Production on a working interest basis, including Natural Gas Liquids (NGLs), averaged 410 boepd in 2011, compared with 1,143 boepd in 2010. The composition of this production was 51% oil, 43% gas and 6% NGLs. After tax and royalties, net interest production in 2011 was 323 boepd.
However the year-on-year comparison is distorted by the sale of a package of properties constituting in total 1.1 mmboe of 2P working interest reserves, which completed in late September 2011: the production from these properties was excluded from the reported total as from the 1 June 2011 effective date of the transaction. In September 2011, the month in which the sale was closed, working interest production from these sold properties was 322 boepd.
Production in December 2011 was 337 boepd (working interest basis), comprising 37% oil, 59% gas and 4% NGLs.
At Eugene Island 32, Gulfsands participated in the reprocessing of 3D data to optimise further field development and identify new drill opportunities anticipated to be conducted during 2012. During early 2011 it was determined that the EI32 A Platform, a major structure supporting the living quarters for the EI32 Field, required significant repair or replacement. Instead of replacing the platform, Gulfsands and its partners received regulatory approval to undertake major repairs to the EI32 A Platform, yielding significant cost savings to the joint venture. This work has now been completed. At West Cameron 310 a major rig work-over of the #1 well was successfully completed and the well has been returned to production. The Ship Shoal 271 Field was returned to production in September after being shut-in all year due to third party pipeline issues.
Several significant decommissioning projects were completed, including HI A-471, Matagorda 555 and Eugene Island 97.
Sale of interests
Portfolio divestment continued during 2011 with the completion of the sale of a second package of assets in September for $6.0 million (prior to closing adjustments). The previous such sale had been signed in late 2010 and completed in H1 2011 (see Financial Review). The 2011 sale removed a significant forward liability provision relating to the decommissioning of
the properties in question, resulting in the release to Gulfsands of $4.2 million of cash held as collateral for abandonment bonds. When combined with the release of escrow funds associated with the completion of the plugging
and abandonment projects, a total of approximately $11.1 million in restricted funds were released during 2011.
Plans for 2012
Gulfsands intends to divest the remaining Gulf of Mexico assets in 2012, subject of course to being able to negotiate appropriate commercial terms.
Gulfsands owns a small portfolio of non-operated oil & gas properties in the Gulf of Mexico, in the shallow shelf region offshore Texas and Louisiana. These comprise interests in 14 leases containing nine producing fields. Gulfsands also has a small interest in one onshore oil & gas field in Texas.
The assets are relatively mature, are deemed to be non-core and are in the process of being sold. Proved & Probable reserves at year-end 2011 amounted to 1.7 million boe on a working interest basis (1.4 million boe on a net revenue interest basis), comprised 60% of oil and 40% of gas.