Magellan continues to examine new exploration and production acquisition opportunities, principally in Australia, New Zealand and the United Kingdom, to augment its current proven and probable reserves of 23 million barrels of oil equivalent. The Company acquired an interest in several small oil fields and surrounding exploration acreage in the Nockatunga area of the Cooper Basin with effect from 1 July 2003.
During the 20032004 year, the Company’s exploration drilling program centred on the Cooper-Eromanga Basin of Australia and the Taranaki Basin of New Zealand. The Company participated in the drilling of eight petroleum exploration wells. None of the wells encountered commercial hydrocarbons.
Six exploration wells were drilled in theCooper Basin, Australia’s most prolific onshore hydrocarbon-producing basin. Magellan’s participation in two of the wells was funded in part under farmout arrangements.
Five of the wells were located in South Australia on the south western margin of the basin, and one in Queensland on the central eastern part of the basin, near the Nockatunga oil fields. The Company will participate in a well in the Browse Basin, offshore Western Australia, later this year.
In New Zealand, Magellan was granted another two petroleum exploration licences in the onshore Taranaki Basin and participated in two exploration wells targeting the Mt Messenger oil play in the basin. A further three exploration wells are planned for later this year in the Taranaki Basin.
In other overseas exploration, the company holds six licences in the Weald-Wessex Basins of southern England. Two exploration wells are planned for drilling over the next twelve months. The Company also participated in several applications for new acreage in the Weald-Wessex Basins under the 12th UK Landward Licensing Round which closed in June.
6 PEL 94, 95 & 110 AND PELA 116
COOPER-EROMANGA BASINS
Magellan has a 35% interest in exploration licence PEL 94, a 50% interest in PEL 95, a 22.5% interest in PEL 110 and a 50% interest in the application area PELA 116. The grant of an exploration licence over PELA 116 is subject to native title negotiations which are yet to commence.
Aldinga-1, drilled in August 2002, encountered an oil pool in the Cadna-owie Formation. An extended production test commenced in May 2003 to determine its economic viability and recoverable oil reserves. The well commenced production at a rate of 80 BOPD, and is currently producing at around 30 BOPD. The production test is continuing.
Magellan and its co-venturers drilled five exploration wells and conducted two 2D seismic surveys in the area during 2003-2004. None of the wells intersected significant hydrocarbons and each was plugged and abandoned.
The Albus 2D seismic survey in 2003 acquired a total of 164 line kilometres of date in PEL 110, and the Malleus 2D survey in 2004 acquired 85 line kilometres and 248 line kilometres in PEL 94 and PEL 95, respectively.
Semaphore-1 spudded in PEL 110 in October 2003, and was designed to test the oil potential of the Triassic Tinchoo Formation, Jurassic Poolowanna Formation and Hutton Sandstone at a location on the north-western margin of the basin some 30 kilometres north of the Keleary oil field. The area was postulated to lie on the pathway for hydrocarbons migrating northwards from the Cooper Basin depocentre. Oil shows occurred at several levels in the well.
Waitpinga-1, drilled in PEL 94 in November 2003, tested the oil potential of the Cretaceous Namur Sandstone, the Hutton Sandstone and the Permian Patchawarra Formation in a large structure in the Milpera Embayment, a thick Permian depocentre. The presence of oil in the Murta Formation in Maslins-1, drilled in 2002, had suggested that oil had been generated in the Milpera Embayment.
Seacliff-1 followed in PEL 95, and targeted the Namur Sandstone in an anticlinal trap on a prominent north-south structural trend.
The 2004 drilling program commenced in June with the drilling of Myponga-1 in PEL 94 and Noarlunga-1 in PEL 95. Myponga-1 was located approximately 80 kilometres south of the Moomba facility and targeted the Namur Sandstone and Murta Formation, with secondary targets in the Cadnaowie Formation and Hutton Sandstone. Noarlunga-1 tested an anticlinal structure on the southern margin of the Cooper Basin. The primary targets were the Namur Sandstone and Murta Formation, with secondary targets in the Cadna-owie Formation, Hutton Sandstone and Epsilon Formation.
