Petsec Finalizes Interest Sale in China JV

- Petsec Finalizes Interest Sale in China JV

Thursday, June 23, 2011
Petsec Energy Ltd.

Petsec advised that the final tranche of consideration in respect of the sale of its China Joint Venture interest has been received. The transaction was completed under the previously announced Sale and Purchase Agreement whereby Horizon Oil acquired Petsec's wholly owned subsidiary, Petsec Petroleum LLC, which held the Company's 25% working interest in the Block 22/12 Beibu Gulf project in China.

The sale for A$38 million in cash, plus 15 million Horizon share options with an exercise price of A$0.37, follows Petsec's previous announcements that it is debt free after eliminating US $100 million of debt over the past three years.

Petsec Energy Ltd's Chairman, Mr Terry Fern, said the Company will use the sale proceeds to fund the expansion and transition of its existing USA oil and gas operations to onshore areas of the USA, and to participate in the rapidly expanding shale oil industry.

"The Company's strategy is to not only move into areas where the shale source rocks are oil-prone but also to continue with our structured transition to a greater focus on exploration for liquid rich reserves in general," Mr. Fern said.

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Petsec Enters Sale, Purchase Agreement with Horizon

- Petsec Enters Sale, Purchase Agreement with Horizon

Friday, June 03, 2011
Petsec Energy Ltd.

Petsec Energy has agreed to sell 100% of the company's wholly owned subsidiary, Petsec Petroleum LLC, which holds Petsec Energy's entire interest (25% working interest) in Block 22/12, Beibu Gulf, China.

Petsec Energy has entered into a Sale and Purchase Agreement with Horizon for a A $38 million cash payment, plus options with a 3 year term and exercise price of 37 cents/share over 15 million Horizon Oil.

The sale –which is expected to be completed during June 2011 –follows previous advice from Petsec Energy that it had decided to put the China interests on the market and to use sale proceeds to fund a significant expansion of the Company's USA petroleum operations.

Petsec's Chairman, Mr. Terry Fern, said the sale of the China interests, combined with Petsec's existing Gulf of Mexico gas production, would provide funds to launch the Company into a new era of growth in the USA.

"Our Board took the view that the required funding of US $37 million to develop the Company's 12.25% interest in the 6.12/12.8W oil fields, in Block 22/12, would deliver better and earlier returns if applied to shale oil operations in the USA," Mr. Fern said.

"As well as our strategy of moving into areas where the shale source rocks are liquid rich, Petsec is also making the structured transition to greater focus on oil exploration generally –in particular since there is currently an oversupply of natural gas in the USA and a relatively low price as a consequence," he said.

"This includes our previously stated move away from the exploration and production of smaller, natural gas targets, which at current US natural gas prices are marginally economic. Instead, we have set a minimum prospect target of greater than 20 billion cubic feet of gas equivalent (Bcfe) and with concentration on those prospects that are likely to have higher hydrocarbon liquids content and hold associated oil."

Petsec, which last week announced that it was debt free after eliminating US $100 million of debt during the past three years, plans to accelerate its move into the shale oil business as well as transitioning its traditional Gulf of Mexico oil and gas exploration and production focus to the Gulf Coast and onshore Louisiana and Texas.

Last year the Company participated in the Marathon gas/condensate discovery onshore Louisiana with a well drilled to 18,800 feet. The follow-up Marathon No 2 well is currently drilling ahead at 17,300 feet, with a target total depth of 21,000 feet.

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Petsec to Sell Chinese Interests to Fund U.S. Shale Oil Development

- Petsec to Sell Chinese Interests to Fund U.S. Shale Oil
Development

Wednesday, May 18, 2011
Rigzone Staff
by Karen Boman

Australia-based Petsec Energy will sell its interests in China's Beibu Gulf in order to fund its exploration efforts for unconventional shale oil on the U.S. Gulf Coast.

Petsec Chairman Terrence N. Fern said the company's board has determined that the US $37 million of funding required to develop the Mmbbl net to Petsec in the 6.12/12.8W oil fields would most likely deliver superior and earlier returns if applied to shale oil operations in the U.S. Fern anticipates the process and completion of a sale could take four months. The 6.12/12/8W oil fields are located in Block 22/12.

The company has developed a number of potentially large conventional oil subsalt plays in the Gulf Coast and near onshore areas which the company hopes to test later in 2012. However, Fern said during a presentation Wednesday that the company believes the quickest and least risky acquisition of sizable oil reserve additions is through shale oil onshore Louisiana and Texas.

"The advanced of horizontal drilling, fraccing and completion technologies which has given us a glut of gas, has in recent years allowed the investigation of profitable extraction of oil from shales."

The company has formed a joint venture with an experienced Eagle Ford shale player and has been conducting a regional review over the past nine months to identify areas of shale oil potential which are not being actively explored. In the past two years, the Eagle Ford has developed into a viable oil play, indicating reserves of 250,000 to 400,000 bbl/well for each 120 acre spacing. The play also has had highly repeatable success, $20/bbl finding and development costs, and operating cost of less than $3/bbl.

"Our strategy is to be an 'early mover' in areas where the shale source rocks are liquid rich and to acquire high quality acreage before it becomes extremely competitive and costly to lease," Fern said. "Initial leasing in a trend may take place at rate of $100/acre (more or less), but once a play has been proven and competition becomes heated, rates can climb to $10,000/acre (or more)."

The global financial downturn, weak U.S. gas prices, and the impacts of Hurricane Ike and the Macondo oil spill has prompted Petsec to refocus its business plan from the Gulf of Mexico and towards a exploration and production focus onshore Louisiana and Texas, and to pursue unconventional shale oil plays. As part of this strategy, Petsec has also repaid its debt, increased its exploration targets size, and increased its exposure to oil.

As part of its 2011-2013 business plan for the U.S., the company will target conventional oil and gas/condensate prospects with net reserve additions of more than 100 Bcfe, and has 10 prospects of 20 Bcfe to 200 Bcfe each on which to focus. The mapped potential of these 10 prospects ranges from 400 to 750 Bcfe, which Petsec plans to test over the next three years.

For unconventional shale oil, Petsec will target prospects with net reserve additions of over 35 MMbbl and will focus on lease acquisition and drilling activity in the second half of 2011.

The company will participate in three to five conventional wells in 2011 in the Gulf Coast and on the Gulf of Mexico shelf, with most activity to take place in this year's fourth quarter. One to two wells will be drilled on the Marathon gas/condensate discovery made in October 2010, and at least one high impact Gulf of Mexico well will be drilled as well.

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