Shares in Carnarvon Petroleum have regained some of yesterday’s losses, after the oil and gas explorer revealed plans for its lesser known Buffalo project in the Timor Sea.
Shares in Carnarvon Petroleum have regained some of yesterday’s losses, after the oil and gas explorer revealed plans for its lesser known Buffalo project in the Timor Sea.
The company’s share price fell more than 30 per cent on Monday to 41 cents each following an update that said drilling results at its Phoenix South had come in at the lower end of the forecast range.
Yesterday’s fall came after Carnarvon’s share price had more than quadrupled in the past month on the back of an oil discovery at its Dorado-1 well in the Carnarvon Basin, up to a peak of 63 cents per share last week.
In a letter to shareholders today, managing director Adrian Cook said its 100 per cent-owned Buffalo project was economically viable.
“BHP produced oil for several years at Buffalo before the field was successfully abandoned in 2004,” he said.
“It’s important to note that the field was still producing some 4,000 barrels per day when it was abandoned.
“Carnarvon’s technical team, convinced that there could be a quantum of oil left behind that was material for a junior and commercially recoverable, set about applying modern seismic data technology to answer this question.
“Using cutting-edge reservoir mapping technology, we have remodelled the project and identified a very attractive redevelopment project together with new exploration targets.”
Mr Cook said that, at today’s oil price, the project would generate revenue of more than $3 billion over a project life of a few years.
“Importantly the capital expenditure can be predominantly or entirely funded by Carnarvon,” he said.
Carnarvon shares were up 16.54 per cent at 47 cents each at 12.30pm AEDT.
Mr Cook said the company was progressing discussions with the Timor-Leste government and was targeting drilling in 2019.
“While we won’t get the adrenaline rush of an exploration discovery from the first Buffalo well, it is expected to prove up a resource with total project costs modelled at around $US20 per barrel,” he said.
“This would make this among the lowest cost structures we’ve ever seen, indicating the project will have attractive economics in any foreseeable oil price environment.”
Mr Cook said the company was focused on commercialising Dorado, and expected to provide volumetric estimates to the market in the near future.
Carnarvon holds 20 per cent of Dorado, while Quadrant Energy, the operator, holds 80 per cent.
