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Perth BasinThe Company owns an 11.77% interest in one exploration permit and one permit application located in the Perth Basin of Western Australia. Exploration Permit 381, also known as the Scott River Permit, contains 455,405 acres.The Whicher Range Permit Application adjoins the Scott River Permit to the north, and has been reserved for the applicants pending resolution of native claims pursuant to the Australian Native Claim Act 1993. Negotiations have been ongoing during 1996 and it appears this issue will be resolved during 1997 and the permit awarded. The permit application area covers 439,141 acres, and contains the Whicher Range Gas Field discovered by Union Oil of California in 1968. During the year, the operator of this project, Amity Oil NL, conducted extensive reservoir studies on the Whicher Range Permit Application Block. The results of these studies indicate that the use of different drilling technologies and newer completion techniques could make the Whicher Range Gas Field eco-nomic to develop. Based on this technical assessment and the market for natural gas now available in the area, and subject to a resolution of the native claims, the partners plan to re-enter and test the Whicher Range No. 1 in 1997. A new well is planned for late 1997, conditioned on successful re-entry and testing of the Whicher Range No. 1 well. Potential, recoverable reserves estimated for the Whicher Range Gas Field are up to 1 trillion cubic feet of natural gas. Additionally, new seismic acquisition in EP381 was commenced in March 1997 to delineate further prospect leads. A seismic program in the Whicher Range Block is also expected following successful re-entry and re-completion of the Whicher Range No. 1 well in late 1997. Bass BasinThe Company owns a 20% interest in block T27/P, located offshore in the Bass Basin between the mainland of Australia and Tasmania. The block contains 1,800,000 acres in water depths of approximately 70 meters.The Bass Basin is the central of three basins offshore from the State of Victoria in southern Australia. To the east is the Gippsland Basin, which contains a series of oil and gas fields with original reserves of 5.6 billion barrels oil and oil equivalent gas. The western most basin is the Otway Basin, which is the site of recent large gas discoveries which will likely serve the South Australian natural gas market. Several prospect leads have been mapped on the block using existing seismic data and well control. The most attractive lead is the Barramundi Prospect located less than 10 kilometers north of the Yolla Field discovered by Amoco in 1985. The Yolla Field is estimated to contain natural gas reserves of 1 trillion cubic feet and 80 million barrels of oil and condensate. Reserve potential in the Barramundi Prospect is estimated to be in excess of 300 million barrels of recoverable oil, or 2 trillion cubic feet of natural gas and 80 million barrels of oil and condensate. Primary reservoir objectives are sandstones within the Eocene-aged Eastern View Coal Measures, and Paleocene to Upper Cretaceous-aged Furneaux section, both of which were tested productive in the Yolla discovery. The operator of the permit, Globex Exploration, completed a 1,000 kilometer seismic survey in March 1996 over the Barramundi Prospect and several other prospect leads located on the block. Throughout the balance of 1996 detailed studies of this seismic data were carried out. Globex has advised the Company that it will be very difficult to mobilize a drilling rig into this area in 1997 and will ask the Australian Government for an extension of the drilling commitment. Under the circumstances, it is anticipated such extension will be granted. Papua New GuineaIn early 1996 the Government of Papua New Guinea advised the Company that its application for a Petroleum Prospecting License, containing 1,200,000 acres, located both on and offshore in the Fly River Delta and Gulf of Papua would be granted. The official date granting the license was June 11, 1996.The first year work program consists of a geological and geophysical review using existing data. This review should be completed by May 1997. Based on the results of this study the Company will decide whether to proceed into the second year's work commitment which provides for seismic reprocessing and acquisition of a high resolution aeromagnetic survey. The third year commitment includes an off-shore seismic program, and a test well is required in the fourth year. Although this license is in a frontier exploration area, the Company believes that potential exists for finding one or more oil fields with reserves in the 100 million barrel range at depths less than 8,000 feet. Financial ResultsThe Company reported its first oil sales during 1996 from an oil discovery made on the Emerald Mountain Prospect in Colombia. Oil sales totaled $233,682 (U.S.) for the year related solely to production testing of the El Segundo No. 1 and No. 2 wells in Colombia. Additionally, two private placements totaling $13,000,000 (U.S.) were completed in 1996 with the proceeds to be used primarily for future exploration and delineation of the Emerald Mountain Prospect. This financing provides a strong working capital base which will allow the Company to carry forward its exploration and delineation program well into 1997. For the year ended December 31, 1996, the Company reported a net loss of $2,194,637 (U.S.) or $.17 (U.S.) per common share. Net working capital in the Company at December 31, 1996 totaled $9,100,038 (U.S.).Based on the acquisition of a 36.7% working interest in the Emerald Mountain Prospect, which was completed on July 26, 1996, the Company's net assets increased to $167,667,109 (U.S.) at December 31, 1996 from $4,050,132 (U.S.) at December 31, 1995. Oil production sales in 1997 from Colombia will provide additional cash flow to the Company to be used in the appraisal of the Emerald Mountain Prospect. Since the oil will be initially transported by trucks, a rate of 2,500 BOPD, as of April 1, 1997, is being used for cash flow projections and financial planning purposes. |