KUALA LUMPUR: 3D Oil Ltd, the equal joint-venture (JV) partner of Hibiscus Petroleum Bhd to develop oil fields in Australia, is confident that their first project, the West Seahorse oilfield, will start producing oil and generating income by 2014.
Some 50% of West Seahorse’s total oil reserves will be produced in the first year.
Newell: ‘Once we start production, we can get the payback in a matte r of months.’ 3D Oil managing director Noel Newell said he expected West Seahorse to generate revenue of A$740mil (RM2.38bil) that would, in turn, translate into a profit of A$300mil (RM964.5mil), based on the estimated 9.2 million barrels of oil reserve there.
“Initially, we will produce 6,000 to 8,000 barrels of oil per day from two drilling wells that will generate revenue of A$600,000 to A$800,000 per day. One interesting thing about this field is that it will produce oil so quickly that you can get 50% of your total production in the first year.
“Once we start production, we can get the payback (making profit and recover capital) in a matter of months,” he told StarBiz.
Although the estimated reserve of West Seahorse is 9.2 million barrels, Newell said oil company usually did not extract all but would leave some behind. In the case of West Seahorse, they would extract about 7.4 million barrels.
It was reported that Hibiscus and wholly-owned unit Ocenia Hibiscus Sdn Bhd would invest A$29mil (RM95.5mil) for a 13% stake, or 30.96 million new shares, in the Australian-listed 3D Oil.
Meanwhile, via Carnarvon Hibiscus Pty Ltd, a wholly-owned subsidiary of Ocenia, Hibiscus has entered into a conditional farm-in agreement with 3D Oil.
The deal was for a direct 50.1% stake in the developing asset of VIC/P57 for A$13.5mil (RM44.4mil) and an additional investment of A$13.5mil (RM44.4mil) to work on the asset.
Within the permit of the VIC/P57 exploration licence is the West Seahorse field.
From the JV, Hibiscus is expected to receive preferential cashflow until it recovered its farm-in investment. It will get a payback of 74.9% of petroleum produced until it recovers the A$27mil it initially invested, then this would revert to 50.1%.
Both 3D Oil and Hibiscus would also enjoy more than A$70mil (RM225mil) tax credit granted for offshore development there.
Newell said West Seahorse was located in the Gippsland Basin, the most prolific oil area in Australia. However, he believed it had not been explored for small fields.
The area has the highest historical exploration success rate in Australia where more than four billion barrels of oil have been discovered.
Dominance of Esso/BHP JV on high-impact projects have resulted in a relatively few marginal oil discoveries.
“Next to West Seahorse is Seahorse, a JV field of ESSO/BHP which has 20 years of production history. And we are confident that West Seahorse has similar capacity.
“The production cost is also lower as it is located in shallow water. Coupled with the tax credit, the project looks very attractive. The quality of oil there is of Brent crude, which always trades at a premium of the West Texas crude,” he said.
On the partnership, Newell said Hibiscus was the first company that 3D thought would strategically complement its skills.
“Hibiscus is also able to provide the capital to kickstart this project. This deal is transformational for us as we are looking to potentially drill more prospects in the basin,” he said.
Beyond West Seahorse, Newell revealed that the JV had two other potential oil fields – Sea Lion and Felix.
“We can use the cash generated from West Seahorse to give shareholders some returns and also to develop the other two fields. Sea Lion is closer to West Seahorse, thus we are looking to develop that next, probably start drilling at the end of 2013. It potentially has a reserve of 11 million barrels.
“The Felix field is like an icing on a cake due to its sizeable nature of about 100 million barrels. The earliest we will probably drill is at the end of 2014. Once we start producing from this field, we are looking at billions in revenue,” he said.
Newell said 3D Oil faced challenges in finding the right partner with the skills and fund to kickstart the project until it met Hibiscus.
“Hopefully, this deal will transform us into an oil producer and mid-cap oil player,” he said.
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