Production and Sales
Buru Energy holds a 50% interest in the Ungani Oilfield and is the joint venture operator of the field. The remaining 50% interest is held by Roc Oil (Canning) Pty Limited (ROC). Production from the Ungani Oilfield for the year ended 31 December 2020 totalled ~372,000 bbls at an average rate of ~1,000 bopd (2019 production of ~373,000 bbls), with Buru Energy’s 50% share of production being ~186,000 bbls. The average production rate included well offline time with ongoing minor well interventions and maintenance being carried out as required throughout the year. The northern wet season saw a number of short-term closures of the Ungani access road from normal wet season rainfall in January and February 2020.
Ungani crude oil continues to be trucked by Fuel Trans Australia Pty Ltd to Wyndham Port and stored in Cambridge Gulf Limited’s storage Tank 10 prior to its FOB sale. The price received FOB Wyndham represents the realised Brent linked oil price less the buyer’s fixed marine transport discount.
Gross sales of Ungani crude during the year totalled approximately 432,000 bbls from six liftings at Wyndham Port. Buru Energy’s share of revenue from the Ungani Oilfield for the year totalled ~A$11,300,000 at an average received price of ~A$52/bbl (2019: ~A$13,800,000 at ~A$87/bbl). The received prices for the liftings during the year were significantly impacted by the unprecedented global situation of a combination of an oil oversupply by the OPEC+ producers and demand destruction from the shutdown of the global economy following the onset of the COVID-19 pandemic.
During the second quarter of 2020, the Ungani Joint Venture considered whether a temporary suspension of production from Ungani would be prudent, however a reduction in field operating costs and the partial recovery in global crude prices, meant production was continued throughout the year. The COVID-19 restrictions had no material effect on the Company’s operational capability in line with the Company’s operations being staffed locally, with no FIFO staff, and not in the proximity of any Kimberley remote Aboriginal communities.
Cost of sales totalled ~A$6,900,000 at A$37/bbl (2019: ~A$7,400,000 at ~A$39/bbl) giving a gross profit from sales of Ungani crude net to Buru Energy of ~A$4,500,000 before amortisation charges, at an average annualised margin of ~A$15/bbl (2019: ~A$7,600,000 at ~A$48/bbl).
The Ungani Joint Venture mobilised the Halliburton coil tubing unit to the Ungani 6H wellsite in early March to complete the operations that were suspended in late 2019. After a number of operational issues were encountered, it was agreed to suspend the Ungani 6H well and demobilise all equipment and contractors. The JV then deferred all discretionary expenditure including non-essential capital expenditure on the Ungani Oilfield following the onset of the COVID-19 pandemic.
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.
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.