After a number of years of oil exploration activities in Argentina, I am pleased to report an oil discovery was made by the Group in the Chirete Concession as first announced on 12 December 2018. This is an outstanding result, and reinforces the Group’s successful drilling campaign in Chirete, with 2 out of 2 exploratory wells culminating in oil discoveries. The latest achievement underlines the Group’s decision in April 2015 to farm-in to the block, and to diversify its exploration risk in Argentina.
Presently, the Group is conducting extended well test and logging analysis of its recent oil discovery, to evaluate its commercial viability. Preliminary test data to date is promising, initial indications are that the HLG.St.LB.x-2001 exploratory well contains light crude oil with an American Petroleum Index (“API”) index of approximately 37, with virtually zero water content and an indicative maximum oil flow rate to date of approximately 2,295 barrels of production per day from a choke size of 10mm diameter.
Upon the completion of the extended well test, the Group will be able to establish the final and optimum rate of production achievable, and the technical characteristics of the oil. A development plan for the commercial production of crude oil in the Chirete Concession is expected to be finalised towards Q4 2019.
The oil discovery at the Chirete Concession capped off a momentous 2018 and allowed the Group to quickly put behind the disappointment of losing the Palmar Largo Concessions, following the unexpected rejection by the provincial regulatory authorities of its 10 year extension application to continue operating the oilfield. The Group relinquished the Palmar Largo Concessions, and ceased oil production activities on 30 November 2018, after having only received 9 days’ notice from the province to vacate the facilities and the block.
Despite the highlight of an oil discovery in the year, the Group for the year ended 31 December 2018 reports a consolidated net loss after tax of HK$257.22 million. This was primarily attributable to the mark-to-market write down of our investments in Beijing Gas Blue Sky Holdings Limited and Foothill Exploration Inc., as well as provisions for certain promissory note and other receivables.
Due to the Group’s accounting policy of recognising exploration and evaluation assets at cost, the consolidated results of the Group does not financially reflect the positive value which may have arisen as a consequence of the HLG.St.LB.x-2001 oil discovery.
Other Developments in 2018
The HLG.St.LB.x-2001 exploratory well was the Group’s second drilling campaign using its own rig. Both the rig and the crew performed exemplary. There was minimal non-productive time attributable to either health and safety incidents or mechanical failure. This is a testament to the professionalism and dedication of the Group’s drilling and rig services division. It is the every intention of the Group to continue to utilise its own rig for the Morillo Deep exploratory drill in the Tartagal Oriental & Morillo Concessions targeted for Q2 2020. The Morillo Deep exploration well is located approximately 17 km from the latest successful drilling of HLG.St.LB.x-2001.
Following the Group’s re-entry into the business of commodities trading in August 2017, the Group continued to successfully engage and close out a number of commodities trades involving non-ferrous metals during the year. This is in line with the Group’s strategic objective to diversify its revenue base and source of profit generation.
New Times Energy continues to proactively manage, structure, and position its business to best serve the interests of its shareholders. The Group is committed to maximising shareholder value by exploring and developing oil and gas prospects in a safe, environmentally, socially and ethically responsible manner.
The Group is well aware of the importance to continually reassess and diversify its current business and geographical portfolio to better position itself for the future. Thanks to the financial support of its investors, the Group is well funded to seek and capture suitable investment opportunities in the energy sector, wherever that may be in the world.
With the possible commercialisation of oil production in the Chirete Concession in 2019, I would like to take this opportunity to express my sincerest gratitude to the Board, the management team, and all staff members of New Times Energy group for their hard work and dedication in getting the business to where it is today. I am also much obliged to our shareholders, investors, business partners, bankers, customers and suppliers for all their continued support. Last but not least, I would like to pay tribute to our former independent nonexecutive Director, Mr. Peter Wong, who passed away on 11 March 2019. The Board and I convey our heartfelt condolences to his family, and we sincerely thank him for his invaluable and insightful contributions to the Company over the past years.