07/07/2008 - 15:08

Tap forecasts lower earnings for HY08

07/07/2008 - 15:08

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West Perth-based Tap Oil Ltd has forecast a significant impact on its bottom line following disruptions at its Woollybutt oil field which kept it offline for most of the year.

Tap forecasts lower earnings for HY08

West Perth-based Tap Oil Ltd has forecast a significant impact on its bottom line following disruptions at its Woollybutt oil field which kept it offline for most of the year.

In a corporate file interview published on the Australian Securities Exchange, chief executive Peter Stickland gave assurances that the technical issues which forced the shut down of Woollybutt had been rectified.

Last month, production at the oil field re-started following the wrap up of technical and compliance issues. The field is now producing about 6000 barrels a day, and will ramp up to 12,000 barrels over the next couple of weeks.

Mr Stickland said that due to Woollybutt being offline for most of the year, total production would be down by a little over 50 per cent.

"... Although we have benefited from rising oil prices we're expecting our revenue for the first half to be down significantly," Mr Stickland said.

Also impacting on the Tap's bottom line is its direct and indirect partnership in the activities on Varanus Island, where a pipeline rupture and fire at the gas facility last month wiped out a third of the state's gas supply.

Mr Stickland said the company has a comprehensive insurance package covering both the costs of repairs to the Harriet joint venture facility - which Tap has a 12.3 per cent interest in - and business interruption for loss of revenue.

Tap also has an arrangement where it purchases 9.5 terrajoules of gas per day from the John Brookes field, 45 per cent owned by Santos, which is processed by one of the gas facilities on the Island.

Below is an excerpt from the interview:

corporatefile.com.au

What impact on half yearly earnings do you expect from the disruption to Woollybutt production?

CEO Peter Stickland

Woollybutt was off line for most of that period and that has reduced our total production by a little over 50% compared to the June 2007 half and we were still incurring some costs through that period. So although we have benefited from rising oil prices we're expecting our revenue for the first half to be down
significantly.

corporatefile.com.au

Tap has 12.2229% equity in the Harriet JV. In early June, an explosion at the JV's Varanus Island production facilities interrupted domestic gas sales. The operator of the JV, Apache, announced in mid June that it expected a return to partial production within a couple of months. What impact on production and gas sales do you expect for Tap's share? What insurance options do you have such as business interruption insurance?

CEO Peter Stickland

Tap is both a direct and indirect participant in the activities on Varanus Island. Our direct participation is through our 12.2229% equity in the Harriet Joint Venture, which produces both gas and oil through its Varanus Island
processing facility. Production from this facility is not expected to resume until December 2008.

We also purchase around 9.5 TJ per day from the John Brookes field and onsell it to our customers. That's a very profitable arrangement for us. This gas is processed through the East Spar plant on Varanus Island, again operated by Apache. Although this plant was also damaged by the explosion, it was not as severe and production is expected to resume through it in mid August. Tap has a comprehensive insurance package covering both the costs of repairs to the Harriet Joint Venture facility and business interruption for Tap's loss of revenue. Until the insurance claims are resolved we won't know for certain the outcome, however we believe the insurance cover we have in place is quite comprehensive.

 

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