Oil Basins Limited (ASX:OBL) June 2010 Quarterly Report
During the June Quarter, the Company reports:
- OBL held a number of strategic Farm-Out / Divestment discussions with respect to both its drill-ready Gippsland interests (where the Company was earlier appointed agent on behalf of the Vic/P41 joint venture for Managing the Farm-Out) and all of its Canning Basins interests.
- The Company completed the independent expert geological assessment of the extent of the coal measures situated within its large 50% Canning Basin permit 5/07-8 EP and 90% (beneficial rights) Backreef Area.
- Subsequent to quarter-end, the Company completed a further independent expert geological assessment of the Coal Seam Gas (CSG) and Unconventional Shale Gas (USG) potential within its large 50% Canning Basin permit 5/07-8 EP and 90% (beneficial rights) Backreef Area. Gross and Net potential prospective resources are detailed in Tables 1, 1a, 2 and 2b of this Report. (see link at the bottom)
- The prognosed Backreef-1 has been re-assessed and potentially de-risked and is now drilled with three objectives, shallow CSG, deeper and significant unconventional Shale Gas potential (as evidenced by the previous seismic inversion assessment) and the previously delineated Clanmeyer sandstone primary reservoir target.
- Subsequent to quarter-end, the Company has engaged its Backreef Area Joint Venture Partner Backreef Oil Pty Limited (as nominated Operator and free-carried as to 10% by OBL) to make preparations for the drilling of Backreef-1, source at least two suitable drilling rigs, engage consultants to assist in the necessary Aboriginal Heritage field survey, source equipment and conduct the necessary environmental survey over the location within WA Production Licence 6. Further details will be released to the market after first consulting with all relevant stakeholders and licence titleholder.
- During the quarter and upto the date of this report the Company at the request of OBLOA Optionholders converted 3,439,999 options to OBL shares (raising some A$51,600).
- Subsequent to quarter-end, on 29 July 2010 the Company successfully completed a Strategic Placement of 6.5 million shares (representing circa 4.94%) to a significant downstream Corporate third party. The OBL directors are very pleased with this potentially important development which may lead to a Strategic Alliance between both parties. When appropriate and the confidential negotiations are complete the Company will make an ASX Announcement.
- OBL remains a low overhead oil and gas explorer and post the recent Strategic Placement presently has net cash of circa A$0.442 million, available working capital is deemed adequate to fund the Company's ongoing 2010 calendar year working capital commitments and permits the Company to pursue additional future growth and attractive investment opportunities.
COMPANY'S EXPLORATION INTERESTS
OBL holds rights to or interests in a portfolio of attractive drill-ready exploration assets. This portfolio includes three (3) offshore and three (3) onshore petroleum exploration permits in Australia, as follows:
- 12.5% Rights to Vic/P41 situated in offshore Gippsland Basin,
- 17% interest in Vic/P66 situated in offshore Gippsland Basin,
- 90% Rights to Backreef Area (by way of OBL agreeing to funding 100% of Backreef-1), onshore Canning Basin (note Rights have increased to 90%). In addition to significant conventional petroleum prospectivity within the Clanmeyer formation, the recent assessment has concluded that there is CSG and USG potential within the Backreef Area and all of these prognosed targets will be assessed in the proposed forthcoming drilling of Backreef-1 (to be drilled to 1500m by 31 October 2010).
- Nil% Rights to DR9 situated in onshore Canning Basin (20% Farmin at OBL's discretion),
- 50% interest in EP5/07-8 situated in onshore Canning Basin (exploration assessment activities recently expanded by OBL to cover both conventional petroleum, CSG and USG prospectivity).
- 25% interest in R3 situated in offshore Carnarvon Basin hosting the Cyrano Oil Field.
A. EXPLORATION ACTIVITIES
Ownership (OBL - Rights upto 12.5%)
During the quarter geological and geophysical studies continue with work being focused upon performing an independent inversion assessment and a regional Basin Study. Overall expendition is estimated at around A$250,000 with OBL's contribution during the remainder of the year estimated at circa A$31,000.
