Who is right about the Cooper Basin oil reserves, Santos, which is cutting back its ambitious in-fill program because it can't find any more, or Beach Petroleum, which is confident of finding more?
Beach said on Friday that it expects to maintain its strong exploration program in the coming year in the area, despite the surprise announcement by Santos on Thursday to scale back its 2008 program of its apparently successful Cooper Oil Project.
Beach Petroleum says it will be looking to increase its activities in the region wherever possible.
Santos said in its third quarter production report that it will reduce the drilling in its Cooper Oil Project (COP) because it has run short of new prospects.
It will still continue with the campaign, but not at the intensive pace it was doing earlier in 2007.
It would seem various problems have contributed to Santos' cutback in its COP drilling campaign from 200 wells this year to about 90 wells next year.
Beach says Santos did made limited references to areas within the Cooper Basin where it will be cutting back, such as the Cooper Basin permit ATP 299P, where Beach doesn't have any interest.
Beach said the COP refers to projects that span the basin from Queensland to South Australia and incorporate a number of joint ventures. Beach is involved in some of these, but not all.
Beach Petroleum's Managing Director, Reg Nelson, said that from his company's point of view, the COP to date has been highly successful in delivering additional reserves and shareholder value.
"In particular, as far as we are concerned, the 2007 exploration program where Beach is involved has identified numerous new oil projects, many of which will be pursued in 2008," Mr Nelson said in a statement issued last Friday.
Mr Nelson noted that Santos had indicated that its 2008 portfolio focus, weighted more towards exploration and delineation, was clearly pursuing opportunities presented in these new survey areas.
Mr Nelson said, "Far from scaling back our efforts in the Cooper Basin, we will be looking to increase our efforts wherever possible.
"It has not been made clear to us as a joint venturer to what extent the proposed Santos "scale back" might involve areas in which Beach is involved, but all I can see is – as in Bodalla five years ago – opportunity where others may fear to tread."
Meanwhile broking comment Friday in the wake of the Santos news was more aimed at the cost to the company of fixing up infrastructure problems in the COP.
Output from the Cooper Oil project, which straddles the South Australian and Queensland borders, fell 19% during the third quarter because of these constraints and it would seem the reason Santos is cutting back on the program next year is because of inadequate infrastructure.
Goldman Sachs JBWere estimated on Friday that it will cost Santos about $100 million to fix the problems, which include the construction of a new pipeline and modifications to a processing plant.
The bulk of the cost, about $80 million, will be required for the new 200 kilometre Jackson-to-Moomba pipeline with construction is expected to be complete by the middle of next year.
Santos says it has been forced to truck oil from the south-west Queensland part of the project due to problems with the Moonie-to-Brisbane pipeline which was shut down in July due to worries about the line's integrity. These have not been sorted out.
Santos says the cost of transporting oil by road has added about $4 per barrel to its Cooper Oil operating costs.
As well, Santos has also has to install modifications to its Limestone Creek processing plant to allow heavier crude oils to be processed.
Santos also announced on Friday that it would pay around $US50 million ($SA55 million) for gas assets in Bangladesh. These include a 37.5% stake in a producing field and some exploration areas. There's a further $US20 million payment to be made if certain production and development targets happen.
Santos shares fell 3.91% on Thursday and they fell a further 51c or 3.4% on Friday to $14.48. Beach shares fell 1c to $1.47 on Friday.
Santos' shares fell 8.93% last week, despite world oil prices climbing over $US90 a barrel. It was the third worst performer for the week in the ASX200.
