Austral Pacific reports good oil flow rates for Cheal-A4

Operator Austral Pacific reports that positive early test results showed that the well was exhibiting good pressure at surface and producing oil at an yet un-stabilised rates.

Chief executive Dave Bennett said "We are pleased at how readily Cheal-A4 has come on stream, although flows are yet to establish stable levels. Production testing operations have commenced on the Cheal-A4 well".

This initial production test of the Mt Messenger pay sands will continue for a month, before switching to the shallower Urenui pay sands, which will be tested separately and together with the Mt Messenger pay. Pressure gauges have been placed down-hole in Cheal-A3X to monitor reservoir response during Cheal-A4 flow.

Cheal-A4 well, which commenced drilling on October 18, was deviated northeastwards from the Cheal-A site to intersect the Mt Messenger sandstones midway between the Cheal-A3X and the Cheal-2 well. When originally drilled in the mid 1990s, Cheal-2 was outside the area of oil entrapment. The original Cheal-1 well was reopened in 2003 by the Austral Pacific joint venture but production tests showed limited oil and gas flows.

Austral Pacific also reported that the Cardiff-2 well into the deep section of the PEP 38738 deep rights permit had reached 3923m in 12 1/4" hole on November 29. Electric logs were being run prior to running intermediate casing. The objective Kapuni sands will be intersected all the way from about 4000m to the planned 4900m target depth. It will likely be the end of December before TD is reached and testing can begin.

Downstream electricity generator Genesis Energy has a 40% equity interest in the PEP 38738 deep permit and has the right to purchase 100% of the deep gas reserves by funding the Cardiff-2 well up to a $15 million cap. Operator Austral Pacific has a 25.1% interest, International Resource Management Corporation 19.8% and Cheal Petroleum Ltd 15.1%.

Austral Pacific also reports that it is now investigating ways of increasing volumes from the recently opened Kahili gas condensate field (PMP 38153) which the company operates.

The company says the Kahili-1A well continues to under-perform its expected production profile, despite initial good performance. Gas rates are now typically around 500,000 cubic feet per day, and the well is being cycled to assist lifting condensate, which is loading down the well.

Independent analysis indicates the well is depleting a fault bounded compartment low on the southern end of the field, with connection to the larger volume of the field to the north having become limited.

However, updated mapping of the field incorporating recent seismic, has resulted in an approximate 50% increase in the estimated volume of total gas reservoir. This matches more closely the original reservoir engineering reserves estimates.

The alternatives for accessing the predicted larger volume were either a second well (Kahili-2) to intersect the field more than 100m higher on the structure than Kahili-1B, or a deviated or lateral drilling operation from the existing Kahili-1A well-bore.

Austral Pacific said the remapping has also identified the possibility of a fault compartment at the crest of the Kahili structure, that may hold additional gas.

In its report for the latest quarter Austral Pacific says it had a net loss of US$745,266 for the nine months ended September 30, 2004. This compares with a net gain of US$924,065 for the same period of 2003. The decrease was mostly due to there being no net gain on license sales in the latest period (September 30, 2003 US$1,858,884). The company had cash and short-term deposits of US$8.1 million at September 30, 2004 compared to US$1.5 million at September 30, 2003. Working capital as at September 30, 2004 was US$6.8 million against US$3.1 million a year earlier.