Technical Review:
Geoscience is based on all the new studies over the last two years the final drilling programme is now taking shape. Over this period Desire Petroleum exploration plans have evolved and is now in a much better position to understand the potential of the whole of the North Falkland basin.
Desire Petroleum’s philosophy remains unchanged, when it resumes drilling, to give ourselves the best possible chance of finding commercial hydrocarbons.
The company aims to achieve this by drilling as many different play types as possible, at different stratigraphic levels with both oil and gas as potential targets.
Liz Prospect:
This is a large stratigraphic trap, well defined on 3D seismic, with the morphology of a fandelta. The main target is of Barremian age with deeper secondary targets. This will test the play at the level of the mature oil source rock. The presence and quality of the sandstone objective is the principal risk.
Ann Prospect:
A well on this prospect will evaluate the updip extension of the trap drilled by the 14/9-1 well which encountered good oil shows in a sand over 30 meters thick with good porosity. The Ann prospect is a 4-way dip closed structure defined on 2D seismic. There is also a deeper, secondary target at the Jurassic level. The thickness of the Aptian sandstone target over the crest of the structure is the principal risk.
Dawn and Jacinta Prospects:
One well will test both of these prospects in an undrilled part of the basin. The Dawn prospect is a fault-bounded structural closure with the target anticipated to be Jurassic sandstone. Hydrocarbon charge and the presence of reservoir sandsones are the main risks.
The Jacinta prospect is a large stratigraphic trap which largely relies on the pinch-out of the Aptian sandstone. Seal and reservoir quality are the principal risks associated with this prospect.
Alpha Prospect:
A large fault and dip-bound structure with reservoir anticipated to be of Mid-Cretaceous age. Hydrocarbon charge is considered to be a principal risk.
These prospects are largely independent of each other but flexibility will be retained in the programme to allow changes in the event that the results in one well have a significant bearing on another prospect. All of these prospects are in shallow water, 400 meters or less, with total drilling depths ranging from 1,000 to 3,600 meters. Due to the experience gained in drilling in 1998 these wells are expected to be straightforward to drill with no particular hazards.
The technical work on tranche F has now been concluded and confirmed Helen as a significant prospect but the Jayne prospect has been downgraded to the status of a lead.
Operations:
Site survey data are available at these four locations and the data has been integrated into the well planning and design. It should be noted that wellheads and tubulars for 4 x 3,000 meter wells are still stored near Aberdeen. All the casing is new, as advantage was taken of the tight steel market to allow Desire Petroleum stock to be used by other operators and replaced.
As these materials and most of the other equipment for the drilling programme will likely be mobilized from the UK, the time from securing a rig to first drilling is likely to be in the order of five to six months. An environmental impact assessment (EIA), approved by the Falkland Islands Government (FIG), is in place covering tranches C and D where the Ann and Liz prospects are located. An EIA covering tranches I and L and license PL 034, covering the Dawn/Jacinta and Alpha prospects, is currently proceeding through the approval process with FIG. Note both EIAs will require an addendum once the final rig details are known, and the oil spill contingency plan is complete.
Status of non-executive directors:
None of the non-executive directors would be deemed independent under the Combined Code. However, the non-executive directors have considerable experience in the oil and gas sector which the company draws upon on a regular basis. In addition, the non-executive directors are sufficiently independent of management so as to be able to exercise independent judgment and bring an objective viewpoint and, thereby, protect and promote the interests of shareholders.
Audit committee:
The Audit committee was chaired by E Wisniewski and included A G Windham and D L Clifton as members throughout the year. R Lyons was appointed to the committee on June 11, 2008. D L Clifton resigned from the committee on February 4, 2009.
The committee convenes twice a year and its terms of reference include the review of the Annual and Interim Accounts, accounting policies of the company and its subsidiaries, internal management and financial controls, and the planning, scope and results of the Auditor’s programme. UHY Hacker Young Manchester LLP attends the meetings at the request of the committee.
Remuneration committee and Nomination committee
The Remuneration committee is chaired by A G Windham and included E Wisniewski and D L Clifton as members throughout the year. R Lyons was appointed to the committee on June 11, 2008. D L Clifton resigned from the committee on February 4, 2009.
The Nomination committee was chaired by D L Clifton and included E Wisniewski and A G Windham as members throughout the year. R Lyons was appointed to the committee on June 11, 2008. D L Clifton resigned from the committee on February 4, 2009 and R Lyons was appointed chairman of the committee on that date. The committees’ responsibilities include the consideration and approval of the terms of service, nomination, remuneration and benefits of the company’s directors.
The board, as a whole, determines the remuneration of the non-executive directors.
Internal control
The board, which presently comprises the chairman, the chief executive officer and non-executive directors, meets formally on a regular basis. The directors are responsible for ensuring that the group maintains adequate internal control over the business and its assets.
There is an agreed schedule of matters requiring referral to the board. These matters include the group’s corporate strategy, acquisitions and disposals, approval of major capital expenditure, treasury policy and risk-management policies. Procedures have been formalized where the directors may need to take independent professional advice. The Audit committee has reviewed the necessity for the establishment of an internal audit function, but considers that, due to the nature and size of the group at present, it would not be appropriate for the group to have its own internal-audit department.
On the wider aspects of internal control, relating to operational and compliance controls and risk management, as included in provision D.2.1 of the Code, the board, in setting the control environment, identifies, reviews, and reports on the key areas of business risk facing the group. These procedures have been in place throughout the current financial year.
here is close day-to-day involvement by the directors in all of the group’s activities. This includes the comprehensive review of both management and technical reports, the monitoring of foreign exchange and interest-rate fluctuations, commitment to the Health, Safety and the Environment Management System, government and fiscal-policy issues, employment and information-technology requirements and cash-control procedures. Attendance at joint venture meetings and site visits are made whenever appropriate. In this way, the key risk areas can be monitored effectively and specialist expertise applied in a timely and productive manner.