As previously reported, as a result of the Vic/P41 Joint Venture Meeting held on 28 April 2010, OBL was appointed agent on behalf of the Vic/P41 joint venture partners (JVPs) for Managing the Farm-Out.
Broad information of the key exploration attributes of this Farm-In opportunity will be presented in a separate ASX Announcement and duly qualified Exploration & Production Companies or International Independents seeking an attractive strategic investment in one of Australia's premier hydrocarbon provinces should contact OBL directly.
Recently, on 22 April 2010, Esso Australia, an ExxonMobil (NYSE:XOM) subsidiary, reported that they had encountered oil and gas at the South East Remora-1 exploration wildcat well. Located 35 km off the Victorian coast in Bass Strait and 3 km north of the Marlin Platform, the well was drilled in 57 metres of water to a total depth of 3,602 metres below sea level, the wildcat discovered oil and gas in the Latrobe and Golden Beach groups in the Gippsland Basin. The well is included in the Gippsland Basin Joint Venture between Esso Australia Resources (50%, operator) and BHP Billiton Petroleum (ASX:BHP) (Bass Strait) (50%). Data analysis and additional studies are being conducted to evaluate the discovery.
The importance of the South East Remora-1 discovery is that it has been made on the downthrown side of the Rosedale Fault - due West to but on a similar geological setting to the Vic/P41 Kipling/Benchley Prospects and the nearby Kipper Gasfield. Verifying and derisking the Rosedale Fault play type prognosed by the Vic/P41 JVPs.
The Company effectively holds a potentially low cost Drilling Option of upto 12.5% of this strategic drill-ready permit. The Company is performing this task for no fee and has presented the attributes of Vic/P41 to a number of interested third parties at conferences and by invitation.
Ownership (OBL - 17%)
During the quarter geological and geophysical studies continue.
Company obligations for the remainder of 2010 are relatively modest by industry standards.
Ownership The OBL Group has conditional Rights in the Backreef Area to 90%:
Note - the Backreef Area is also subject to various royalties and back-in rights (previous detailed in the OBL 2009 Annual Report).
Effectively OBL has right but not the obligation to drill and fund Backreef-1 to earn 90% Beneficial Interest (subject to a once-off 30% backin rights to the titleholder for repayment to OBL 90% well cost which must be exercised within 90 days of completing the Backreef-1 well). To earn the interest the well must be drilled to at least 1500m by no later than 31 October 2010.
During the quarter OBL has focused upon:
(a) Presenting the Farm-In opportunity to third parties - at the time of preparing this report Confidentiality Agreements are still being exchanged with interested third parties,
(b) The independent coal measures assessment of the Backreef Area was completed (refer to summary attached); and
(c) The independent CSG Study and USG Study of the Backreef Area was completed (refer to summary attached).
Subsequent to quarter-end, the Company has engaged its Backreef Area Joint Venture Partner Backreef Oil Pty Limited (as nominated Operator and free-carried as to 10% by OBL) to make preparations for the drilling of Backreef-1, source at least two suitable drilling rigs, engage consultants to assist in the necessary Aboriginal Heritage field survey, source equipment and conduct the necessary environmental survey over the location within WA Production Licence 6. Further details will be released to the market after first consulting with all relevant stakeholders and licence titleholder.
During 2008. OBL reprocessing of vintage 2D seismic delineated an attractive large undrilled Backreef stratigraphic prospect (circa 900 MMbbls OOIP and circa 270MMbbls gross 2P prospective potential resources) - prognosed to be a sand fan within an ancient marine channel.
During 2009, after settlement of the OBL - Arc Energy legal dispute, which resulted in OBL moving from 35% to 80%, OBL commissioned an Independent Expert Geologist Report of the Hydrocarbon Potential of the Backreef Area (refer to OBL ASX Release made the 18 February 2009). This independent report concluded that the Backreef-1 prospect is highly attractive and drill-ready.