In 2004 Magellan farmed out a 15% interest in PEL 94 to Black Rock Petroleum. Black Rock contributed to the cost of the Malleus 2D seismic survey and the Myponga-1 well in PEL 94 to earn its interest in the permit.
ATP 267P AND ATP APPLICATION 732P COOPER BASIN
Magellan acquired a 40.936% interest in ATP 267P as part of its acquisition of the Nockatunga oil fields in July 2003.
The Callisto-1 well was drilled in ATP 267P in November 2003 to test the gas potential of the Permian Toolachee Formation and oil potential of the Jurassic Hutton Sandstone northeast of the Jackson oil field, but failed to encounter significant hydrocarbons.
The Nockatunga joint venture will conduct a 247 km2 3D seismic survey later in 2004, part of which lies within the ATP 267P area. The survey will more closely define near field exploration drilling prospects identified on existing 2D seismic data.
The Queensland Government advised that Magellan (100% interest) is the successful bidder for ATP Application 732P to the northeast of the Nockatunga area. The grant of
ATP 732P is subject to native title negotiations which are yet to commence. The area lies between the Jackson-Naccowlah-Nockatunga trend and the Tintaburra-Ipundu trend. The block has numerous Eromanga Basin oil plays, as well as Permian Cooper Basin gas potential in the northwest portion of the application area.
ATP 613P, ATPA 675P & 733P
MARYBOROUGH BASIN
The Company has a 100% interest in ATP 613P and ATP Applications 674P and 733P in the Maryborough Basin. Magellan and Novus drilled Gregory River-3ST in 2003, adjacent to the 1966 Gregory River-1 well which tested gas while drilling. No significant gas flows were encountered in Gregory River-3ST which down-graded the prospectivity of the area for conventional gas. Novus withdrew from the venture. The Company is investigating the coal seam gas potential of the Burrum Coal Measures within the ATP 613P area.
8 WA-306-P & WA-307-P
SOUTHERN BROWSE BASIN
Exploration permits WA-306-P and WA-307-P are located in the Barcoo Sub-Basin of the southern Browse Basin. Magellan has a 12.5% and 50% interest in the permits, respectively.
The Company reduced its interest in the permit from 50% under a farmout arrangement with Antrim Energy Australia, the Operator of the WA-306-P joint venture. Antrim subsequently farmed out a 55% interest to ONGC Videsh, a wholly-owned subsidiary of India’s largest integrated oil and gas company. Antrim and ONGC Videsh will fund the drilling of the South Galapagos-1 well in WA-306-P under the farmout arrangments. Magellan and Antrim will each continue to hold a 50% working interest in the adjacent WA-307-P permit.
The results of the 2003 seismic survey upgraded the prospectivity of an 80 km trend of prospects identified in WA-306-P and WA-307-P, resulting in the confirmation of several attractive drilling targets. The initial well will target oil in the South Galapagos prospect, a significant four-way closed structure in the Jurassic Lower Vulcan and Plover Formations. The Jurassic formations on the North West Shelf host individual fields up to 180 million barrels of recoverable oil and more than 20 Tcf of gas.
Estimated mean potential oil reserves of the South Galapagos prospect are around 100 million barrels.
The Sedco 703 semi-submersible drilling rig has been contracted to drill South Galapagos-1 later in 2004. The well will be drilled to a minimum depth of 3,700 metres in approximately 320 metres water depth.
WA-291-P
CARNARVON BASIN
Magellan currently holds a 50% interest in WA-291-P, located in the north-eastern part of the Carnarvon Basin of the North West Shelf. Magellan and its joint venturer, Tap Oil, are seeking farminees to participate in the drilling of the Sheila-1 well.
The Sheila prospect is located in the Beagle-Sub-Basin and has combined fault-dependent and independent structural closures, updip from Bruce-1 which had oil shows at the top of a thick Triassic sand.
WA-287-P, WA-288-P & WA-311-P
NORTHERN BROWSE BASIN
Magellan has surrendered its interests in exploration permits WA-287-P, WA-288-P and WA-311-P on the north-eastern margin of the Browse Basin in the Timor Sea. The drilling of the Strumbo-1 well in WA-288-P in early 2003 down-graded the prospectivity of the area.
