonable quality for refiners and thefirst load was priced at over $55/bbl, around 70-75% of the West TexasIntermediate price (WTI) at the time. However with the subsequent rapid increasein WTI towards $100/bbl, the Company does not expect to receive such a highpercentage of WTI for subsequent loads. The Company has completed all the tests required by the State and FederalAuthorities and expects to receive confirmation of the Company's productionpermit and allowable flows shortly. Compliance with these requirements resulted in 4 days of downtime in October butthe Company views this as exceptional. Based on operational experience to date(including some downtime in November), the Company estimates that an averagedowntime of approximately two days per month for maintenance and materialreplacement is likely. The Company has now completed its assessment of the total capital expenditurecost of bringing Orion 36 on-stream at $3.5 million. In addition to this sum,certain major items of equipment are being leased at a cost of some $30,000 permonth. In accordance with the partnership agreement, the Company will retain 97%of revenues net of costs, taxes and over-riding royalties until the $3.5 millionis recovered and 72% thereafter. Revenue from Orion 36 continues to benefit from the sustained high prices forWTI and natural gas and at the 3.5mmcfd output level which was comfortablymaintained during the second half of October, daily gross revenue was in excessof $30,000. Milford 36 The extended test of the Milford 36 well has been delayed by commerciallysensitive discussions with certain minority partners who are reluctant tocontribute to the cost of the well test. The Company, supported by the operator,Wellmaster, has now pushed ahead and issued the AFE and cash-call, and expectsto resolve the situation shortly. The expected outcome is that the Company's netrevenue interest in the well is likely to increase from 29% to over 40%. Ed Childers, whose appointment as the Company's new Chief Operating Officer(COO) was announced yesterday, will oversee the test and a further update willbe issued in due course. Calvin Field As previously announced, the COO has significant experience of operations inLouisiana and will be reviewing our approach to developing the Calvin Deepprospects with our partner Ensight. Our current plan remains the re-entry of the5-29 well in Q1 of 2008, and a more detailed update will be issued once thisreview has been completed. The Calvin 36-1 well continues to produce steadilybut at less than 50mcfd. Stephen Gutteridge, Chairman of Meridian Petroleum, said: "This is a comprehensive update which gives an insight into the detail of ouroperations at Orion. We now have nearly three months of important operatingexperience, during which output of both gas and liquids has steadily trendedupwards. Based on this experience, we believe that higher output levels areachievable, but with only one significant producing asset at present, we willnot take any unnecessary risks. Beyond Orion, there is short-term potential forincremental production from Milford 36, sizeable medium-term upside from theCalvin 5-29 re-entry, and beyond that Calvin deep gas and CBM. We intend todevelop the business at a pace we can afford, and we are looking to underpinfuture value with good cash-flow and increased P1/P2 reserves, supported bystrong technical ability and a prudent approach to planning." John Randell, who works for Wellmaster, Inc., is an independent contractor who meets the criteria of a qualified person under the AIM guidance note for mining, oil and gas companies, has reviewed and approved the technical information contained in this announcement with respect to Orion. Ends For further information contact: Meridian Petroleum Plc Ambrian Partners Parkgreen CommunicationsStephen Gutteridge, Chairman Tim Goodman Simon Robinson+44 (0) 20 7811 0145 Richard Greenfield Erica Nelson +44 (0) 20 7776 6400 +44 (0) 20 7851 7480 This information is provided by RNS The company news service from the London Stock Exchange