Business review and management changes:
During the year, the Company completed comprehensive reviews of its recent exploration performance and a review of its current portfolio of production and development assets. As a result of this work, a number of exploration permits have been relinquished and the scale of near term exploration activities has been reduced to align with internal funding capacity. A new General Manager Exploration and Geoscience, Dave Gaudoin, has been appointed and the Company is renewing its exploration portfolio as well as pursuing its near term exploration plans. These plans include the evaluation of unconventional gas opportunities in the onshore Perth Basin and drilling the Atlas gas prospect in Indonesia.
The review of production and development assets completed during the latter part of the financial year confirmed AWE’s existing reserves estimates for all its core assets except Tui, where a reduction in remaining reserves was reported. The review also confirmed significant reserves growth in the Sugarloaf shale gas project from development drilling during the year and identified potential resource opportunities in the BassGas project which will be targeted as part of the second phase of the MLE project.
Progress on Strategy:
Technical and commercial reviews of the Company’s assets were completed in the second half of the year. Opportunities within existing fields have been identified and production improvement achieved through successful workovers.
The workover of the Cliff Head-12 well has increased production by 1,500 bopd and the Pateke well workover successfully restored production to the Tui project. The Company has established its exploration plans for 2011-12, targeting opportunities within its existing portfolio, adjacent to discoveries and existing facilities.
New management processes have been introduced, which have established greater executive management review of operational and investment decisions. A Contract Committee has been established to review and approve all material contracts and a Reserves Committee established which is responsible for review and approval of reported reserves.
Unconventional Gas:
Part of AWE’s strategy is to pursue targeted growth opportunities as an energy company. This includes opportunities outside the Company’s conventional oil and gas operations. The Company’s shale gas initiative is a key part of this strategy.
AWE’s acquisition of an interest in the Sugarloaf shale gas project in the USA was completed during the year and represented a first significant step into unconventional gas. Since then, the Company has developed its own technical and operational capability in unconventional gas and is applying this to the onshore Perth Basin exploration and to the evaluation of other investment opportunities, including opportunities in Indonesia.
An added benefit from AWE’s shale gas business has been the application of shale gas technology to the Company’s existing tight gas discoveries in the Perth Basin, where two discovered fields with up to 80 BCF gross Contingent Resources are planned to be evaluated during 2011-12.
Future Plans:
During 2011-12, AWE will focus on delivering its base business plan while pursuing opportunities for growth. A key part of this base business will be ensuring AWE’s business is sustainable, with sound safety and environmental management and open and transparent relationships with our stakeholders.
The Company has established clear budget goals for the year, including a production target of 5.0 to 5.5 million BOE and a revenue target of $270 to $300 million at a Brent oil price of $100 per barrel. This will provide the basis for the generation of strong cash flow during the year, which together with existing cash assets will fund the Company’s planned development and exploration activities.
The Company’s growth strategy is being pursued through the active regeneration of its exploration acreage, targeting both new acreage and potential farm-in opportunities. The Company will seek to leverage its technical and operating capability to expand in both conventional oil and gas as well as its new unconventional gas and liquids business.
AWE holds an excellent portfolio of production and development assets which includes a diverse mix of conventional oil and gas assets and unconventional gas assets, with a current reserves to production ratio greater than 10 years.
Within this portfolio, Management believes there will be further opportunities to add value through its focus on fully exploiting the underlying assets and maximising the use of existing facilities. This will include pursuing opportunities to exploit the Company’s 78 million BOE of Contingent Resources.
The Company is well positioned for the future, and Management is confident it can build on AWE’s existing position to deliver growth for the Company and increased value for shareholders.
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