In the third quarter of fiscal 2013, the Company launched its mult-year deepwater exploration drilling program in Indonesia and repaid its Cdn$310 million convertible debentures due December 2012, primarily using the net proceeds from successful offerings of common shares and convertible notes. The business enviroment in India appears to have improved significantly as evidenced by the release of a goverment-appointed committee's report on domestic gas pricing and the restart of planned development and exploration activities for the D6 Block in India.
In December 2012, the Rangarajan Committee provided its report to the Goverment of India that included a recommendation on a pricing mechanism for natural gas produced in India and this recommendation is currently being reviewed by the Goverment for approval. Based on current inputs into the pricing formula, the price for natural gas sales from the Company's assets in India would increase to approximately $8 - $8.50/MMBtu, compared to $4.20/MMBtu for current natural gas sales from the D6 block. The field development plan an additional development area in the D6 Block was submitted in January 2013 and the plan for a development in the NEC-25 Block is to be submitted by March 2013. With field development plans submitted and increased clarity on future gas prices for the developments, the Company's expects to book a substantial portion of its approximately 600 bcf of estimated contingent resources as reserves, effective March 31, 2013.
The operational efficiency of Niko's drilling team in Indonesia has continued to be outstanding, with the first two wells in the multi-year program drilled safely, significantly under budget and much faster than anticipated. Changes made by Niko for the Ocean Monarch rig have resulted in significant reductions in time and costs for wells drilled in this program. These improvements and the Company's portfolio approach across its extensive portfolio of exploration prospects in its significant acreage position in Indonesia, will allow the Company to benefit from economies of scale, increased flexibility to move between drilling locations at lower costs, and increased statistical likelihood of success.
The Company's planned capital spending is flexible and is focused on development activities in India and exploration activities in Indonesia and Trinidad. The Company is currently in negotiations with various third parties regarding farm-outs, non-core asset dispositions and other arrangements, and the Company is confident that the combination of ongoing funds from operations from its producing properties and the proceeds it expects to receive from some or all the farm-outs, asset dispositions and other arrangements that the Company has been working on will provide appropriate funds from the Company's capital spending plans.
On behalf of the Board of Directors,
Edward S. Sampson
Chairman of the Board, President and CEO