Exploration: Kupe Upgrade Good News For Origin, NZOG and Genesis
July 27th, 2010
The Kupe oil and gas field holds substantially more light crude oil than previously estimated, as well as additional gas and LPG which will boost its value by between $650m and $750m at today’s prices. The increase represents a boost of around $200m-plus for Kupe’s 31% owner, state-owned Genesis Energy, which identified the value of Kupe reserves as one of the primary drivers of profit improvements forecast over the next three years in its latest Statement of Corporate Intent. Kupe operator, ASX-listed Origin Energy, owns 50% of the field, meaning its share of the increase is likely to be in excess of $325m, with the remainder going to 15% owner NZOG, and 4% owner, Mitsui E&P Australia.
The news was a tonic for NZOG shares, which rose on the news after steadily falling ahead of this week’s announcement the second of the two highly rated Tui prospect exploration wells had come up dry (see below). Reserves of light oil were up 27% to an estimated 18.6m barrels equivalent, while natural gas reserves are revised up 8% to 273 Petajoules, along with a 5% increase in recoverable LPG to 1114 kilotonnes.
NZOG chief executive David Salisbury says light oil provides the greatest financial return of the three products, so the big upgrade there is “particularly significant.” He estimates the value of NZOG’s portion of the increase at around $100m. The reserves review allows confirmation of a further $20m to $30m capex later in the field’s life, to drill two additional production wells, details for which will be decided over the coming year.
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