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ANZON ENERGY


Anzon Energy: A Closer Look
By the Proactiveinvestors.com team.

Vital statistics Date: 9th March 06
Epic: AEL
Shares Issued: 70.1 million
Share Price: 99p
Market Cap: £69.4 million
1 Year Range: N/A
Sector: Oil & Gas Production
News: Latest
Website: http://www.anzonenergy.com
Other Articles: AEL




Anzon Energy (AIM:AEL) the UK listed oil and gas explorer has exploration and production assets in Australia and Indonesia.

The structure of the company is quite complicated, it has exposure to an oilfield development through 56.5% ownership of Anzon Australia (ASX:AZA). Anzon Energy also has a direct working interest (wi) of 90% in two Indonesian exploration licences.

Anzon Australia’s main assets are the Basker-Manta oilfield and the smaller gummy gas field in the Gippsland basin area of the Bass straight offshore Australia. Commencement of drilling of Basker-2 developmental well occurred in August 2005, the first of a four well drilling programme to bring field development production up to 20,000bod by mid-2006. At the time AZA had a 62.5% wi in this project with the remaining 37.5% wi held by the joint venture partners Beach petroleum. The field development brought into use the Floating, Production, Storage and Off take (FPSO) vessel the “Crystal Ocean”, the first time a FPSO has been used in the Bass straight. The Crystal Ocean has been contracted to AZA until at least January 2008, with an option for at least three extensions for a total of four years.

The field was put on an extended production test (EPT) and the subsequent production was transferred from the Crystal Ocean to the 680,000 barrel capacity Aframax-class shuttle tanker the “Basker Spirit”. The Basker Spirit is also contracted to AZA for a period of three years. Basker-2 was brought into production in November 2005 at a rate of 9,500bopd (Barrels of oil per day) and 10mmcfd (10 million cubic feet per day) of solution gas without associated water from the upper oil pay zone.





Subsequent production was achieved from a lower net pay zone of the Basker-2 well and flow of 5,000bopd was achieved. An established production index form the aggregated flow from both upper and lower zones has suggested a flow of 11,500bod when put on production during the full field development.

During December 2005 Beach Petroleum decided to exercise their option to buy a further 12.5% of the Basker-Manta development project. As a result a cash payment of A$50m was to be made to Anzon Australia. There is also a small royalty to be paid by Beach on any oil production over the 30.1mmbbls of current P2 reserves. On the 12th of January 2006 the Basker Spirit made its first delivery of 300,000 barrels of Basker-Manta oil for delivery at the crib point terminal in Westernport Bay. The value of the oil was estimated at A$25m (AZA’s share approximately A$12.5m). The increased stake taken by Beach Petroleum and the subsequent production from the EPT has left Anzon Australia in a healthy cash position by the end of February 2006.

The semi-submersible drilling rig “Ocean Patriot” was then moved into position to drill the second production well in the field development plan. Manta-2 commenced drilling (spudded) on the 18th of January 2006. Due to the strong production performance of Basker-2 during the EPT, the full field development (FDD) was thought to be capable of bringing online up to 35,000bopd at peak production. These very high production rates are thought to be possible via a water drive mechanism in the structure forcing the oil up into the perforated well bore. By February 5th production from the field totalled 412,645bbls of oil, production during January alone was 175,584bbls from a production period of 26 days.

The results of the Manta-2A development well indicated shows of 32.6m of oil sand thickness and a 24.7m gas sand thickness, some 25% increase from the data obtained from the drilling of the Manta-1 well by Shell in 1984. It is clear that from the increased oil sands in the Manta-2A developmental well that there is scope for further P2 upgrades from this field as occurred previously as a result of the Basker-2 well. Manta-2A was production tested and maximum flow rates of 6443bopd were achieved during the test, operations were suspended and the well was shut-in, and is due to be tied-in to production facilities during Q3 2006. The semi-submersible rig Ocean Patriot is now progressing to drill Basker-3, Basker-4 and Basker-5 development wells over the next 4 months before full field production can begin, approximately by July 2006.


Back in August 2005 the proven and probable (P2) reserves for the Basker-Manta oil field were 23.3 million barrels of light oil. As a result of the Basker-2 well, an independent reserve report by Gaffney Cline and Associates upgraded the P2 reserves by 30% to 30.1 million barrels. As the field is being developed the reserves will be reviewed, and if the results of the Manta-2A well are anything to go by, there is room for more upgrades to total P2 once all of the developmental wells have been completed.

One of the most notable things about the Basker-Manta field development is Anzon’s ability to bring a marginal field discovery to full field development within 2 years of acquisition from Woodside Petroleum. That shows significant efficiency on the part of management, a field of contrasting size in the North Sea would take approximately 2-4 years to see first production and full field development. First production from the EPT Basker-Manta was achieved in not much more than 12 months of acquisition.

There is significant room for growth in both reserves and production from Anzon Australia and the rapid development of Basker-Manta could bring is over US$950k per day to AZA (based on a wellhead price of $55usd per barrel and 50%wi of 35,000bod). AEL’s indirect share of those revenues equates to just over US$540k per day by year end. Establishment of suggested peak flow rates will require further success on Basker-Manta, but with the results from the drill bit to date they look quite achievable.

AEL have acquired a 90%wi in two exploration licences in Sumatra (Indonesia) in 2001, they are the Kaya and Kruh. These have some P2 reserves, namely 3mmbbls and 8-10mmbbls respectively. Exploration upside of AEL’s core Indonesian assets has been suggested to be in the region of 50mmbbls. The seismic shot over these Indonesian properties is currently being evaluated for the best location to carry out future drilling. In a recent presentation by AEL, areas such as the Middle East and offshore west coast of Africa have been highlighted as areas of speculative interest to AEL’s management. With the success of the subsidiary AZA to date, an acquisition of exploration licences in these speculative areas couldn’t be ruled out.

The author of this article is a shareholder in Anzon Energy.



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