Winchester Energy Advances Peru Offshore Bid Amid Steady Texas Production

Strategic Move into Offshore Peru

Winchester Energy Limited (ASX: WEL) has taken a significant step towards expanding its exploration footprint by signing a non-binding term sheet with US-based Jaguar Exploration, Inc. The agreement targets joint applications for Technical Evaluation Agreements (TEAs) over two offshore blocks in the Lima and Pisco Basins of Peru, covering approximately 8,060 square kilometres. This move represents a strategic diversification beyond Winchester’s core Texas assets and positions the company to potentially access new hydrocarbon resources in a competitive South American basin.

The term sheet grants Winchester exclusivity until definitive binding agreements are executed, anticipated upon successful TEA awards. Under the proposed joint venture, Winchester would hold an 80% working interest, with Jaguar free-carried until the first exploration well is drilled. The company plans to seek a third-party farm-in partner to fund drilling, reflecting prudent capital management given the exploratory nature of the blocks.

Stable Production and Revenue from Texas Operations

Meanwhile, Winchester’s existing operations in Texas continue to deliver steady production and revenue. The March quarter saw average net production of 74 barrels of oil equivalent per day (boepd), consistent with the previous quarter’s 73 boepd. This output is predominantly oil, accounting for 92% of the mix, underscoring the company’s focus on liquid hydrocarbons.

Net revenue after royalties was AUD 578,012 (US$362,991), slightly up from the prior quarter, despite a marginal decrease in the average oil sale price to US$71.81 per barrel. The company’s portfolio includes multiple producing wells across Nolan, Taylor, and Coke Counties, with the Jocelyn Varn Oil Field notably maintaining stable production from its JVU#6 well, which has produced over 14,000 barrels with no decline since early 2023.

Operational and Financial Discipline

Winchester has implemented a cost reduction program involving corporate overhead cuts and staff rationalisation, reflecting a disciplined approach to capital allocation. The company’s quarterly costs and revenues remained broadly in line with the previous quarter, indicating effective cost control amid stable operational output.

Routine maintenance activities were completed during the quarter, including the plugging and abandonment of the Group 39 well, in line with regulatory decommissioning obligations. These actions demonstrate Winchester’s commitment to operational compliance and asset stewardship.

Financially, Winchester ended the quarter with cash reserves of approximately US$501,000. The quarterly cash flow report reveals operating cash outflows of US$32,000 and investing outflows of US$66,000, primarily for property, plant, and equipment. No new financing activities were recorded, highlighting the company’s reliance on existing cash and operating revenues to fund near-term activities.

Reserves and Future Outlook

Reserve estimates for the Jocelyn Varn Oil Field, as assessed by Mire Petroleum Consultants, indicate 2P (proved plus probable) reserves of 415,000 barrels of oil and 169,000 thousand cubic feet of gas, translating to 443,000 barrels of oil equivalent. The company holds a 77% net revenue interest in these reserves, which underpin the field’s production sustainability.

Looking ahead, the success of the Peru offshore exploration bid will be a key catalyst for Winchester. The company anticipates investing approximately US$250,000 per block over the two-year evaluation period, funded from existing cash or operating revenues. The potential to secure exploration licenses and attract farm-in partners could materially enhance Winchester’s growth prospects.