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CEO Report and Overview of Operations and Finances - Matthew Boyall
During the FY2018 year, Cue achieved the strategic goals of stabilising and building a sustainable, cash flow positive business while maintaining exposure to step change opportunities.
The Sampang PSC underwent a significant change during the year, with cessation of oil production and conversion to a gas only project completed late in CY2017. The significantly lower operating costs and simplified systems of gas only production has made the Sampang PSC more sustainable and extended the life of the existing production significantly.
In addition, the Sampang Joint Venture has approved the drilling of the Paus-Biru -1 well. The well is expected to spud late October 2018 and will target the known producing Mundu reservoirs that are seen at Oyong and Wortel. Success with this well will further extend the life of the Oyong and Wortel fields.
Maari continued to provide Cue with consistent revenue and exposure to the increased oil price seen over the year.
The Ironbark prospect in WA-359-P continued to be a main focus for Cue and significant support for the opportunity was achieved with Beach Energy executing a farm in agreement for 21% equity in the Permit in November 2017. In addition, Cue extended BP's option over 42.5% equity until October 2018.
With a 15 Tcf prospective volume, Ironbark has the potential to dramatically change the value of Cue if successful. The company continues to progress well planning and review funding options, targeting a 2019 drill date.
Subsequent to June 30, 2018, Cue announced that a suspension and extension to the current permit term had been approved to 25th April 2019.
During the 2018 financial year, Cue produced strong financial results, with an after tax profit of $7.74 million, cashflow from Operations of $6.83 million and an increase in cash of $4.56 million.
Revenue of $24.5 million was a reduction on the previous year due to no oil revenue from Oyong field and lower Sampang gas production associated with the production system changes. The
Oyong and Wortel fields are now stabilised at their long term production rates and annual revenues are expected to perform more predictably in future years.
The operating costs at Sampang are expected to halve under gas only production. Some of the benefits of this can be seen in the 25% reduction in Cue's production costs and only slight reduction in gross profit margin.
Overhead and administration costs were reduced significantly from previous years as Cue operated under a simplified and more focused model.
During the year, oil production from Maari averaged approximately 360 bopd to Cue (7200 bopd gross). Production was down from the previous year due to natural field decline and production interruptions while work was undertaken on the Well Head Platform (WHP) and individual wells over the year.
A number of significant projects were undertaken during the year to ensure the sustainability and life of the field. A workover of the MN1 well to deepen the Electric Submersible Pump (ESP) and complete new sections in the wellbore resulted in a 200% increase in production from the well. Workovers were also completed on other wells as part of routine maintenance or to gain access to new production zones.
Compression was successfully added to the Well Head Platform to lower the production pressure of the wells. Incremental production increases from this project are being seen and it is expected that further benefits will be realised in the future.
Permanent repairs to the Well Head Platform were completed early in FY2018 .
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