Drillsearch (DLS) became the first June 30 balancing company to give us a trading update for the 2014-15 financial year yesterday, and in doing so, reaffirmed its involvement in oil and gas, despite the sharp price falls of the past year.
The company told the ASX that it expected to have produced 3 million barrels of oil equivalent for the year up to Tuesday night. That’s a result that would be at the lower end of its previous forecast of 3-3.2 million barrels of oil equivalent (mmboe), but lower than the 3.4 mmboe in 2013-14 (when prices were a lot higher – up to 44% higher in the case of oil).
And it is looking for a similar performance in the new financial year, giving a range yesterday of 2.8-3.2 mmboe.
Despite the slide in oil prices in the year, Drillsearch didn’t follow many of its peers and cut spending on exploration and other work – it said it had completed its largest ever work program in full year 2015, with 41 wells drilled across its acreage.
DLS 1Y – Drillsearch upbeat despite tougher environment
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"A total of 41 wells were drilled across Drillsearch’s acreage – resulting in 12 new discoveries, three in Oil and nine in Wet Gas, and an overall drilling success rate across Oil and Wet Gas of 74%,” the company said yesterday.
"In addition, the Western Flank joint venture undertook significant investment in wellhead capacity including a successful ten-well development campaign to support strong production from our Oil Business.
"That work could see the company reserves boosted.
"Successful drilling results on the Western Flank – including three discoveries, two appraisal wells and ten Bauer development wells – will see an increase in 2P oil reserves, at least replacing reserves produced during FY2015, with risk to the upside.
"In the Western Wet Gas joint venture with Beach, FY2015 drilling included further testing of areas where Drillsearch has carried undeveloped 2P gas reserves.
"The results of the Danville-1 and Antechamber-1 wells, both plugged and abandoned, and the Canunda-2 appraisal well, are expected to result in a reduction of 2P gas reserves booked for the Brownlow-Middleton project area at year-end, with the potential for that reduction to be partly offset by new 2P gas reserves booked at the Ralgnal-1 and Maupertuis-1 discoveries.
"In the Western Wet Gas joint venture with Santos, the exceptional drilling results in FY2015 – seven new discoveries from eight wells – are expected to result in new 2P gas reserves initially being booked at year-end, with the potential for additional 2P gas reserves to be booked following testing work planned in FY2016.
“Margins from the oil business continue to be strong and Drillsearch continues to maintain a robust cash position,” the company said in a statement to the ASX.
But spending cuts are coming and Drillsearch said yesterday it expects the $145 million of capital spending in 2014-15 will fall to $80 million-$110 million in 2015-16.
Managing director Brad Lingo said Drillsearch had delivered another period of exceptional outcomes in the field.
“Even after a period of record investment in our business, we continue to have a robust financial position and a solid platform for growth,” he said in the statement.
The company’s work program for full year 2016 is expected to include drilling up to 22 wells and bringing new and existing gas discoveries online.
Drillsearch shares rose 1.5% to $1.05 yesterday. It releases its full year results on August 26 and the 2014-15 production report later this month.
