(EnergyAsia, September 2, Wednesday) — Australia’s Arrow Energy said its profit for the year ended June 30 2009 surged by 885% to A$366 million compared with the previous year. (US$1=A$1.2).

The company said its full year earnings before interest, tax, depreciation and amortisation (EBITDA) was A$580.2 million, a 723% increase on the prior full year while underlying earnings (EBITDA) of A$59.6 million was 13% higher.

The company said its strong performance was underpinned by its transaction with Royal Dutch Shell, which paid A$565 million for a 30% stake of Arrow’s interest in all of its Australian upstream tenements and 10% interest in Arrow International.

Revenue from continuing operations increased to A$112.3 million despite the 30% production sale to Shell and a seven-week shut down of the Townsville power station. 

Arrow said its cash on hand at year end was A$399 million with a further A$49.5 million received from Shell during August on the completion of the Tipton West transaction with an additional A$49.5 million to be received once all documentation has been completed. The company said it expects to receive the retention money of approximately A$50 million from the initial Shell transaction of at the end of the first quarter.

Arrow CEO and managing director Nick Davies said: “The underlying business is performing extremely well which reflects the success of our margin enhancement strategy. Arrow’s continuing push into electricity generation combined with sustained low operational costs enabled the company to record a strong full year result despite some one-off operational restrictions at Townsville power station.

“Gas production has increased 173% over the last three years which gives us the confidence to forecast that by 2015 we may see a further ten-fold increase in production from today’s levels. Completion of the Braemar 2 power station is a significant milestone which will increase Arrow’s exposure to a buoyant electricity market and provide options for utilisation of LNG ramp up gas.” 

Arrow said it has a half share in the 450 MW project which brings the company’s total net generation capacity to 375 MW.

Reserves and production growth: 

Mr Davies said a continuing ramp up of the company’s Surat Basin fields over the past 12 months had offset the production fall at its Moranbah field due to the seven-week shut-in resulting from the Townsville power station maintenance and helped net gas production climb to 17.2 petajoules (PJ) for the year, up from 16.3 PJ in 2007. Electricity sales increased from 615,170 MWh to 825,794 MWh for the year.

According to Arrow, its gross 2P reserves have been upgraded by 1,845 PJ during the year. The company has a target to increase gross 2P reserves by 1,000 PJ each year. (1,000 PJ is equivalent to 165 million barrels of oil).
“Arrow has interests in more than 65,000 square km of coal seam gas tenements and less than 10% of this acreage has been appraised,” Mr Davies said. 

“A review based on coal seam data gathered from extensive coal exploration and appraisal activity shows that Arrow has an estimated gross coal seam gas resource in excess of 70,000 PJ.  Even if only half of this resource base can be economically developed then there is sufficient coal seam gas for LNG exports of over 20 million tonnes per annum.
“We are working hard on development plans to bring our vast reserves to a planned LNG export facility at Gladstone,” he said.

Arrow aims to be Asia’s number one coal seam gas player: 

“Strategic joint ventures with major industry players in China, India, Indonesia and Vietnam are providing Arrow with significant exposure to strong overseas energy markets, where gas pricing ranges from A$5 to A$15 per gigajoule (GJ) which compare favourably with domestic gas prices in eastern Australia.

“Most Asian countries that we’re targeting have the potential to be at least as large as our current Australian operation within the next seven years,” he added. 

Arrow has completed drilling in China, India and Vietnam and further work will be conducted upon the receipt of final test results. The company expects to start drilling in Indonesia later this year. 

“We have recently signed a production sharing contract (PSC) for Tanjung Enim in Indonesia and are progressing other project opportunities throughout Asia.” he said.

Outlook for the current financial year:

“2010 will be a pivotal year for Arrow with final investment decision (FID) due for the Fisherman’s Landing LNG project and more than $300m gross to be spent in the next 18 months on drilling and development in preparation for our LNG opportunities,” Mr Davies said. 

“The long-term demand for oil and hence the long-term price for oil will remain strong and we are well positioned to build on the firm base that we have created and the partnerships that we have forged. We have a world-class team, an Asia-Pacific wide alliance with Shell, substantial footholds and assets in four Asian countries and a healthy financial position. The best is yet to come.”