Stuart Petroleum Enjoys A Good Drilling Success Rate In The Under-Explored Cooper/Eromanga Basin In Central Australia Stuart Petroleum is among a clutch of small Aussie start-up companies which have established themselves in recent years to take advantage of the fact that a number of Australian hydrocarbon basins are under-explored and that, in some of them, new opportunities have opened up.
Arc Energy, Origin Energy and Voyager Energy have all done well with the Hovea, Jingemia and Cliff Head discoveries in the Perth Basin. These young companies are usually pure exploration plays, assembling acreage and putting together, through farm in and farms out, consortiums to find the oil and gas.
Stuart is an Adelaide based company, which was formed in 1999 with the express purpose of applying for and exploring acreage in the Cooper/Eromanga basin in central Australia. Until 1999 Santos, the large Australian oil and gas producer, had a stranglehold on the basin. Anyone who wanted to do business there had to go in with Santos. There was a widespread feeling that not enough wells were being drilled. The state government of South Australia ended the near monopoly in 1999 and small companies like Stuart and Beach Petroleum moved in. Stuart applied for acreage in the ex-Santos areas. It was awarded four areas in the basin: PEL 90, PEL 93, PEL 102 and PEL 113, covering some 5,051 sq kms.
Stuart was successful on its first time out. In April 2002 Stuart (75 per cent) and Beach Petroleum (25 per cent) discovered oil in three formations, the Birkhead, Hutton and Upper Tinchoo with the Acrasia No 1 well on PEL 90.Two step out wells were also successful and added the Poolowanna and Lower Tinchoo formations to those already discovered. The Acrasia field has been flowing at 1,200 barrels of oil a day and the company’s report for the half year to December 31, 2003 said that 220,000 barrels of oil had been produced. With another discovery contributing from December 2003 Stuart is targeting 300,000 barrels to 350,000 barrels for the full year 2003/2004.
In late 2003 there was another success with the Worrior 1 well on PEL 93. This time Stuart had 70 per cent of the action with Cooper Energy taking the remaining 30 per cent. In December the well flowed at 1,600 barrels a day from the Birkhead and Hutton formations.
Stuart also had a gas find. The Kiwi No 1 well (Stuart 75 per cent) was spudded on the Kiwi Farmout Block of PEL 90 in October 2003. The well was drilled to 2,908 metres. Gas flowed at 9.6 million cubic feet per day. This led to estimates of gas reserves of 3.6 billion cubic feet. Since the find is not close to a pipeline, this is probably not big enough to exploit and further drilling in the area is planned.
There have been disappointments. On the Pando Block, PEL 93, the Karbine No 1 well was plugged and abandoned in 2002. More recently the Saintly well on PEL 113 was also unsuccessful.
But the result is that Stuart now has production of 1,400 barrels per day net to itself and reserves of around 4 million barrels of oil which makes it a significant cash cow. Now this is not Saudi Arabia. But we have a saying at oilbarrel.com which has almost become mantra that in oil and gas all things are relative. There is a 40 per cent success rate on drilling in the Cooper/Eromanga Basin and there are lots of opportunities. The oil and gas is onshore, close to existing infrastructure, cheap to produce and easy to sell.
With oil prices sky high and the Australian dollar moving in the right direction against the American one, cash flow is, shall we say, very healthy. The company reckons after costs it can realise A$25 a barrel. For the six months to December 31 there was a net profit of A$1.5 million, an increase of 321 per cent over the comparable six months in 2002/2003. There is only one month of Warrior in these figures. The second six months of 2003/2004 should see another sharp rise. With Stuart planning involvement in 22 more wells, the net income curve could go on steeply rising.
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