- Potential reserves calculations indicate that the Backreef Prospect could host unrisked recoverable oil resources of 141 MMbbl, 270 MMbbl and 337 MMbbl in the low, median and high case estimates respectively.
- The corresponding figures for gas, if the Backreef Prospect hosts gas only, are 261 BCF, 500 BCF and 624 BCF respectively.
With respect to the Backreef Area during the 2Q2010, OBL has recently focused upon derisking the high-risk Backreef Play with respect to additional prognosed CSG and USG potential.
PERMIT 5/07-8 EP
Location - onshore Fitzroy Sub-Basin WA
Ownership (OBL - 50%)
New Permit - awaiting Native Title awarding and Operator recently met again with the majority of stakeholders in July. Following satisfactorily executing stakeholder and authorities agreements, the joint venture interests will be as follows:
- Backreef Oil Pty Limited 50% (Operator)
- Oil Basins Limited (or Nominee) 50%
Conventional Oil & Gas Potential
The area consists almost entirely of Fitzoy Graben sediments. The northwestern half of the area lies under King Sound and associated tidal flats. As this area is not more prospective than the southeastern half, but is far more expensive to explore, this review will concentrate on the southeastern half.
The area has a thick sequence of Fitzroy Graben sediments. There is a broad syncline trending northwest - southeast centred on the mouth of the Fitzroy River.
Three wells have been drilled in the area, or immediately adjacent, in this graben sequence. They are Booran-1, East Yeeda-1 and Millard-1.
Booran-1 was drilled on a large anticline on the Derby Peninsular. East Yeeda-1 was drilled on a faulted anticline with the Anderson Formation as the primary target. Millard-1 was drilled on a large, simple anticline to target the Grant Formation.
In both Booran-1 and East Yeeda-1, porosity was about 20% in the Poole Sandstone and uppermost Grant Formation, at about 1,200 metres. Porosity then reduced at about 1% per 100 metres of depth to reach about 10% at the top of the Anderson Formation at about 2,200 metres.
Reservoir quality then continued to become further sub-commercial.
The best reservoir/seal combination in the area is the Poole Sandstone/Noonkanbah Formation, followed by the sands and shales of the uppermost Grant Formation.
The lower two thirds of the Grant Formation appears to be devoid of intraformational sealing shales.
This part of the Fitroy Trough contains a large thickness of source rocks in the oil window, and below that a larger thickness in the gas window. As such, it has generated oil and gas. The bulk of this generation may have occurred before the Triassic structuring event. Nevertheless, oil may continue to have been generated and migrated post the Triassic event. The presence of oilfields in the Grant Formation in the Sundown area point to long distance migration.
The Booran structure is an elongate, high relief structure generated near to the northern edge of the graben. The Millard structure is a low relief anticline located in weakly structured part of the graben. East Yeeda is a culmination on an east-west trending high, cross-cut by northwest-southeast trending normal faults. Mapping of the East Yeeda area by Bridge Oil in the mid-1980s suggests that these faults are approximately 2 km apart. Fault independent closure appears to be rare. The most common type of prospect is a rotated fault block with seal provided by downthrown Noonkanbah Formation.
Exploration will target the Poole and Upper Grant Formation sands as reservoir properties below this level are quite poor, or in the case of the lower two thirds of the Grant Formation, the sands lack seals.
There do not appear to be any drillable prospects generated from the existing seismic data set over the area. Based on the structural style, seismic could be directed at finding large anticlines similar to Booran and Millard, on trend from these structures, or defining rotated fault blocks on the East Yeeda high and to the northeast from there towards the Sundown Oilfield.
The latter approach is more likely to generate drillable prospects than the former. Although they will be smaller, there will be a lot more of them. The Bridge Oil mapping of the East Yeeda Ridge suggests a prospect density of one per 100 sq km.
Concepts Underlying the Proposed Exploration Program
1. The economically valid couplet is the Poole and Upper Grant/Noonkanbah pair.
2. Targets in the underlying Anderson Formations and below will be no larger in volume than those in the Upper Grant in the same structure, but will have far worse porosity and permeability, affecting production economics.
