JOHANNESBURG (miningweekly.com) – Oil and gas company Senex Energy and energy group Origin Energy have partnered to explore tight gas sands in key areas of South Australia’s southern Cooper-Eromanga basin.

Two new gas farm-out agreements would see the parties undertake a two-stage work programme comprising the drilling of least 15 wells and second-dimensional (2D) and third-dimensional (3D) seismic acquisition programmes across two areas, said Senex MD Ian Davies on Monday.

The multi-stage work programme would cost $185-million, with additional work programme expenditure of up to $67-million subject to operating committee approval.

Under the agreements, Senex would be free-carried for its share of the first $185-million of the anticipated work programme. Origin could earn up to a 50% interest in ‘Area A’ over two stages and up to a 40% interest in ‘Area B’ over two stages.

The $105-million first stage aimed to evaluate the potential of the tight gas sands, provide exposure to shales and deep coal seams – and provide proof of concept – while the $80-million second stage would evaluate the commerciality of the gas resource.

The Area A evaluation included a 300-line kilometre 2D seismic survey, the drilling of up to eight exploration and appraisal wells – the first of which was expected to be drilled within 12 months – fracture simulation and flow testing across a 1 008 km2 portion of petroleum exploration licence (PEL) 516 and a 23 km2 portion of PEL 115 within the southern South Australian Cooper basin.

The evaluation of Area B, which comprised a 904 km2 portion of the Permian system of PEL 514 in the Patchawarra Trough in the northern South Australian Cooper basin, included a 250 km2 3D seismic survey, the drilling of up to seven exploration and appraisal wells, fracture stimulation and flow testing.

The potential additional work of up to $67-million under Area B would involve further exploration and appraisal work during both stages.

The transaction agreements were expected to be complete during June 2014.

FINANCIAL RESULTS
Meanwhile, Senex posted higher earnings during the first half of the year, with revenue reaching a record at $88.3-million – a 14% rise on the prior corresponding period.

During the half-year to December, oil sales revenue increased 16% owing to higher Australian dollar oil prices, with an average realised price for the half-year of $133/bl barrel, compared with $113/bl achieved during the six months to December 2012.

Senex reported a gross profit of $51.3-million during the period under review, up 26% from corresponding prior period, while net profit after tax increased 9% to $25.6-million.

The group had no debt and $102.5-million in cash and listed shares carried at fair value as at December 2013.

Net oil production for the six months ended December fell 1.5% to 0.65-million barrels, while total gross oil production from Senex-operated fields over the half year reached 1.01-million barrels.

Senex pointed out that production increased 16.7% during the December quarter of 2013/14 and was expected to increase further in the March and June quarters of 2013/14 as new wells were brought on line.