Carnarvon Petroleum Limited's (ASX:CVN) March quarterly report shows that the company is in a strong financial position despite the current economic climate as the Dorado joint venture continues its development plans for the project offshore WA.
At the end of the quarter, the company held A$118 million, which managing director and chief executive officer Adrian Cook said meant Carnarvon was in a very good position to cover its 2020 expenditure and beyond.
He said: “During the quarter we have witnessed significant global consequences from the COVID-19 pandemic, with direct and secondary impacts occurring within our industry.
“Maintaining Carnarvon’s prudent financial position has always been at the forefront of the company’s strategy and has ensured that the business is in a robust position to withstand these current market conditions.
“Carnarvon preserved its strong cash balance this period, with A$118 million as at the end of the quarter."
Dorado progresses towards FEED work
Development feasibility studies have been completed and the concept select phase is expected to be completed soon.
Cook said: “The work being undertaken is focused on preparations to commence the Front-End Engineering Design (FEED) phase.
“The sheer size and nature of the Dorado field and expected recovery in the longer-term oil prices means that it is a strong and robust project, capable of producing at globally competitive capital and operating costs.
“On this basis, the Carnarvon team will continue working very closely with the operator to progress the Dorado development and I look forward to providing continued updates as we achieve key milestones.”
Expressions of Interest have been received from Floating Production Storage and Offtake (FPSO) contractors and the joint venture has been working closely with various parties to advance the engineering and pre-FEED workstreams.
Buffalo farm-out process continues
During the quarter, Carnarvon continued planning the redevelopment of the Buffalo oil field in Timor-Leste.
This included advancing the company’s operational readiness and ensuring Carnarvon, or an incoming operating partner, has the appropriate systems required for the development, drilling and production of Buffalo.
Cook said: “Carnarvon has continued with its farm-out process and is working with potential partners interested in joining Carnarvon in the project and assisting with its future funding.
The introduction of a partner will be relevant in Carnarvon’s funding strategy as the company moves towards the development of both the Dorado and Buffalo fields.
In parallel with the farm-out process, Carnarvon has been establishing operations in Timor Leste and developing its operational readiness.
Cook said: “Buffalo is an important asset to Carnarvon and despite the farm-out process taking longer than anticipated, it remains our focus to attract a quality partner on fair terms. “
The company also commenced an evaluation of well data to identify additional follow-up exploration prospectivity for the Buffalo project.
Carnarvon has recently received data from the Keraudren 3D seismic survey, which builds on previous Capreolus 3D data, and will be integral for better defining the development of Dorado and establishing high-quality exploration drilling targets in the survey area.
The new seismic data will also support the Dorado FEED subsurface work by assisting with the positioning and configuration of wells for future production operations.
Near field exploration prospects including Pavo and Apus have been identified with planned drilling dependent on improving market conditions.
Carnarvon project locations.
Condor and Eagle projects
During the quarter, Carnarvon also continued its technical work on the Condor and Eagle projects in the proven Vulcan Sub-basin within the Bonaparte Basin.
The company has used the Cygnus 3D survey data completed by Polarcus in 2018 and expects a third phase of the survey data to be available later in the year covering the Condor permit.
The 3D data will cover around 317 square kilometres which have previously only been covered by 2D seismic.
With seismic interpretation possibly identifying petroleum indicators, Carnarvon intends to continue its work to refine the potential of these plays and is seeking expressions of interest from potential partners to further these projects.
Cook said: “During the quarter the company responded quickly to the COVID-19 pandemic to protect its staff, ensure reasonably smooth ongoing business operations and to reduce non-essential costs.
“The company will continue to monitor global and industry conditions and will make appropriate changes as circumstances dictate.”