Buru Energy provides quarterly results for the period ended 31 December 2020.

Executive Chairman Eric Streitberg’s comments on the report:
“The last quarter of 2020 was a seminal period for the Company with the execution of a transaction with Origin Energy that will underpin a major exploration program on the Company’s Canning Basin exploration permits during 2021.

The exploration program will include a major regional seismic acquisition program and the drilling of potentially company changing conventional oil exploration wells.

The participation by Origin in a basin-wide exploration program is a strong vote of confidence in the Basin’s prospectivity and of Buru’s ability and experience as Operator in the Kimberley’s Canning Basin.

We have moved quickly to kick start the exploration program, building on the work done in the last quarter to prepare for a wide-ranging program during 2021. A preferred seismic contractor has been identified with a contract award expected shortly. Several drilling rigs suitable for the program have also been identified, and a drilling contract is expected to be awarded once contract negotiations are completed.

Buru has production from our Ungani Oilfield, a strong balance sheet, no debt, and a committed new partner, and we are very much looking forward to a revitalised and high potential exploration program during 2021.”

Highlights

Corporate / Exploration

• Farm-out transactions were executed with Origin Energy for a wide-ranging exploration program in the Canning Basin
• The exploration program includes two conventional oil exploration wells, Kurrajong 1 and Rafael 1
• In addition to the wells, some 1,200 km of seismic will be acquired over regional areas and over conventional oil exploration targets
• The transaction provides the funding and certainty for a basin-wide exploration program commencing during the 2021 Canning Basin operational field season

Ungani Oil Production and Sales

• Oil production for the quarter was some 78,000 barrels (gross) at an average rate of ~850 bopd
• Cash receipts for oil sales of some ~A$3.5M were received during the quarter from two oil liftings (September and November) from Wyndham Port
• Joint Venture review of further development drilling and workover activity on the Ungani Oilfield is being progressed with the aim of increasing production and slowing predicted production declines

Financial

• The final instalment of the Alcoa loan was repaid and the Company is now debt free
• The Company’s balance sheet remains strong with a cash and cash equivalents balance of $21.4 million

Corporate / Exploration

Canning Basin Farm-out with Origin Energy Group
On 21 December 2020, Buru announced to ASX that it had entered into two farm-out transactions with the Origin Energy Group (Origin) for a Canning Basin-wide exploration program that will include the drilling of the world class Rafael conventional oil prospect. 

The transactions are structured as follows:

• Origin will earn a 50% interest in exploration permits EP 129, EP 391, EP 428, EP 431 and EP 436 previously held 100% by Buru (the Buru Permits), with Buru retaining a 50% interest in these permits.
• Origin will earn a 40% interest in the EP 457 and EP 458 permits held by subsidiaries of Buru and Rey Resources Ltd (the Buru-Rey Permits), with Buru and Rey retaining respective 40% and 20% interests.

The agreed work program for both transactions (Work Program) includes a commitment to drill the Rafael 1 and Kurrajong 1 conventional oil exploration wells as soon as practicable in 2021 after the end of the current northern Australian wet season. Origin will provide individual carry amounts totaling $16 million for these well costs and will provide an additional $1 million payment to Buru in recognition of past costs.

The Work Program further includes the acquisition of extensive regional and prospect level seismic programs, with Origin carrying the first $3 million of seismic acquisition expenditure on the Buru Permits and the first $3 million of seismic acquisition expenditure on the BuruRey Permits.

Origin will also carry the first $4 million of expenditure if the joint venture decides to acquire a 3D seismic program over the Rafael prospect area within the Buru Permits after the drilling of the Rafael 1 well. Origin has options to either withdraw or fund further activity in two of the Buru Permits. If fully exercised, these options require Origin to fund (on a carried basis) up to an additional $10 million of exploration expenditure to maintain its 50% interests in these two permits.

Similarly, to maintain its 40% interests in the Buru-Rey Permits, Origin must provide a carry of $6 million towards further exploration expenditure at its option.

Buru will remain as operator of all exploration permits, and the farm-out to Origin does not include the Yulleroo Gasfield, which has been retained 100% by Buru as a defined area.

The farm-in party (Origin Energy West Pty Ltd) is a wholly owned subsidiary of Origin Energy Limited which is a major Australian integrated energy company.

The working interests across Buru’s extensive Canning Basin portfolio as a result of these transactions are illustrated on the map below.

Exploration Drilling Program – Kurrajong 1 and Rafael 1
The planned 2021 drilling program includes the drilling of two exploration wells, Kurrajong 1 and Rafael 1 on the Buru Permits (EP 391 and EP 428), in addition to a potential development well drilled at the Ungani Oilfield. Well design, procurement of long lead items and engagement of drilling program supervisory staff is well advanced in consultation with joint venture partners.

In contrast to recent Buru drilling programs which involved “dry hire” rigs, the 2021 drilling program is planned to be contracted to a full service drilling rig contracting company that has a rig capable of drilling the deep Rafael well. Several drilling rigs suitable for the program have been identified, and a drilling contract is expected to be awarded once contract negotiations are completed. 

Seismic Acquisition Program

Planning for the 2021 seismic program is also well advanced with contract negotiations with the preferred seismic contractor underway. Requisite heritage and environmental approvals are also well advanced.

The program will be aimed at filling in regional data gaps and also providing potential drilling targets on the conventional oil prospects on the Buru permits and on the EP 457/EP 458 permits focused on the newly identified sub-salt play.

Ungani Oilfield (L20/L21 - Buru Energy 50% and operator)

Production from the Ungani Oilfield for the quarter totalled ~78,000 bbls (gross) at an average daily rate over the period of ~850 bopd (September quarter: 93,000 bbls at an average daily rate over the period of ~1,010 bopd). The quarterly production was considerably impacted by wet weather during the month of December with the Ungani access road being closed intermittently due to heavy rainfall. Further heavy rainfall has continued to impact production during January.

Production from the existing Ungani Oilfield wells is declining largely in line with field reservoir modelling, with continuous improvements being implemented to optimise oil recovery both for the surface production facilities and the downhole well configurations. These activities include a further workover of the Ungani 7H well where water cuts have increased more quickly than predicted, the installation of an ESP in the Ungani 5 well and acquisition of larger ESPs for future installation in the Ungani 1ST1 and Ungani 2 wells.

Oil production from the Ungani Far West Reeves zone has also been impacted by increasing water cuts with oil rates slowly declining.

Further development of Ungani
Given the potential availability of a slot on the rig being mobilised to the basin for the exploration program, the Ungani Joint Venture is currently undertaking technical and commercial analysis of the feasibility of drilling a further development well on the Ungani Oilfield during the 2021 drilling season. 

Sales

Buru’s oil sales are via secure trucking and oil storage and export contracts, with the oil being trucked from the Ungani Oilfield to storage tanks at the Port of Wyndham where it is then sold FOB, primarily to SE Asian refineries.

Oil sales for the quarter totalled ~68,000 barrels gross (Buru’s share 50%) from one lifting completed on 30 November 2020. As per the marketing agreement with BP Singapore Pte Limited (BP), BP purchase the crude FOB Wyndham and deliver the crude to a refinery in SE Asia. Under the marketing contract, the price received is the actual price BP sold the crude to the refinery (being a fixed differential to the average dated Brent price for the month of December), less shipping and associated costs. Under these terms Buru’s 50% revenue share from the November lifting was approximately A$1.9 million.

On a cash basis, a further ~A$1.6 million was received during the quarter from the previous lifting in September, giving total cash receipts during the December quarter of ~A$3.5 million.

KeyFacts Energy: Buru Energy Australia country profile