Falcon Oil & Gas Ltd. (TSX VENTURE:FO)(AIM:FOG)(ESM:FAC) is pleased to announce that Origin Energy Resources Limited ("Origin"), Falcon's 35% joint venture partner, has submitted the Results of Evaluation of the Discovery and Preliminary Estimate of Petroleum in Place for the Amungee NW-1H Velkerri B Shale Gas Pool ("Report") to the Northern Territory Government.
The submission follows the completion of extended production testing at the Amungee NW-1H exploration well of the "B Shale" member of the Middle Velkerri Formation.
In addition, Origin undertook a resource study based on the Amungee NW-1H well results and other key wells in the Beetaloo Basin including regional seismic data to determine a 2C contingent gas resource estimate for the Middle Velkerri B Shale Pool within EP76, EP98 and EP117.
Key Details of the Discovery Evaluation Report
The Report was submitted in compliance with Section 64 of the Northern Territory Petroleum Act (2016) and as per the Reporting a Petroleum Discovery Guideline. The Report follows the initial submission of the notification of discovery and an initial report on discovery in October 2016. The Report provides the following volumetric estimates and recovery / utilisation factor for the B Shale member of the Middle Velkerri Formation within permits EP76, EP98, and EP117.
|Middle Velkerri B Shale Volumetric Estimates 1|
|Gross||Net Attributable 2|
|Best Estimate||Best Estimate|
|Area km2 3||16,145||4,751|
|Combined Recovery / Utilisation Factor 4||16%||16%|
|Technically Recoverable Resource (TCF)||85||25|
|OGIP Concentration (BCF/km2)||31||31|
|1 The Report and estimates included in the table above were not prepared in accordance with COGEH|
|2 Falcon's working interest is 29.43%, net attributable numbers do not incorporate royalties over the permits|
|3 Area defined by a depth range at a maturity cut-off consistent with the dry gas window within the Beetaloo JV Permits (EP79, EP98, EP117)|
|4 The combined recovery/utilization factor range was applied stochastically to the OGIP range to calculate the range of technically recoverable resource within the Beetaloo JV permits.|
Understanding the factors controlling deliverability and recovery as well as spatial variation within the gas play/shale pool are in their infancy. A quantitative assessment of the aggregated estimated recoverable resource of the gas play that can handle these complexities will require a statistically significant number of wells testing the gas play. As there is only a single production test within the gas play Origin decided upon a qualitative assessment approach instead to estimate the technically recoverable resource.
Factors considered in the qualitative assessment of technically recoverable hydrocarbon resource in the gas play were the SRV recovery factor range, the subsurface utilization factor range and surface utilization factor range.
Origin's Contingent Gas Resource Estimates for the Middle Velkerri B Shale Pool within EP76, EP98 and EP117
Origin has prepared a contingent gas resource estimate using probabilistic methods and reservoir evaluation data, in addition to regional seismic data.
|Assessment of 2C Contingent Gas Resource Estimates for the Middle Velkerri B Shale Pool within EP76, EP98 and EP117 as of 15 February, 20171|
|Measured and Estimated Parameters||Units||Best Estimate|
|Original Gas In Place (OGIP)3||TCF||61.0|
|Gross Contingent Resource4||TCF||6.6|
|Net Contingent Resource4,5||TCF||1.94|
|1 Contingent resource estimates have been prepared on a statistical aggregation basis and in accordance with the Society of Petroleum Engineers Petroleum Management System (SPE-PRMS). Contingent resource estimates are those quantities of gas (produced gas minus carbon dioxide and inert gasses) that are potentially recoverable from known accumulations but which are not yet considered commercially recoverable due to the need for additional delineation drilling, further validation of deliverability and original gas in place, and confirmation of prices and development costs. If the estimates were to be prepared in accordance with COGEH, Falcon is highly confident that there would be no change to the contingent resource estimates above.|
|2 P50 area from the contingent resource area distribution|
|3 OGIP presented is the product of the P50 Area by the P50 OGIP per km2|
|4 Estimated contingent gas resource category of 2C. There is no certainty that it will be commercially viable to produce any portion of the resources|
|5 Net to Falcon's 29.43% working interest in EP76, EP98, and EP117, net contingent resource number does not incorporate royalties over the permits|
As noted in Origin's press release the "The contingent resource estimates contained in [their] report are based on, and fairly represents, information and supporting documentation that have been prepared by Alexander Côté who is a full-time Origin employee and a Qualified Reserves and Resource Evaluator. Mr Côté is a registered professional engineer with specialised unconventional gas resource characterisation and development experience. Mr Côté has consented to the form and context in which these statements appear". Mr Côté is a member of the Association of Professional Engineers and Geoscientists of Alberta.
