Vietnam discovery vindicates Delek Energy investors

Premier Oil CEO Simon Lockett: Premier's first operated well in Vietnam has provided confirmation of oil and gas.

Investors in Delek Energy Systems Ltd. (TASE: DEOL) who rejected an offer to purchase by the company following Globes disclosure of figures about the companys Vietnamese offshore drilling project, can now be pleased with their decision. On Friday, British company Premier Oil plc (LSE:PMO; PMRS.PK), which manages the drilling, announced that it had completed operations on well Dua-4X on Block 12E, and that it was an oil and gas discovery.

Following interpretation of a 3D seismic survey acquired in 2005, Premier Oil drilled well Dua-4X down-flank from the 1974 Dua-1X discovery well, a well that flowed 1,500 barrels of oil per day. Following the intersection of hydrocarbons in the Dua 4X vertical well, a sidetrack has been drilled (Dua-4X ST1) to provide further geological information. Wireline testing of both Dua-4X and Dua-4X ST1 recovered oil samples and core and pressure data to help define the quantity and quality of hydrocarbons within the northern flank of the Dua structure. As planned, no DST was performed.

Premier Oil will now undertake a second geological sidetrack, Dua-4X ST2, to further evaluate potential gas and oil reservoirs in the southern fault block of the Dua structure.

Premier Oil CEO Simon Lockett, said, "I am pleased that Premier's first operated well in Vietnam has provided confirmation of oil and gas in Dua's northern fault block. We look forward to the results of the sidetrack into the southern fault block."

In October 2005, Premier Oil notified shareholders of different estimates for the Dua oil and gas fields. For this purpose, Premier Oil capitalized the expected oil reserves in the field at $50 per barrel. Assuming that the expected quantities of oil are found, the current value of the field is $700 million: $500 million on one site and $200 million at the second.

After Globes reported these estimates ahead of an offer to purchase by Delek Energy, the company issued a response in which it said that it had not published these figures, because they included information that could mislead investors. Globes believed that investors were wise enough to decide what information it wanted to know use, and which it did not. Delek Energy has subsequently notified investors about every development in the Vietnamese drillings, including todays update.

Delek Energy owns 25% of Blocks 12E and 12W, located in 100-meter water in the South China Sea, 400 kilometers southeast from Vietnam, through a wholly owned subsidiary. Premier Oil and Australian company Santos Ltd. (ASX:STOPB), which bought part of Premier Oils stake in April, own the rest of the concession. Premier Oil bore all of Delek Energys share in the confirmation drilling, but Delek Energy will bear its share of the $15.6 million cost of the planned sidetrack drilling, i.e. $4 million. When the confirmation drilling of the Dua oil field is completed, the exploration drilling at Block 12E is scheduled to begin at a depth of 4,000 meters.

Even if Premier Oils original estimates of the potential of the Vietnamese fields are only partly fulfilled, or are completely unfulfilled, Delek Energy has apparently learnt its lesson from the failure of its offer to purchase, and now provides its shareholders with full information about the drillings.

Published by Globes [online], Israel business news - www.globes.co.il - on July 2, 2006

Copyright of Globes Publisher Itonut (1983) Ltd. 2006

 
Twitter Facebook Linkedin RSS Newsletters Israel Business Conference 2018