PEDLS 098, 099, 112, 113, 125 & 126
WEALD-WESSEX BASINS, ONSHORE UK
The Company holds six exploration licences in the Weald and Wessex Basins of southern England. The basin contains the largest onshore UK oil field, Wytch Farm. Exploration during the early years of the six-year term licences involves the interpretation of existing geological and geophysical data, generally with limited reprocessing of seismic data, with a drill or drop option during the later years.
The PEDL 098 and 113 joint venturers are planning to drill the Sandhills-2 well on the Isle of Wight later in 2004. The well will target an oil play in the Jurassic Great Oolite Formation. The Sandhills-1 well which was drilled in the 1980s is interpreted to have by-passed oil pay in the Great Oolite Formation. The Isle of Wight licences are also considered to have oil potential in Triassic sandstone reservoirs, the producing horizon at the Wytch Farm oil field.
Magellan farmed out a 17.5% interest in PEDLs 098 and 113 and a 5% interest in PEDL 099 to Northern Petroleum (GB), and a 5% interest in PEDL 098 and 113 to Montrose Industries. Magellan will have a 22.5% interest post-farmout in PEDL 098 and 113.
The farminees will fund Magellan’s share of the cost of drilling and any production testing of the Great Oolite Formation in the Sandhills-2 well.
Magellan has a 50% interest in each of PEDL 125 and 126 licences that are adjacent to the Horndean and Singleton oil fields. The licences were granted to Magellan and Northern Petroleum (GB) in July 2003 under the 11th UK Landward Licensing Round. Several structures, similar to those of the Horndean and Singleton oil fields, are the focus of exploration in these licences. The Hedge End-1 well in PEDL 125 potentially has by-passed oil pay in the Great Oolite Formation section, and a re-drill of the well is being planned.
The company holds a 33.3% interest in PEDL 112 in the Kent area on the eastern margin of the basin, and evaluation of this area is on-going.
To build on its strong exploration position in the Weald and Wessex Basins, the Company participated in several applications for new petroleum exploration and production licences in the basin under the 12th UK Landward Licensing Round which closed in June 2004. Announcements on the winning bidders are expected in the third quarter of 2004.
PEP 38222 & 38225
GREAT SOUTH BASIN, NZ
The Company (100% interest) holds exploration permits PEP38222 and PEP38225 in the offshore frontier Great South Basin to the south of the South Island of New Zealand.
Data from the Tara-1 and Taroa-1 wells, drilled in the 1970s, suggest that large volumes of hydrocarbons have been generated in this part of the basin. Strong oil and gas shows occurred over large intervals in both wells. Analysis of seismic data in the permit is aimed at detailing prospects considered large enough to be commercial in this frontier basin.
PEP 38256
CANTERBURY BASIN, NZ
Following a re-evaluation of the remaining leads identified in PEP 38256, located in the onshore Canterbury Basin on the South Island, Magellan (25% interest) has decided to withdraw from the area.
PEP 38746, 38748, 38753, 38765 & 38766
TARANAKI BASIN, NZ
The Company holds a 25% interest in PEP 38746, PEP 38748, PEP 38753 and PEP 38766 and a 12.5% interest in PEP 38765 in the onshore Taranaki Basin of the North Island, New Zealand’s most productive hydrocarbon basin.
Two exploration wells, Bluff-1 in PEP 38746 and Wawiri-1 in PEP 38753, were drilled in September 2003. Both wells targeted oil plays in the Miocene Mt Messenger Formation sands, but failed to encounter significant hydrocarbons. Magellan has elected to withdraw from the PEP 38753 joint venture.
Magellan and its co-venturers are planning to drill a further three exploration wells in the Taranaki Basin later this year. Two wells in PEP 38748 will target oil plays in the Mt Messenger Formation sands in the Hihi and Kakariki prospects. A well on the Mirimiro prospect in PEP 38765 will also target oil in the Mt Messenger Formation sands.