Following the announcement this week, Triangle managing director Rob Towner told Small Caps the company had been reviewing a number of mature field assets in the basin that would complement its resources – be it infrastructure or people.
“We’ve been in the Perth Basin for about two and a half years running the Cliff Head oilfield, and in that time, we’ve seen oil prices go from $45-50 a barrel to $76 now,” he said.
“We’ve had to make the decision to move on these things because in all commodity cycles, when these price increases happen, people start to go shopping.”
Towner said Triangle had completed technical reviews on Mt Horner and it was a project the company had been wanting to get involved in for a while.
“The exploration and redevelopment potential of L7 [the production licence comprising the oilfield plus surrounding acreage] fits perfectly with Triangle’s strategy of exploration for additional reserves within already proven oilfields,” he said.
Under the terms of the agreement, Triangle will earn its interest in the L7 production licence by funding a farm-in work program to the value of $3 million. Any costs above this limit will be shared equally between the joint venture partners.
This program will include a 3D seismic survey of at least 50sq km and a drilling program of two or more new wells.
In addition, the joint venture will commence an early work program which will include the workover of two existing Mt Horner wells. This program will be funded 50/50 by Triangle and Key and is expected to run concurrently with the drilling and seismic program.
“In other words, we won’t require the seismic to do the workovers,” Towner said.
“We’ve discussed initially with Key to have the programs really up and away in May next year,” he said, adding that this was a conservative forecast and really hoped it would commence around March.
Upon completion of both the farm-in and early work programs, Triangle has the option to assume operatorship of L7.
The terms also state that after the farm-in wells have been drilled, Triangle will recover the payback amount through the entitlement of 87.5% (based on the company holding a 50% interest) of production from L7 for the first two years of commercial production.
Thereafter, the company will be entitled to 75% of L7 production until the payback amount has been recovered.
Key is solely responsible for all activities and costs associated with the decommissioning of the existing Mt Horner wells, with the joint venture to only share decommissioning costs that may arise from any future wells or infrastructure.
Mt Horner oilfield
Mt Horner is located south of Geraldton, WA in the North Perth Basin. The field was shut-in during 2011 due to high water cut and aged infrastructure but had previously produced around 1.7 million barrels of oil.
According to Triangle, preliminary mapping has identified a “Mt Horner lookalike” prospect called Delilah, which lies on trend and north of the existing oilfield.
The company also believes L7 has further exploration upside including a structure that is shown on current seismic to spill into the licence and other underexplored oil plays.
Complementing Cliff Head
Triangle holds a 78.75% operating interest in the Cliff Head oilfield, located 10km off the coast of WA in shallow water depths of 15-20m.
This project involves an offshore platform connected to the onshore Arrowsmith processing plant via two 14km pipelines. Crude oil is then trucked to BP’s Kwinana refinery in Perth’s south.
The Arrowsmith facility was commissioned in 2006 with a production capacity of 15,000 barrels per day.
Although according to Towner, the Cliff Head oilfield is currently only producing around 800bbls/day.
“The infrastructure there has further capacity. That’s where we see an opportunity,” he said.
“Any extracted oil could potentially be processed at Triangle’s onshore Arrowsmith processing plant which could add to the economic viability of the L7 development.”
State Gas drilling plans
State Gas holds a 60% operating stake in the Reid’s Dome conventional gas project in central Queensland’s Bowen Basin.
Last week, State Gas told the market it had engaged Silver City Drilling to drill two gas wells at the project, with the first – PrimeroWest-1 – due to commence in November.
The second well, Nyanda-4, remains subject to formal approval by the Reid’s Dome joint operating committee.
Triangle’s stake in State Gas is currently worth about $12.5 million on paper.
“But if they have some success with drilling, we might find our interest in that will be worth more than Triangle,” Towner said.
Triangle also holds a 30% stake in the Xanadu joint venture, operated by Norwest Energy (ASX: NWE) in the offshore Perth Basin.