OilVoice - Niko Reports 2009 Second Quarter Results

Niko Reports 2009 Second Quarter Results

Sunday, August 16, 2009

Niko Resources Ltd. reports its financial and operating results for the quarter ended June 30, 2009.

Operational Highlights

Development
- Production from the D6 gas field began in April 2009 increasing Company-wide production in the quarter ended June 30, 2009 by 65 percent over the previous quarter to 160 MMcfe/d. Company-wide production is currently at 230 MMcfe/d.

Exploration
- At D6, the AR2 and AS1 gas discoveries were drilled in proximity to the previously announced R1 discovery. The BA2 well is currently being drilled.
- The Khoja-1 well in Cauvery was unsuccessful, but had indications of gas and oil while drilling. Drilling of the Khoja-2 well commenced in July 2009.
- At NEC-25, the AJ2 well discovered gas.
- Processing of 3D seismic in Pakistan is continuing.
- 2D seismic in Kurdistan was completed and processing has commenced.
- Acquisition of 2,400 square kilometres of 3D seismic commenced in the Southeast Ganal Block in Indonesia in July 2009.

New Ventures
- In Indonesia, Niko acquired interests in three production sharing contracts in May 2009 resulting in an additional 15,000 square kilometres of gross acreage. Niko will operate and has a 67 percent working interest in one of the blocks and a non-operated 25 percent working interest in the other two blocks.

- In Trinidad, Niko signed an agreement whereby it will have a 26 percent interest and operate the 2AB shallow water block offshore Trinidad.

Production

Gas production from the D6 Block commenced in April 2009 and increased Niko's total production in the quarter ended June 30, 2009 by 65 percent from the previous quarter. Primarily as a result of D6 gas production, average Company production for the year ending March 31, 2010 is expected to increase to 269 MMcfe/d, which is a 216 percent increase over fiscal 2009. Production from the Dhirubhai 1 and 3 gas fields is currently in excess of 1,280 MMcf/d (128 MMcf/d working interest to the Company) and is targeted to reach 2,800 MMcf/d (280 MMcf/d working interest to the Company) before calendar year-end.

Oil production from the MA field in the D6 Block remained shut down from March 22, 2009 to April 25, 2009 for the hook-up of the Phase II sub sea facility and connection to the floating production, storage and offloading vessel. Production averaged 8,500 bbls/d (850 bbls/d working interest to the Company) during the quarter and there was one sale resulting in sales during the quarter of 5,000 bbls/d (500 bbls/d working interest to the Company). Oil production is targeted to reach up to 35,000 bbls/d (3,500 bbls/d working interest to the Company) before March 31, 2010.

Gas production from Block 9 in the quarter ended June 30, 2009 was 95 MMcf/d (63 MMcf/d working interest to the Company) and current production is in excess of 110 MMcf/d (73 MMcf/d working interest to the Company) including the addition of production from the Bangora-3, which was put on-stream in June 2009.

Development

D6 Block - Dhirubhai 1 and 3 Gas Development: Gas production commenced from the Dhirubhai 1 and 3 discoveries in April 2009. Additional wells in the Dhirubhai 1 and 3 gas fields were completed during the quarter for a total of 17 of the 18 wells being completed to date. Nine of the wells have been connected and eight tested with a combined productive capability of approximately 1,940 MMcf/d (194 MMcf/d working interest to the Company). Contracts have been signed for the equivalent of approximately 1,508 MMcf/d (151 MMcf/d working interest to the Company) and the customers are currently taking approximately 1,280 MMcf/d (128 MMcf/d working interest to the Company).

Exploration

India
D6 Block: The AR2 and AS1 discoveries were drilled in proximity to the R1 well. These wells extended the gas accumulation originally discovered by the R1 well and as a result enhanced the potential natural gas resource in this area. The Company is currently drilling the BA2 well. The Company expects a continuous exploration drilling program to proceed on numerous prospects within the block.

