Hey guys
Here are a few notes from the macquarie circular
Production Process - FPSO
The development of the Puffin Oil Field is to be undertaken using a disconnectable FPSO.
FPSOs have been used successfully in oil field developments proximate to the Puffin Oil Field,
including at Jabiru, Challis, Buffalo, Elang/Kakatua, Laminaria and Skua.
The development method involves the FPSO being tied back to subsea well completions (figure 1
below). The oil will be extracted from the Puffin-7 and the Puffin-8 wells and flow up to the FPSO
through flexible flowlines and umbilicals connected to the FPSO through a subsea manifold. The
FPSO will stabilise the crude oil produced from the wells and store it in its onboard storage tanks.
The stabilised crude will be exported by a flexible floating hose to an offtake tanker moored in
tandem to the FPSO. Storage in the FPSO will allow for the offloading of oil to shuttle tankers and
subsequent crude sale on a free on board basis. The currently anticipated point of delivery of the oil
will occur when the oil is taken out of the development facility to the storage tanks on board the
FPSO. That is, the ownership will change on board the FPSO, prior to offloading to the shuttle
tankers.
Drilling
As noted above, a two well campaign, involving the drilling of Puffin-7 and Puffin-9 wells, was carried
out in the first half of 2006. The Stena Clyde semi-submersible rig was utilised for that campaign.
The Company has also secured the Stena Clyde for the drilling of Puffin-8 commencing in February
2007. This well will supersede the previously announced Puffin-8 which was to be drilled in the Puffin
South West structure, to produce from the Puffin-2 reserves. The Company has appointed the Peak
Group as its drilling manager in relation to the drilling of Puffin-8 as it did with Puffin-7.
As part of its development and exploration activities in 2007, the Company is also considering
undertaking a further three well programme in order to assess further known oil accumulations within
the Permit Area. The programme is expected to include development of one production well in the
North East 1 region during the period October to December 2007. The wells are expected to be
drilled using the new Wilcraft build jack up rig, with Peak Group as drilling managers. The expected
cost to drill and complete this programme is approximately US$100 million and is planned to be
funded mostly from cash inflow from expected oil production.
Development and Ongoing operating costs
The Company has estimated that a total remaining capital cost of A$97.2 million will be required to
complete the Puffin-7 and Puffin-8 development wells (Phase 1 and 1A of the Puffin Oil Field
project). It is expected the that the funds from issue of the Unsecured Notes will be used for the
associated costs of developing the additional production well, Puffin- 8. As discussed above under
“Schedule for development and exploration”, the scope of Puffin-8 is beyond what was originally
contemplated by the existing debt facility, which was undertaken to fund only one production well,
Puffin-7.
A summary of the outstanding development costs are highlighted in the table below. These costs will
be funded by drawing down the remaining amount on the existing debt facility, the Unsecured Notes
issue and cash at hand.
Item
Estimated
Development Cost
(A$m)
Drilling of Puffin-8 14.1
Completions (Including Tree) 8
FPSO Capital Expenditure —
Subsea Equipment 20.2
Installation services (AED proportion) 34.6
Project Management 5.8
Other Project Costs Including Insurance and Commissioning 9.6
Other 2.1
Total Development Cost 97.2
60
The total ongoing annual operating costs have been estimated by the Company to be U.S.$70
million. The Company believes that the most significant ongoing cost will be the cost of leasing the
Front Puffin FPSO.
Costs are obviously low in this case due to the sale of oil effectively on the FPSO facility.
Make of this what you will. However I don't think MacBank would be too much off the money.
However on these figures 30,000 bopd ~ 10,500,000 bopa
@ US$60pb = US$630m
EBITDA = US$540m
Even doubling these expected costs AED still looks attractive.
All figures are as of Convertible Note Offering -Exercise of Lead Managers Option 23/02/07.
Looks OK to me .... any opinions