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Quarterly Production Announcement

Quarterly Production Announcement
For The Period Ended 30 September 2000

1 Highlights

 Total production of 12.9 million barrels of oil equivalent for the three months to 30 September 2000.
 Continued high levels of natural gas production from Maui driven by both Methanex and the use of gas for electricity generation
 Gas production in Canada up 11 per cent over the corresponding quarter in 1999
 Oil production in Canada up 5 per cent over the corresponding quarter in 1999
 Maui oil production increased 13 per cent over the previous (June) quarter as contribution from the Maui BD oil development project begins
 Further appraisal work on the Pohokura discovery increases confidence in reserve estimates.


2 Sales

Sales September
Quarter
FY 2000 September
Quarter
FY 1999
YTD
FY 2001
YTD
FY 2000

Natural Gas (bcf)
NZ Offshore (1) 30.7 31.1 30.7 31.1
NZ Onshore 4.1 4.4 4.1 4.4
North America 14.4 13.0 14.4 13.0
Brunei 3.8 3.7 3.8 3.7
Total 53.0 52.2 53.0 52.2

Condensate (000 bbls)
NZ Offshore 1,121 1,354 1,121 1,354
Brunei 121 61 121 61
Total 1,242 1,415 1,242 1,415

Oil (000 bbls)
NZ Offshore 157 390 157 390
NZ Onshore 445 813 445 813
North America 1,333 1,273 1,333 1,273
Total 1,935 2,476 1,935 2,476

LPG (000 tonnes)
NZ Offshore 29 32 29 32
NZ Onshore 5 5 5 5
Total 34 37 34 37

Total Sales (000 boe) (2)
NZ Offshore 6,690 7,247 6,690 7,247
NZ Onshore 1,181 1,596 1,181 1,596
North America 3,733 3,435 3,733 3,435
Brunei 747 678 747 678
Total 12,351 12,956 12,351 12,956
(1) Pre-paid gas treated as not yet produced
(2) A conversion factor of 6 bcf: 1 million barrels of oil equivalent (mmboe) is utilised in calculating the oil equivalence of gas

Production


Total Production September
Quarter
FY 2000 September
Quarter
FY 1999
YTD
FY 2001
YTD
FY 2000

Condensate (000 bbls)
NZ Offshore 1,302 1,477 1,302 1,477
Brunei 118 76 118 76
Total 1,420 1,553 1,420 1,553

Oil (000 bbls)
NZ Offshore 444 529 444 529
NZ Onshore 526 657 526 657
North America 1,333 1,273 1,333 1,273
Total 2,303 2,459 2,303 2,459

Total Production (mboe)
NZ Offshore 7,159 7,509 7,159 7,509
NZ Onshore 1,261 1,440 1,261 1,440
North America 3,733 3,435 3,733 3,435
Brunei 744 693 744 693
Total 12,897 13,077 12,897 13,077

Daily Sales


Average Daily Sales September
Quarter
FY 2000 September Quarter
FY 1999
YTD
FY 2000
YTD
FY 1999

Natural Gas (mmscf/day)
NZ Offshore 334 338 334 338
NZ Onshore 45 48 45 48
North America 157 141 157 141
Brunei 41 40 41 40
Total 577 567 577 567

Condensate (bopd)
NZ Offshore 12,185 14,717 12,185 14,717
Brunei 1,315 663 1,315 663
Total 13,500 15,380 13,500 15,380

Oil (bopd)
NZ Offshore 1,707 4,239 1,707 4,239
NZ Onshore 4,837 8,837 4,837 8,837
North America 14,489 13,840 14,489 13,840
Total 21,033 26,916 21,033 26,916

LPG (tonnes/day)
NZ Offshore 315 348 315 348
NZ Onshore 54 54 54 54
Total 369 402 369 402

Total Daily Sales (boe/day)
NZ Offshore 72,717 78,772 72,717 78,772
NZ Onshore 12,837 17,351 12,837 17,351
North America 40,576 37,333 40,576 37,333
Brunei 8,120 7,370 8,120 7,370
Total 134,250 140,826 134,250 140,826
3 Production and Development Activities
(i) New Zealand Offshore

Gas production from Maui during the September quarter 2000 was 30.7 bcf, up 2.3 billion cubic feet (bcf) on the preceding June quarter, but down 0.4 bcf on the September quarter for 1999. Gas production for the September quarter in 1998 and 1997 was 24.6 bcf and 26.4 bcf respectively, illustrating the trend for higher gas sales over the last 18 months. This is a result of continuing high offtake by Methanex and high usage by electricity generators since the restructuring of the industry in early 1999.

Condensate production was 1.302 million barrels (mmbbl) for the quarter, in line with the preceding June quarter but a decrease of 0.175 mmbbl or 12 per cent on the corresponding quarter for 1999. This is primarily attributable to the temporary unavailability of high condensate yield wells on the Maui B platform as a consequence of the BD oil development project.