Suspension of Drilling Operations
On 14 September 2016, the Northern Territory Government introduced a moratorium on hydraulic fracturing, and subsequently established an independent scientific inquiry. Pending the outcome of this independent inquiry, Origin has requested a suspension of all drilling operations with the DPIR. We await their formal response to the request.
Philip O'Quigley, CEO of Falcon, commented:
"The submission of a discovery evaluation report supporting the existence of a material gas resource in the Beetaloo Basin coupled with Origin's best estimate assessment of a gross contingent gas resource of 6.6 TCF for the Middle Velkerri B shale pool surrounding and adjacent to the Amungee NW-1H exploration well are exciting developments for Falcon.
Additional exploration and appraisal activity will be required to refine the pool size and better assess the recoverable resource range and ultimately the commerciality of the play.
However, it is interesting to note that in Origin's opinion the Marcellus and Barnett Shales in the USA are analogous, commercially-productive fields that are similar to the Middle Velkerri B Shale reservoir."
Origin's ASX/Media Release
Please refer to Appendix A for a copy of Origin's ASX/Media Release "Beetaloo Basin drill results indicate material gas resource".
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014 of the European Parliament and of the Council.
Further information relating to disclosure of resources
|Well Name||Amungee NW-1H|
|Permit / location||EP98 (onshore Beetaloo Basin Northern Territory, Australia)|
|Working interest in well||Falcon 29.43%|
|Product type||Shale gas|
|Risks and level of uncertainty with recovery of resources||Risks and uncertainties include the lifting of the Northern Territory moratorium on hydraulic fracture stimulation, completing longer-duration production testing above the 57 days conducted on Amungee NW-1H, reducing well costs with scale of activity, establishing gas sales agreements and building infrastructure to connect the resource to market. |
Contingent on the moratorium being lifted, additional appraisal drilling is planned (as per the work program associated with the permits), along with hydraulic fracture stimulation and testing to assess deliverability and move the project towards commercialisation.
|Significant positive and negative factors relevant to the estimate||Significant positive factors relevant to the estimate of the contingent resources include the successful well test at Amungee NW-1H which produced enough gas to surface to be of commercial interest; core and log data from Amungee NW-1H, Beetaloo W-1, Kalala S-1, Tanumbirini-1, McManus-1, Altree-2 and Walton-2 provide convincing evidence of a significant volume of moveable hydrocarbons; and the Marcellus Shale (Pa., USA) and Barnett Shale (Tx., USA) are analogous, commercially-productive fields that are similar to the Velkerri B Shale reservoir. |
Significant negative factors include the lifting of the Northern Territory moratorium on hydraulic fracture stimulation, the limited number of wells on the Company's acreage, lack of a developed service sector providing uncertainty regarding estimates of capital and operating costs, developing hydrocarbon regulations and environmental legislation and the requirement to obtain social acceptability for oil and gas operations.
|Commerciality||Currently this project is based on a conceptual study. The economic status is undetermined at this time. The contingent resources will continue to be assessed as additional appraisal wells are drilled and tested in order to better evaluate the commercial potential of the play. After a sufficient number of wells have been drilled to demonstrate that the project is technically feasible and a development plan has been generated, economics can be run to determine commerciality of production.|
|Amungee NW-1H Well Test Results|
|Well name||Amungee NW-1H|
|Permit||EP98 (onshore Beetaloo Basin NT)|
|Working interest in well||Falcon 29.43%|
|Geological rock type of formation drilled||Organic rich shale (mudstone and siltstone)|
|Depth of zones tested||~2170-2190 metres below sea level|
|Type of test||Production test following hydraulic fracture stimulation|
|Hydrocarbon phases recovered||Gas (Approximate composition: methane ~92%, ethane+ ~3%, carbon dioxide and inerts ~5%)|
|Flow rates and volumes||Average rate (57 days): 1.1 MMscf/d|
Final production rate: 1.07 MMscf/d
Cumulative production: 63 MMscf
|Number of fracture stimulation stages||11 stages (average size ~ 100T/stage)|