Page 21 - Sun Resources Annual Report 2013

Production Review
Sun Resources NL derived production revenue from its
working interest in the Flour Bluff Gas Field near Corpus
Christie, in South Texas, throughout the reporting
period. This revenue remained unprofitable as gas
production declined steadily throughout the year. This
was a disappointing result despite improvements in
price due to seasonal fluctuations in gas price between
lows of US$2.70 per mcf to highs of US$4.20. Total gas
production declined by 50% over the reporting period,
from a gross daily rate of approximately 500 mcfd to
250 mcfd. As reported elsewhere in this document, Sun
has elected to withdraw from this asset.
During the reporting period, Sun and its working
interest parties commenced two ‘proof-of-concept’
drilling programs that have subsequently delivered a
100% technical success rate in producing oil from the
Woodbine formation. Initial oil production commenced
from the Beeler Oil Project area in November 2012,
just three months after the initial horizontal Woodbine
well was spudded. Oil production has grown steadily
over subsequent months as a total of three Beeler
Project and two Amerril Project horizontal Woodbine
wells have been drilled, fracced and completed. Sun’s
working interest daily oil production as of 30 June 2013
averaged approximately 29 bopd (gross production
before royalties, averaged over the June 2013 quarter).
Sun’s working interest daily oil production at the
beginning of the reporting period was approximately
2 bopd from Flour Bluff so the initial success of drilling
in the Woodbine Tight Oil Play has delivered a 10-fold
increase in Suns’ oil production from its USA assets.
This increase in oil rate coincided with a general
increase in the price of West Texas Intermediate crude
(WTI) from approximately US$85 per barrel in October
2012 to US$100 per barrel around 30 June 2013.
Sun’s Woodbine oil wells continue to flow back oil,
gas and fraccing fluids at the time of reporting so it
is considered premature to ascertain what resources
and reserves may be certifiable. Sun’s gross working
interest share of oil production (before royalties and
costs, including minor contribution from Flour Bluff)
was approximately 6,000 barrels to 30 June 2013. Sun
will be working toward its first resources and reserves
reports on these new Woodbine assets during the
2013/14 financial year. This reporting process will
develop in parallel with the new ASX reserves and
resources reporting obligations that will commence on
1 December 2013.
REVIEW OF ACTIVITIES 19