Maui B oil production for the quarter was 0.444 mmbbl, up 0.052 mmbbl or 13 per cent compared to the previous quarter, but down 0.085 mmbbl or 16 per cent compared to the same quarter in 1999. This reflects the natural decline in production from the F reservoir sands, mitigated by beginning of production from the MB-7 well on 1st September at 7,000 barrels per day (FCE share). Bad weather prevented offloading from the FPSO at the end of September and early October. With storage tank tops reached, Maui oil production was shut in for the last four days of September and the first 10 days of October. Total deferred production during the quarter as a consequence of this was approximately 33,000 bbls with a further 84,000 bbls of production deferred at the beginning of the current (December) quarter.

(ii) New Zealand Onshore

Onshore gas production was 4.1 bcf, down 0.2 bcf over the previous quarter, or 0.3 bcf over the corresponding quarter for 1999. Onshore oil production was 0.526 mmbbl, down 0.131 mmbbl (20 per cent) when compared to production in the corresponding quarter 1999.

The natural decline in oil production was partially mitigated by the bringing in to production of McKee-9A at 800 b/d at the beginning of the quarter.

The quarterly LPG production from both onshore and offshore at 34,000 tonnes were up 4,000 tonnes (13 per cent) this quarter over the preceding quarter, but down 3,000 tonnes (8 per cent) compared to the corresponding quarter for 1999.

(iii) Canada

Gas production for the period averaged 157 million cubic feet per day (mmscf/d), an increase of 6 per cent on the previous quarter and up 11 percent on the corresponding period in the prior year. In the Saskatchewan District, the Hatton Infill programme continued with 56 successful net development wells drilled during the quarter. The wells are expected to be on production in October. In the Provost District, the Viking gas programme resumed with the drilling of a further 12 successful development wells. Two wells came on production in the quarter adding 0.3 mmscf/d. The remainder is expected to be on production in the second quarter. In the Central Alberta District, the Belly River programme provided nine successful net development wells. Of these, four are expected to be on production in the second quarter.

Oil production for the first quarter averaged 14,489 bopd, an increase of 1 per cent from the previous quarter, and up 5 per cent from the corresponding period in the prior year. With global oil prices remaining strong, heavy oil development activity continues to increase. In the Saskatchewan District, drilling continued on the assets acquired from UPRI. To date, thirteen net development wells have been successfully drilled in Baldwinton. All of these wells came on stream during the quarter, at a total rate of 1,200 bopd. There was a disposition of 863 bopd in the Provost district during the quarter.

(iv) Brunei

Gas sales for the quarter averaged 41 mmscf/d (net to FCE), a 2.5 percent increase on the prior corresponding period.

Condensate production for the quarter was 0.118 mmbbl (net to FCE), down 10 percent from 0.131 mmbbl in the previous (June) quarter, due to the forecast natural depletion of the oil reservoirs. Despite this, liquid sales were 70% above budget because two liquids liftings were made instead of the budgeted one lifting.

Water breakthrough occurred in one well during July as per our forecast. Reserves are unaffected.

A plant shutdown planned during October to install a permanent mercury-removal vessel should increase both plant capacity and reliability.

4 Exploration and Appraisal Activities

(i) New Zealand

Appraisal of the Pohokura discovery is continuing. Preparations are underway for a 3D seismic survey to be conducted at the end of this year, and for a third well to be drilled to test the southern extent of the field in early 2001. While no adjustments have been made to the booked reserves, statistical confidence in the probabilistic reserves profile is increasing.

Preparations are well advanced for the drilling of the Tuihu prospect (FCE 50 per cent) onshore Taranaki in mid October.


(ii) Canada

Fletcher Challenge Energy Canada drilled eight successful net exploration wells during the quarter, of which three were completed as oil wells and five were completed as gas wells. In addition, 95 successful net development wells were drilled, of which 16 were completed as oil wells and 79 as gas wells.

(iii) Brunei

The 3-well offshore exploration drilling programme in Blocks A and CD concluded in July 2000.

The results of the drilling are being incorporated into a review of the extensive exploration portfolio with a view to determining the exploration strategy for the next fiscal year.

In parallel with this, evaluation of Block CD with respect to a contractual 50% relinquishment is proceeding. The project is scheduled for completion in December such that an internal review can be conducted and the final report prepared in time for a March 2001 submission.

Technical work has confirmed that attractive exploration and appraisal prospects exist in Block B and these are being considered for investment in 2001 subject to gas commercial issues being resolved.


A summary of exploration and development costs incurred during the quarter is set out in the following table:

NZ$ ‘000s Exploration Costs Development Costs

NZ Offshore 1,086 10,411
NZ Onshore 1,973 1,615
North America 9,410 29,637
Brunei 4,233 309
South America 164
Total 16,703 42,136

Note: Fletcher Challenge Energy accounts for exploration expenditure on a successful efforts basis with unsuccessful exploration expenditure being written off rather than capitalised. Expenditure classified as “Exploration Costs” associated with successful exploration efforts will be capitalised in Fletcher Challenge Energy’s financial statements.