3. The area where the greatest number of Poole and Upper Grant targets will be generated is on the East Yeeda Ridge and the area from there to the northeast.
4. The fault spacing of 2 km in this area will require at least a 1 km line spacing in order to generate fault-independent closures.
5. The initial seismic programme therefore will be on a 2 km line spacing aligned with the existing grid.
6. Based on an area of four square kilometers and 40 metres of closure, potential pool sizes may be of the order of 13 million barrels.
7. Wells will be drilled to 1,500 metres to adequately test the target horizons at about 1,200 to 1,300 metres. Below this level is effectively economic basement.
Permit 5/07-8 EP Exploration & Work Program
The primary targets expected to have the greatest number of Poole and Upper Grant prospects will be generated is on the East Yeeda Ridge and the area from there to the northeast.
The exploration work program (refer below) will combine both initial seismic aligned with the existing grid and 6 wells drilled to circa 1,500 metres to adequately test the target horizons at about 1,200 to 1,300 metres.
Below this level is effectively economic basement.
Based on an area of four square kilometers and 40 metres of closure, potential pool sizes may be of the order of 13 million barrels.
It should be noted that part or portions of this work program may with the consent of the DMP be assigned to prospective CSG and Unconventional Shale Gas activity expenditure.
CSG & Unconventional Shale Gas Potential
In late 2009, OBL commissioned independent expert geologist Ms Dierdre Westblade of Westby Consulting to assess the coal measures within Permit 5/07-8 EP as part of a wider study of the Coal Seam Gas (CSG) potential of the Permit. Work commenced in February 2010 and was further expanded in March 2010 to include the Backreef Area in an overall Independent Coal Measures Assessment Report.
In addition OBL has also commissioned independent expert geologist Mr Roger Meaney to provide an Independent Expert Geologist CSG and Unconventional Shale Gas (USG) Prospectivity Report for the CSG and shale gas potential of both Areas.
Independent Coal Measures Assessment Report
On 31 May 2010, Oil Basins Limited ("OBL") received an independent expert report prepared by Westby Consulting Pty Ltd in response to OBL's request to complete a desktop study of the coal potential of 5/07-8 EP and the Backreef Area, particularly at depths and the thickness required for Coal Seam Gas ("CSG") - the specific criteria used for CSG are seams >3 m thick and at depths >300 m.
Principal Findings :
Although there has been widespread mineral exploration within the Canning Basin all historic coal exploration has generally concentrated on locating shallow coal near the known out-crop of the Permian Lightjack Formation. The closest explored area is located some 30 km to the south of 5/07-8 EP, consequently no deep mineral exploration holes have been completed in either permit area. Therefore, the depth to the Lightjack Formation coal unit has been interpreted from both oil and water wells and the coal quality characteristics were inferred from known shallow deposits to the south.
The Lightjack Formation has been interpreted to be present at depths suitable for CSG throughout all of 5/08-8 EP. However, within the Backreef Area, only the portion west of the Sixty-seven Mile Fault System is interpreted to be at a depth >300m.
South of the Fenton Fault, recent coal exploration by Rio Tinto Exploration (2003/04) discovered an extensive area of high ash content (>45%) shallow coal.
Permit 5/08-8 EP
Esso Exploration's Booran-1 (1982), one of only four wells drilled within the 5,062 sq km of 5/07-8 EP, has recorded coal over a 20 m interval within the Lightjack Formation. It also displays a similar pattern in the downhole geophysics, over the coal unit, to that in Petaluma 1 - indicating the potential for coal depocentres in the style of the Duchess-Paradise and Myroodah deposits in this area.
The proximity of Booran-1 to Derby would make the immediate region a priority exploration target for CSG.
