Carnarvon Petroleum Limited (ASX:CVN) is on the path towards developing Dorado oil and gas field offshore Western Australia.
The preferred development concept for this field is an initial phase of oil and condensate production followed by a future phase of gas export.
Re-injection of the gas initially is expected to result in high flow rates and recovery factors for the liquids with the Dorado-3 flow test results confirming this high flow deliverability.
Relatively simple staged development
The company states there are very few conventional resources of this scale, residing in less than 100-metre water depths and less than 150 kilometres from major port, infrastructure and industry services.
These conditions allow for a relatively simple staged development with only 8 to 10 wells necessary to produce the high flow rates into a Floating Production Storage and Offtake (FPSO) vessel.
Progressing towards production
Carnarvon considers the FEED work a key catalyst in the journey to bringing the project into its production phase.
The company plans to update shareholders mid-way through FEED work with more detailed information on the planned form and timelines for the development.
As the resource hosts liquids and gas resources, Carnarvon plans to develop the liquids project initially and time the development of gas and liquefied petroleum gases (and any future discoveries) using the operating free cash flows from the liquids production.
A first production date has not been announced, but the operator has indicated a goal for this field to be in production by 2025.
The location of the Dorado field
While FEED work is underway, the company expects to announce progress in maturing key exploration prospects to drill near Dorado, seeking to identify and test additional opportunities within the permits in the Bedout sub-basin.
In 2019, the Keraduren 3D seismic survey was acquired over an area attracting near-term interest by the JV with the objective now to advance several the best targets for drilling in 2021.
The Pavo and Apus prospects are lead contenders for these drilling slots and Carnarvon is looking to secure a drilling rig this year.
Carnarvon will also continue to advance the Buffalo project, a former BHP Group Ltd (ASX:BHP) oil field, which it believes contains important value going forwards.
Unlocking region’s potential
Over the years the joint venture partners have changed but Carnarvon has remained as the one core constant since the beginning of the modern journey of unlocking Bedout sub-basin.
During this period nine wells have been drilled with eight successes, a success strike rate of almost 90% which the company states is quite an incredible result for a frontier basin.
Carnarvon is confident there is further potential to be unlocked in the coming years and this has been supported by industry interest in the Dorado acreage and the surrounding area with several parties, including JV partner Santos, beginning to secure positions in the area.
Carnarvon believes this is likely to produce additional activity, information and news that could generate additional success and further interest in time.
Prudent financial strategy
The Carnarvon board and its management team have built a valuable business based on a strategy focused on exploration in the North West Shelf of Western Australia.
Over the last five years, the business has grown to around $530 million in value (as at December 31, 2019) which has delivered a compound annual growth rate of around 18% per annum (based on the share price increase from December 31, 2014, to December 31, 2019).
Throughout this period the board has ensured its operations were conducted in a financially prudent manner, with the current cash balance of $119 million (as at December 31, 2019) forecast to comfortably cover the company’s 2020 operations and ensure a strong financial position exists at the end of the 2020 calendar year.
The importance of a prudent financial strategy is particularly appropriate today with global equity markets dealing with the Covid-19 virus issue and spot oil price uncertainty.
Carnarvon is confident that its strong financial position and medium-term focus on production and exploration mitigate the impact of these global issues on the company in the short term.
Presenting at Proactive’s CEO Sessions
Carnarvon managing director Adrian Cook will be one of five presenters at Proactive’s CEO Sessions this month.
Register now for the CEO Sessions