5 Risk Management

In line with Fletcher Challenge Energy’s stated risk management policy the following positions are current in the forward markets.

OIL AND CONDENSATE
FY 01 FY 02 FY 03 FY 04
WTI Put Options
Volume (mmbbls) 4.20 6.90
Average Strike US$/bbl 17.87 18.00
Average Premium US$/bbl 0.82 0.45
Quarterly settled, deferred premium Asian options

WTI Swaps
Volume (mmbbls) 2.10
Average Strike US$/bbl 15.59

WTI Collars
Volume (mmbbls) 2.28 2.28
Floor US$/bbl 18.00 18.00
Ceiling US$/bbl 21.00 21.00
Average Premium US$/bbl 0.86 0.86
Quarterly settled, deferred premium Asian options

Tapis Collars
Volume (mmbbls) 0.72 0.72
Floor US$/bbl 18.00 18.00
Ceiling US$/bbl 21.00 21.00
Average Premium US$/bbl 0.60 0.60
Quarterly settled, deferred premium Asian options

Tapis Differential
Volume (mmbbls) 1.73
Average Strike US$/bbl -0.04
Represents the discount to WTI that Tapis product receives (negative means Tapis > WTI) Represents the discount to WTI that Tapis product receives (negative means Tapis > WTI)

LLK Differential
Volume (mmbbls) 0.18
Average Strike US$/bbl 5.50
Represents the discount to WTI that LLK product receives Represents the discount to WTI that LLK product receives

Bow River Differential
Volume (mmbbls) 0.11
Average Strike US$/bbl 3.95
Represents the discount to WTI that Bow River product receives Represents the discount to WTI that Bow River product receives

LLG Differential Floor
Volume (mmbbls) 0.28
Average Strike US$/bbl 4.80
Represents the maximum discount to WTI that LLG receives Represents the maximum discount to WTI that LLB receives


BRUNEI NATURAL GAS

Dubai Collars
FY 01
FY 02
FY 03
FY 04
Volume (mmbbls) 0.96 0.96
Average Floor US$/bbl 16.63 16.63
Average Ceiling US$/bbl 19.63 19.63
Average Premium US$/bbl 1.00 1.00
Dubai instruments are used to manage our Brunei gas price exposure Dubai instruments are used to manage our Brunei gas price exposure

CANADIAN NATURAL GAS

FY 01 FY 02 FY 03 FY 04

NYMEX Swaps
Volume (PJ) 7.66 3.89
Average Strike US$/mmbtu 2.33 2.33

NYMEX Collars
Volume (PJ) 3.89
Average Floor US$/mmbtu 3.00
Average Ceiling US$/mmbtu 3.39
Average Premium US$/mmbtu 0.23

AECO Swaps
Volume (PJ) 21.90 14.64 3.69
Average Strike C$/GJ 2.29 2.69 3.09

AECO Put Options
Volume (PJ) 3.69 7.26 3.07
Average Strike C$/GJ 2.95 3.15 3.15
Average Premium C$/GJ 0.29 0.38 0.38

AECO Differential
FY01 FY02 FY03 FY04
Volume (PJ) 11.66 15.40 21.78 25.09
Average Strike US$/mmbtu 0.37 0.37 0.37 0.38

FY05 FY06 FY07 FY08

Volume (PJ) 25.02 25.02 25.02 8.43
Average Strike US$/mmbtu 0.40 0.42 0.44 0.44
Represents the discount to NYMEX that AECO gas receives


For further information regarding this report, please contact:
Stephen Jones, Fletcher Challenge Energy
Telephone: (649) 525-9230 e-mail: stephen.jones@fce.co.nz

Appendix 1

Sales
By
District September
Quarter
FY 2000 September
Quarter
FY 1999
YTD
FY 2000
YTD
FY 1999

Natural Gas (bcf)
Saskatchewan 5.1 4.7 5.1 4.7
Central Alberta 3.7 3.9 3.7 3.9
Provost 5.6 4.4 5.6 4.4
Total 14.4 13.0 14.4 13.0

Oil (000 bbls)
Saskatchewan 668 497 668 497
Central Alberta 285 275 285 275
Provost 380 501 380 501
Total 1,333 1,273 1,333 1,273


Average
Daily
Production September
Quarter
FY 2000 September
Quarter
FY 1999
YTD
FY 2000
YTD
FY 1999

Natural Gas (mmscf)
Saskatchewan 55 51 55 51
Central Alberta 41 42 41 42
Provost 61 48 61 48
Total 157 141 157 141

Oil (bbls)
Saskatchewan 7,263 5,405 7,263 5,405
Central Alberta 3,099 2,987 3,099 2,987
Provost 4,127 5,448 4,127 5,448
Total 14,489 13,840 14,489 13,840

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