The downhole geophysical logs in vintage petroleum wells Booran-1, East Yeeda-1, Millard-1 and Puratte-1, within 5/07-8 EP, as well as nearby wells Kora-1, Runthrough-1 and Whitewall-1 all display a similar geophysical signature to Petaluma-1 indicating that the coaly unit of the Lightjack Formation is present over the entire permit. The base of the Lightjack coal unit varies from >350m in Wonjil bore at the south-west corner of 5/07-8 EP to 710 m in East Yeeda-1, 750 m in Millard-1, 665 m in Booran-1 and 615 m in Kora-1. It is stratigraphically located 15-40 m above the top of the Noonkanbah Formation within 5/08-8 EP - this is consistent with previous findings.
Specifically, the planned Backreef-1 well is designed by OBL to test a much deeper prognosed marine channel prospect, and as sited will test the Permian Lightjack coal measures at a sub-optimal location (ie depth to coal is estimated at only 150m) but nonetheless will enable a core to be cut as Backreef-1 is sited on the down-thrown side of the Sixty-seven Mile Fault System.
Indicative Coal Measures
Booran 1's well formation log which records coal between 645 - 665m and gas just below this interval, supports the geophysical interpretation used above and indicates the potential for coal depocentres in the style of the Duchess-Paradise and Myroodah deposits in this area.
Given that Rey Resources Ltd (ASX:REY) has defined two coal deposits some 30 km apart, each with JORC resources in excess of 500 Mt and a strike length in excess of 10 km, then it can be assumed that similar deposits are present within 5/07-8 EP and the Backreef Area at depth.
The Rey Resources Ltd Myroodah-Duchess exploration leases cover an area of around 3,000 sq km (their entire Canning Basin licences cover around 8,000 sq km).
CSG Potential Prospective Resources
Principal Findings :
OBL is pleased with these important findings and believes they will underpin the continuing work on the Independent Expert Geologist CSG and Shale Gas Prospectivity Report of both Areas, which was released to the ASX on 8 July 2010.
- Oil Basins' Canning Basin acreage is known to contain extensive Permian coal measures (Lightjacket coal measures within the Liveringa Formation) and carbonaceous shales, correlatives of which are known to have sourced the gas and oil accumulations in the Cooper Basin of central Australia and Bowen Basin of eastern Australia.
- If the coals of the Liveringa Formation are like all the Permian aged coals of eastern and central Australia they should be good CSG targets as they are expected to be volatile and 'gassy'. Similar low cost east coast CSG development technologies may be applicable to Canning Basin coals.
- The Permian aged coals of the Canning Basin are thought to have considerable potential for coal bed methane drainage. These source beds, of the Lightjack Formation of the Liveringa Group, are thought to contain Type 2 or oil prone macerals, as confirmed by geochemical analyses of samples from oil wells, and could also have sourced conventional hydrocarbon accumulations.
The estimated Lightjacket Formation 'in-situ coal volumes' are substantial:-
i. High Estimate 118.2 Billion tonnes
ii. Best Estimate 80.2 Billion tonnes
iii. Low Estimate 50.6 Billion tonnes
The estimated total gross estimated recoverable prospective CSG hydrocarbon resource in the 'maximum' (high), 'mean' (best) and 'minimum' (low) deterministic cases are:-
a) High Estimate 10.0 Tcf (average Lightjack coal seam thickness - 14m)
b) Best Estimate 6.8 Tcf (average Lightjack coal seam thickness - 9.5m)
c) Low Estimate 4.3 Tcf (average Lightjack coal seam thickness - 6m)
USG Potential Prospective Resources
Principal Findings :
The Permian aged shales of the basal Noonkanbah Formation appear to be candidates for fracturing and the production of shale gas, given their tight organic rich intervals. 'Wet', or condensate rich, headspace gas has been recorded from samples of this unit. The richness of this unit (within Exploration Permit 5/07-8 EP) has been confirmed by laboratory analyses of the vintage Esso 1982 well Booran-1 (some 3.5 km south of Derby) - this evident wet trend of abnormally high TOCs circa 9.6% is evident with the assessment of the 1982 vintage Esso well West Kora-1 some 15km north east.
