‘High risks in oil drilling’

Press, 24 June 1983, Page 11

‘High risks in oil drilling’

It was an achievement by Bridgevale Mining to have participated in six oil wells m the United States during 18 months, with the limited funds there available to Bridgevale, the chairman, Mr A. J. Wakefield, said yesterday. He told shareholders at the annual meeting that the company was naturally disappointed with the lack of progress in the United States, but that drilling for oil and/or gas was a highrisk business.

This was underlined by the fact that these wells turned out to be non-com-mercial. A further two wells that had been operating commercially, were also declared non-commercial during the year. One lease was lost and another sold because of the inability of the working partners to drill within the allotted time.

But there was the potential for high rewards if a successful well could be brought into production, Mr Wakefield said.

At current oil prices in west central Texas of 330 a barrel, a 40 barrel-a-day well would yield gross receipts of 3400,000 and a net 3270,000 after royalties, state and federal taxes and operating costs. Payback time on the drilling cost would be 6 months.

When Bridgevale started in Texas, oil prices were 340 a barrel and such a well would have produced a net 3340,000 with a 4 month payback time. The interest in the Catherwood lease in West-

em Australia had been renewed because of the rise in gold prices, but negotiations for a farm-in had not yet been successfully concluded. Hancock and Wright had continued to prospect for chromite on the Yalgoo gold-fields but did not wish to proceed. Negotations to farm-out the Mt Margaret nickel areas in West Australia continued.

Coal and Energy was making satisfactory progress; Bridgevale has a 20 per cent stake in this company, which now has total coal reserves of more than 14 million tonnes. This did not include areas for which prospecting licences had been applied. The most important event was acquisition of Burkes Creek, Reefton, coal areas of low sulphur content — ideal for industrial purposes, especially in CanterMr Wakefield said the time needed to bring a new mine into full scale production was not understood. He cited the Energy Plan, which mentioned development lead times of two years for expanding existing mines and 5-8 years for a new mine.

The start of production at Nightcaps in June 1, last year, only nine months after original establishment plans, was therefore “a considerable achievement,” Mr Wakefield said.

Nightcaps had a 300,000 tonne capacity, and was able to handle the foreseeable demand from the local market; it is a well-con-structed open cut mine.