Independent Reserves Assessment for West Seahorse Oil Field

abarrelfullabarrelfull wrote on 03 Sep 2015 06:19

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14 January 2014

3D Oil Limited (ASX: TDO) is pleased to announce that independent expert Gaffney, Cline & Associates (GCA) has completed its Reserves and Contingent Resources Statement for the West Seahorse (WSH) oil field in the offshore Gippsland Basin. The main highlights of GCA’s report are:

  • Proved plus Probable (2P) Oil Reserves of 6.5 million barrels for the West Seahorse Field as at 31 December, 2013.
  • Independent assessment of WSH Reserves provides certainty for project financing and major contracts.
  • WSH project Development Plan and economics reviewed as part of GCA assessment.
  • Mid Case Stock Tank Oil Initially In-Place (STOIIP) of 10.3 million barrels with estimated un-risked 2C Contingent Resources of 1.5 million barrels in secondary ‘Gurnard’ reservoirs

WSH is being developed for production in early 2015 by a joint venture (JV) comprised of TDO 49.9% and Carnarvon Hibiscus Pty Ltd (Hibiscus), a wholly owned subsidiary of Hibiscus Petroleum Berhad (KLSE: HIBISCUS), as Operator with 50.1%.

GCA’s assessment is an update of its 2011 report on WSH which established Contingent Resources for the field. The 2013 update was based on a combination of probabilistic and deterministic methods and incorporated revised field mapping by TDO based on reprocessed 3D seismic. GCA also reviewed the JV’s progress on the WSH development project, including economics, and recognised the recent environmental and regulatory approvals, plus the VIC/L31 Production Licence for the field which was granted on 5 December 2013. Consequently, GCA has upgraded its assessment of the main WSH reservoirs from Contingent Resources to Reserves.

TDO has also performed extensive reservoir simulations studies, which were reviewed by GCA and used to define a set of oil production profiles that formed the basis for the economic analysis tests to determine Reserves.

The assessment of Reserves provides the foundation for finalising the WSH financing plan
and the JV will now move as quickly as possible towards Final Investment Decision which is
anticipated in early 2014.
The full range of undeveloped Oil Reserves for WSH as at 31st December, 2013 are:
Gross 100% Field TDO share within VIC/L31
1P 2P 3P 1P 2P 3P
4.0 6.5 11.5 1.9 2.9 4.9
Four wells have been drilled in WSH and its near vicinity. The discovery well, WSH-1, was
drilled in 1981 and encountered hydrocarbon indications in three layers in the Eocene fluviodeltaic
Latrobe Group. The N1 layer was tested and produced 1,800 barrels of oil per day
(bopd) from a 3 m interval. Oil was recovered by RFT sampling in the N2.6 layer. Well
WSH-2 was drilled in 1982 down dip from WSH-1 to appraise the flank of the accumulation;
however, the N1 and N2.6 zones were found to be water bearing in this well. WSH-3 was
drilled in 2008. The well encountered oil in the N1 layer. Well Wardie-1 was also drilled in
2008 to test a structural culmination one kilometre south-west of the West Seahorse
structure. Oil was encountered in the shallower Gurnard and N1u reservoirs, but the deeper
reservoirs were water bearing.
TDO intends to develop the field using a mobile offshore production unit (MOPU). A modular
drilling rig will be mounted on the MOPU and two new development wells will be drilled.
Produced oil will be measured and transferred to a floating storage and offloading facility and
a shuttle tanker will be used to export the oil.
The design of the production wells, processing facilities, export system and other aspects of
the project development plan is based on the 2P Reserves estimate. On this basis WSH is
forecast to produce at an initial rate of approximately 12,000 bopd and to have an economic
field life of between 5 and 6 years.
The cash flow analyses were modelled under the Australian Petroleum Resource Rent Tax
(PRRT) regime and Australian income tax using nominal dollars to assess project
commerciality and to determine field economic limits. West Seahorse oil price was based on
the Brent crude oil price scenario shown below. Prices were escalated at 2.0% pa after
Year US$/Bbl
2015 97.76
2016 94.82
2017 97.26
2018 101.61
Capital costs are estimated at around US$140 million and annual operating costs estimated
at US$46 million per annum decreasing to US$37 million per annum after 5 years, based on
TDO estimates and results of tenders for facilities, drilling and operational services. In
undertaking the cash flow analyses an exchange rate of A$1 = US$0.90 was used and all
costs were escalated at 2% pa from 2014 onwards for the duration of the project.

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