Malaysia: Newfield announces significant discovery offshore Malaysia - provides update on 'strategic alternatives' for International businesses
02 Apr 2013
Newfield Exploration Company has announced a significant natural gas discovery on the Block SK 310 Production Sharing Contract (PSC) area, located 50 miles offshore Sarawak in approx. 250 feet of water. This is the Company's second pinnacle reef natural gas discovery in the region.
The B-14 well encountered 1,800 feet of gross column and 1,585 feet of net natural gas pay in the main carbonate objective. A drill stem test was recently conducted, which confirmed commerciality of the reservoir. Newfield estimates that Gas Initially In Place (GIIP) ranges from 1.5 – 3.0 Tcf. Newfield operates Block SK 310 with a 30% interest. Partners Diamond Energy Sarawak, a wholly-owned subsidiary of Mitsubishi Corp and PETRONAS Carigali, have 30% and 40% interests, respectively.
The B-14 discovery is located less than three miles from Newfield's first pinnacle reef gas discovery, B-15, also located on Block SK 310 in approx. 250 feet of water. Recoverable reserves on this discovery are estimated at approx. 265 Bcf and will be developed in conjunction with the B-14 discovery.
'This is the largest conventional exploratory success that Newfield has made in its 25-year history,' said Lee K. Boothby, Newfield Chairman, President and CEO. 'Recent amendments to gas terms in Malaysia make natural gas developments economically competitive with oil developments. We have multiple 'reef' prospects to test along trend, and additional drilling is expected to resume in the third quarter with the drilling of our B-17 prospect.'
Block SK 310 covers approx. 1.1 million acres. Newfield has identified additional prospects on the contract area with multi-Tcf of remaining gas resource potential. Newfield has committed to drill one remaining exploration well (B-17 prospect) on Block SK 310.
Boothby said, 'In December 2012, we signed a new PSC for Block SK 408 and completed farming into Block SK 319. Both PSCs are in offshore Sarawak. These areas provide a combined 1.7 million acres and nearly double our acreage position offshore Malaysia. These blocks extend our successful pinnacle reef trend providing dozens of high-potential exploration targets, located in and around producing fields with existing infrastructure and pipelines in place.'
Block SK 408 covers 1.1 million acres in water depths ranging from 200 – 400 feet. There have been 16 discoveries in the block so far with existing infrastructure and production hubs located less than 10 miles from dozens of potential prospects identified to date by Newfield. The Company has a 10-well commitment on the block over a three-year initial exploration period. Newfield will operate the block with a 40% interest. Other partners include Shell (30%) and PETRONAS Carigali (30%).
Block SK 319 covers approx. 580,000 acres and is located adjacent to Block SK 408. Water depths are 300 feet or less. Newfield has identified several exploration prospects in the block and the Company has a five-well commitment over an initial three-year exploration period. Block SK 319 is operated by Shell (50%), and Newfield and PETRONAS Carigali each hold a 25% interest.
Company Provides Update on Process to Explore 'Strategic Alternatives' for its International Businesses
In February, Newfield announced that its Board of Directors authorized the evaluation of strategic alternatives for the Company's international businesses, which consist of offshore developments and related projects in Malaysia and China. Goldman, Sachs & Co. has been retained by the Company and is leading the process. A data room for the international businesses is expected to open in the second quarter of 2013.
Newfield's actions related to its international businesses at year-end 2012 now allow the Company to move cash from its international businesses to the U.S. without significant U.S. cash tax implications. Newfield's 2013 domestic federal taxes remain substantially all deferred. However, because of the Company's domestic net operating loss carry-forward position, Newfield is not able to recognize tax benefits from foreign tax credits.
As a result, the Company expects an effective book tax rate in 2013 of 55 – 65%. At current oil prices, Newfield's full-year 2013 international cash income taxes are expected to be $55 – $65 million.
Newfield Exploration Company is an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. Newfield is focused on North American resource plays of scale. The Company's principal domestic areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. Internationally, Newfield has oil developments offshore Malaysia and China.