North-West Shelf shapes Cue Energy's prospects

Friday 23rd April 2010

Cue Energy is close to signing a farm-in agreement with a global oil major to allow 2011 drilling of its Caterina oil and gas prospect on the North-West Shelf, off the coast of Western Australia, chairman Richard Tweedie said.

In a pep-talk to brokers and media after Cue's first board meeting in New Zealand since re-listing on the NZX last October, Tweedie said drilling in the Artemis and Caterina prospects, in the highly rospective Carnarvon Basin, had the potential to be "company-making stuff."

Tweedie, who is managing director of Cue's 27% shareholder, Todd Energy, distributed research from the Western Australian broking firm Patersons valuing Cue at 47 Australian cents. The shares traded at 27.5 cents on the ASX yesterday, the highest since late September. Its NZX-listed shares were last at 35 cents, the highest since the re-listing. Patersons based its valuation on upside from recently acquired New Zealand exploration permits, Matariki and Te Kiri, offshore and onshore Taranaki respectively.

However, that did not take into account the potential uplift in value if drilling at Artemis and Caterina succeeded. Artemis would be capable of adding around 82 Australian cents a share unrisked, if its mean prospective resource of 12 trillion cubic feet of gas is realised, Patersons said.

Brazilian oil giant Petrobras has already farmed into the Artemis prospect on what Tweedie described as "extraordinary" terms, which would give Cue a free carry on its 15% interest in the prospect, which is scheduled for drilling in the fourth quarter of this calendar year.

Todd’s 100%-owned Caterina prospect is scheduled for drilling in the third quarter of 2011. It will need a development partner first and expects to drop its interest to below 50% so that it can achieve a free carry on the $60 million-to-$70 million 3D seismic acquisition and drilling project.

Low Australian spot market gas prices may create timing issues for development of any major finds, although both NW Shelf prospects are within 60 kilometres of Western Australian LNG export facilities, which are being developed to ship natural gas to energy-hungry Asian markets.

Meanwhile, remedial work is about to start on two wells that have been shut in over recent weeks at the Maari field, and which had reduced Cue's share of production from the offshore Taranaki field in the three months to March, compared to the December quarter.

Businesswire.co.nz

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