MEO: Seruway Drilling Starts in October

MEO Australia Limited has announced that its Indonesian subsidiary, Seruway Offshore Exploration Limited (SOEL) has agreed to execute a binding agreement with Zaratex NV (Zaratex) and Hercules Offshore Inc (Hercules) to secure the second of Zaratex’s two optional rig slots to drill Gurame SE-1X using the Hercules #208 jack-up drilling rig.

The Hercules #208 has recently completed two wells for Zaratex and is currently operating under a similar contractual arrangement for Petronas. Upon conclusion of this well, the rig will be handed over to SOEL. MEO anticipates that drilling will commence in early October and take 35 days to complete on an untested basis or 50 days in the likely event it is production tested.

“Notwithstanding a significant effort to farmout an interest in the Production Sharing Contract (PSC), no acceptable farm-in offers were received. Discussions are continuing with a limited number of parties however MEO considers it unlikely that a transaction can be concluded before the commencement of drilling. As such, MEO will be carrying the US$25m cost (untested) of the well. At the time of acquisition in mid-2011, the PSC had an outstanding 2011 3D seismic obligation together with a 2012 commitment well. Funding the 2012 commitment well was the reason for the modest upfront US$5m acquisition cost,” said the company in a statement.

The Gurame discovery with six existing wells and a modern 3D transition zone seismic survey, was considered the lowest risk drill-ready candidate with the highest probability of a commercial development path. Gurame SE-1X will test the expected gas cap within a structural closure updip of recovered oil to ascertain whether gas will flow at commercial rates. A successful gas flow rate would provide encouragement that the oil zones may also be recoverable.

The Ibu Horst 3D seismic survey was acquired in January this year with the final processed data expected imminently. A comprehensive prospects and leads inventory will be prepared as a precursor to re-launching a Seruway PSC farmout focussed on the Ibu Horst in early 2013.

MEO’s CEO and MD Jürgen Hendrich commented on the announcement:

“SOEL is well positioned to accept assignment of the Hercules #208 drilling rig and appreciates Zaratex’s endeavours in providing this opportunity. We look forward to SOEL completing the drilling and likely testing of the Gurame SE-1X well safely and successfully.“

[mappress]
Press Release, August 24, 2012