The estimated gross potential un-risked shale gas in place (GIP) resource determinations:-
i. Maximum case 527.5 TCF
ii. Mean case 263.8 TCF
iii. Minimum case 106.5 TCF
While no estimate of gross recoverable prospective resources is completely definitive at this very early stage of exploration assessment, the sheer size of this potential new USG play is significant (magnitude of the above USG GIP figures are more than comparable to those previously reported by other 'more remote to existing infrastructure' Canning Basin permit holders). The application of newly proven modern gas extraction techniques, with long-reach horizontal multi-lateral well drilling technologies and multiple-fraccing technologies (as used in the seven North American marine basins extracting USG), are worthy of further exploration assessment in both EP5/07-8 and the Backreef Area.
Should large enough volumes of gas, either of a CSG or USG shale genesis, be proven up then OBL and its JVP Backreef Oil would consider plans for the establishment of domestic gas supply for the local region or to the significant mineral operations in the Pilbara, and/or the establishment of either CSG or USG sourced liquified natural gas (LNG) plant feedstock supply to the proposed Kimberley LNG Hub at James Price Point and/or potentially the development of a large scale gas to liquids (GtL) synthesis plant situated near Derby.
EXTRACT FROM INDEPENDENT EXPERT REPORT Although there is significant potential for both conventional and unconventional hydrocarbonresources, for CSG alone, undiscovered recoverable gross Prospective Resources (SPEdefinition) thought to be present in Oil Basins' tenements.
Ownership The OBL Group presently holds a nil% interest - but can elect to increase to 20%.
The previous Farmin option for Emika-1 DR9 has effectively lapsed with the withdrawal of the Canning Basin Oil Limited (CBO) Information Memorandum Offer on 31 March 2010. Subject to funding the OBL Group may re-elect to farmin with Backreef Oil Pty Limited.
RETENTION LEASE R3
Ownership (OBL - 25%)
Geological and geophysical studies continue. Forecast expenditures remain relatively modest by industry standards.
B. BUSINESS DEVELOPMENT
During the quarter, OBL established a new Papua New Guinea (PNG) registered public company subsidiary Wantok Oil Limited (Wantok) to seek attractive investment and exploration / development opportunities in PNG on behalf of OBL. As mentioned previously, formal registration of this subsidiary continues with relevant PNG regulatory authorities and stakeholders. OBL and Wantok are screening new business opportunities in PNG which is rapidly becoming a major LNG development focus area.
During the quarter, the Company assessed two large acquisition opportunities. Both opportunities were offered to the Company to review under strict confidentiality agreements. The Company withdrew from bidding for one and is presently continuing to assess another. These one-off assessments todate amount additional due diligence expenses of circa A$80,000. Should a satisfactory outcome eventuate the Company will immediately advise the ASX.
C. CAPITAL RAISING
- During the quarter and upto the date of this report, the Company (a) issued 2,312,500 OBL and 578,125 OBLOA options to CBO Applicants raising A$92,500 and (b) at the request of OBLOA Optionholders converted 3,439,999 options to OBL shares (raising some A$51,600).
- Subsequent to quarter-end, the Company on 29 July 2010 successfully completed a Strategic Placement of 6.5 million shares (representing circa 4.94%) to a significant Corporate third party.
D. CASH POSTION
Cash held at 30 June 2010 was circa A$0.221 million and the Company has no significant creditors or liabilities forecast for 2010.
OBL remains a low overhead oil and gas explorer and with present cash on hand of circa A$0.442 million, available working capital is deemed adequate to fund the Company's ongoing 2010 calendar year actual working capital commitments and permit the Company to pursue additional future growth and attractive investment opportunities.
For the complete Oil Basin quarterly report including figures and tables, please refer to the following link:
About Oil Basins Limited
Oil Basins Limited (ASX:OBL) is engaged in the investment in selected exploration production and development opportunities in the upstream oil and gas sector. Oil Basins Limited was listed on the ASX on 23 August 2006 and is involved in exploration for oil and gas initially in the offshore Gippsland Basin waters of south-eastern Australia and the onshore Canning Basin of Western Australia. Since listing the Company has increased its leverage across all of its assets and has increased its exposure to attractive and prospective areas with the Canning Basin.
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