Carnarvon Quarterly Report 31 December 2018
Monday 21 January 2019
Quarter Highlights:
- Noble Tom Prosser rig secured to drill Dorado appraisal wells commencing around April 2019
- Significant follow up potential identified following world-class Dorado discovery
- Buffalo Project PSC discussions significantly advanced with the Government of Timor-Leste
- A$48.3 million held in cash at the end of the quarter after A$1.2m exploration spend
Phoenix Project
(Carnarvon 20%-30%; Santos is the Operator)
The Dorado-1 well made a world-class hydrocarbon discovery, encountering light oil, gas and condensate in a number of reservoirs and collecting significant data from well logging and fluids sampling. A comprehensive post well evaluation of the data obtained in the well is currently underway. This evaluation includes fluid analysis, reservoir studies, image log interpretation and special and routine core analysis.
Given the significant resources encountered and the accompanying subsurface uncertainties from the single well drilled to date, further appraisal of the Dorado discovery is warranted.
The Dorado-2 well is targeting the hydrocarbon columns in a down-dip location in order to confirm the extent of the hydrocarbon accumulations and further calibrate the reservoir and fluid properties. The Dorado-2 well is expected to commence around April 2019.
The Dorado-3 well, being planned with drill stem tests, will also be critical to understand reservoir performance and obtain representative fluid samples required for the design of the Dorado production facilities.
The results from these two wells will also be instrumental in preparing for FID in late 2020.
Carnarvon and its Joint Venture partner Santos, have secured the Noble Tom Prosser jack-up drilling rig for the Dorado wells which was also used to drill the Roc-1 discovery in 2016.
During the quarter, work also continued in defining the follow up potential to the Dorado discovery. The Roc South prospect, which is located 13 km from the crest of the Dorado structure, has a high probability of success with an estimated 74 million barrels of oil equivalent (Gross, Pmean - refer to ASX announcement on 15 October 2018). Roc South is a very similar trap to Dorado, also being up-dip of the Roc discoveries and relying on the Dorado canyon for sealing and setting up the prospect.
There are also two additional standout oil prospects nearby which have been de-risked following the Dorado discovery. The Pavo and Apus prospects are estimated to contain 82 million barrels and 612 million barrels respectively of oil recoverable (Gross Pmean) (refer to ASX announcement on 15 October 2018). Carnarvon looks forward to providing further information on these prospects as the technical work progresses.
Buffalo Project – WA-523-P
(Carnarvon 100% and operator)
Discussions on the Production Sharing Contract (PSC) between Carnarvon and the Timor-Leste government agency Autoridade Nacional do Petróleo e Minerais (ANPM) continued during the quarter.
Pleasingly, all parties have agreed in principle to the fundamental terms of the PSC. The aim now is to have the PSC completed and ready for signing upon the ratification of the Maritime Boundary Treaty (Treaty) between the Australian and Timor-Leste Governments.
Carnarvon is also actively engaging with the governments of both Australia and Timor-Leste in order to be able to drill a well in the Timor-Leste jurisdiction in this calendar year.
Towards the end of 2018, Carnarvon commenced a process to introduce a partner to the Buffalo project. Acquiring a suitable partner will assist with financing the project which will be vital as Carnarvon works towards bringing both the Dorado and Buffalo fields into production.
In the meantime, Carnarvon has also continued to build its operational readiness for the Buffalo project. During the quarter, Carnarvon submitted the environmental plan for the drilling of up to three wells in the field. Finalising the Environmental plan in the coming months will be an important step towards redeveloping the oil field.
In addition, Carnarvon completed a field surveillance program in the area of the Buffalo Oil Field Redevelopment Area. The survey indicated that are no impediments to locating the wells in the surface locations that are most ideal for targeting the identified attic of oil.
Labyrinth Project – WA-521-P
(Carnarvon 100% and operator)
The Labyrinth project is located in the Bedout Sub-basin in close proximity to Carnarvon’s Dorado, Roc and Phoenix South discoveries.
Results from the Phoenix South-3 well in particular have enhanced the confidence of the Labyrinth play type. There is now a higher level of confidence for hydrocarbon charge for reservoirs above the Cossigny Limestone, due to the Phoenix South-3 well intersecting hydrocarbons at this level within the Late Triassic Cuvier Member.
Carnarvon’s geological analysis has identified 1.5 billion barrels of recoverable prospective resource in the permit (refer to ASX announcement on 7 February 2018). In particular, the Ivory prospect is estimated to contain 420 million barrels of mean recoverable oil (refer to ASX announcement on 7 February 2018).
The forward plan for the Labyrinth project is to acquire additional 3D seismic over the standout Ivory prospect. Carnarvon will commence planning the Seismic program in the coming months and aims to initiate the seismic acquisition in 2020.
Carnarvon is looking to bring a partner into the project for the seismic acquisition and the drilling of the Ivory prospect.
Condor Project – AC/P62
(Carnarvon 100% and operator)
Carnarvon continues to augment the technical work already completed on the prospects and leads identified within the Condor project with additional technical work being performed to identify further prospects.
A fault seal analysis was completed towards the end of the quarter with the results to be analysed in the coming months. The aim of the analysis is to minimize the geological risk of the presence of faults and therefore de-risk the prospects which have been identified.
The Condor project lies within the Vulcan Sub-basin which is a world class and proven oil and gas basin featuring the Montara, Jabiru, Skua and Challis oil fields. The basin is currently experiencing a renaissance which is being driven by new 3D seismic data. Carnarvon is utilising the high-quality Cygnus 3D survey, recently acquired by Polarcus, to pursue the potential of the 1,512km2 area within the Condor project permit.
Eagle Project – AC/P63
(Carnarvon 100% and operator)
During the quarter, Carnarvon commenced its technical work on the Eagle project. The technical work involves detailed mapping of the high-quality Cygnus 3D seismic data which was recently acquired by Polarcus. The aim of the technical work is to identify prospects and leads, and to enhance our understanding of the petroleum systems in the permit.
The Eagle project is located in relatively shallow water within the Vulcan Sub-basin and is in close proximity to the Condor project. With the permit awarded to Carnarvon in 2018 with minimal commitments, the Company will continue its technical work in the coming months before looking to bring in a partner to further the project.
Corporate / Financial
The Company’s cash holdings at the end of the quarter were $48.3 million, compared to $49.5 million at the end of the previous quarter.
During the quarter, A$1.2 million was spent on exploration activities in the North-West Shelf which primarily included technical work performed on the Dorado, Phoenix and Buffalo projects, and Carnarvon’s other exploration projects. The Company also spent $1.1 million on business development and corporate costs.
The Company’s United States Dollar (“USD”) holdings at the end of the quarter were US$29.4 million and its Australian Dollar (“AUD”) holdings were A$6.6 million. Carnarvon holds a balance between USD and
AUD as a natural hedge to expected future expenditures denominated in both USD and AUD. The retention
of US dollars influences Carnarvon’s reported cash holdings due to AUD / USD exchange rates at each
reporting period end.
A weakening of the average Australian Dollar relative to the US dollar during the quarter resulted in a foreign
exchange translation adjustment that increased the Company’s reportable cash holdings by A$0.9 million.
In addition to the above, interest of A$0.2m was received during the quarter.