D4 Block: The initial interpretation of the data within the 3,600-square-kilometre 3D seismic survey acquired has identified several areas of interest, which will be fully analysed as part of the ongoing evaluation. Processing and interpretation of the data are expected to be completed in time for the Company to begin drilling in the second half of calendar 2010.

Cauvery: The Khoja-1 well was drilled to a total vertical depth of 4,366 metres in June 2009. Indications of both oil and gas were encountered while drilling. Two drill stem tests were conducted, but both failed to recover a measurable flow of hydrocarbons to the surface and the well was abandoned. With the results of Khoja-1 confirming hydrocarbons in the area, the Company elected to drill the Khoja-2 well, which spudded in July 2009. The primary target of the well is the Cretaceous-Jurassic-Basement interval.

Hazira Block: The 30-square-kilometre transition zone 3D seismic survey is designed to explore for deeper oil and gas targets in the eastern half of the Hazira block. The survey has been merged with the offshore 3D seismic previously acquired providing 3D seismic coverage of almost the entire Hazira block. Evaluation of results is well advanced and a multi-well drilling program will be proposed to commence in the first calendar quarter of 2010.

NEC-25 Block: Approximately 1,000 square kilometres of 3D seismic have been acquired along the central portion of the northwest boundary of the previous 3D surveys. The AJ2 well finished drilling in July 2009 and discovered gas.

Pakistan
The 2,000-square-kilometre 3D seismic program acquired during fiscal 2009 is expected to identify stratigraphic potential, resolve structural complexity and indicate the presence of hydrocarbons. Processing of the 3D data should be completed in the third calendar quarter of 2009 with interpretation and selection of drilling locations to follow.

Madagascar
Interpretation of the 7,600 kilometres of reprocessed 2D seismic is continuing. Further evaluation of the block is planned including acquisition of a high-resolution multi-beam survey and a sea floor coring program intended to identify sea floor oil and gas seeps. Future work as prescribed in Phase II includes the acquisition of a 3D seismic program to be designed based on results of the 2D seismic reprocessing and the multi-beam survey. The Company expects to drill a well in the second calendar quarter of 2011.

Kurdistan
The 350 kilometre 2D seismic program has been completed covering the entire block including the surface structure that dominates the Qara Dagh block. Processing is nearing completion and interpretation has commenced. Interpretation will focus on resolving the sub-surface structural picture and characterizing potential reservoir sections leading to the selection of a drilling location. Drilling is expected to commence in the second calendar quarter of 2010.

Indonesia
Niko has acquired interests in several blocks in deepwater offshore Indonesia. Indonesia has long been a prolific oil and gas producing nation with very large reserves; however, its deepwater areas have remained essentially unexplored. All blocks have sea bottom oil and gas seeps and large structural features, and several have direct indication of hydrocarbons on seismic. The single well commitment for each block will follow seismic acquisition and interpretation.

The Company has arranged for a major international seismic contractor to shoot a 3D spec survey in both the Southeast Ganal and West Sageri blocks, and this program commenced in July 2009. Additional 2D seismic surveys will also be acquired in these blocks and a contract for these surveys is expected to be signed in September 2009 with acquisition to commence prior to the end of 2009. This 2D vessel will also conduct new seismic surveys in the Bone Bay, South Matindok, Kofiau and Seram blocks. In the Kofiau Block, both a 2D and a major 3D seismic program are planned and acquisition of the 3D is expected to commence in the fourth quarter of calendar 2009.

Trinidad
In July 2009, the Company acquired the right to earn a 26 percent interest and operate the 1,605 square-kilometre shallow water block 2AB offshore Trinidad. Both the assignment of the interest and the operatorship are subject to approval from the government of Trinidad and Tobago. The Company has minimum work commitments to acquire and process 864 square kilometres of 3D seismic and drill three exploration wells within three years.

Operating Expense

During the three months ended June 30, 2009, operating expenses averaged US$0.45/Mcfe. Operating expenses increased during the quarter due to the start-up costs related to the commencement of D6 production while production rates were ramping up during the quarter and are anticipated to fall significantly on a unit-of-production basis once the D6 gas field is producing at designed capacity.