Brunei wells a flop for Fletcher

By FIONA ROTHERHAM

Fletcher Challenge Energy and its joint venture partners have curtailed their Brunei exploration drilling programme following disappointing results.

The third well in the drilling programme, East Egret-1, has been plugged and abandoned after failing to produce significant quantities of hydrocarbons.

The drilling programme has so far cost $US17 million, of which Fletcher Energy had to pay $US2.7 million. Under the terms of its 1997 farm-out, Unocal had to finance the first of the wells and the first $US3 million of the two subsequent ones.

Fletcher Energy has a 26.95 per cent share in the licence.

Two prospects in the adjacent Maharaja Lela field operated by Elf will be drilled next year, subject to a commercial deal on the gas.

Analysts said that yesterday's announcement of Fletcher Energy's foray into Australia with a 33.7 per cent stake in Brisbane-based Petroz was neutral to its overall value.

The $80 million deal was in line with what chief executive Greg Gailey has been talking about for months - acquisitions in southeast Asia and Australia to broaden the exploration company's portfolio.

The purchase was small beer but provides a springboard for further activity in Australia.

One analyst said the best feature of the deal was that Mr Gailey is carrying on as usual while Fletcher Challenge makes a final decision on dismantling its letter stock structure, expected in September.

"The package of assets is now more attractive to a potential buyer and it does lift Fletcher Energy's profile in Australia," said UBS Warburg energy analyst Paul Richardson.

His valuation of the company is unchanged at $8.50.

Deustche Bank has retained its valuation of Fletcher Energy at $9.10, but called the Petroz buy "an astute acquisition at a very good price."

It values Petroz shares at 89Ac, compared with the 43.5Ac Fletcher Energy paid.

The new funds raised will allow Petroz to meet its capital commitments for the world-class Bayu-Undan liquids project in the Timor Sea.