AUSTRALASIAN CASE STUDIES

MARGINAL FIELD DEVELOPMENTS

Materials Created and Presented
By Ian Tchacos
 Case Studies – Project Strengths
and Vulnerability Examples
$ Cum
Abandonment
Signature Option?
Bonus?
Reserves? Productivity?
Oil Price? Contractor
Km’s Seismic?
split?
2D and / or 3D?
Operating Costs?
Years
Concept Selection?

Exploration
Wells
Costs? Testing?

No of Appraisal
Wells?
Marginal Field Case Studies
Tindalo Oil
Project
Jabiru Oil
Project

Puffin Oil
Harriet Oil Project
Project
Basker Oil
Project
 Case Studies 1
Puffin Oil Field (2007 – 9 suspended)
 Initial reserves 50mmbbls, produced < 10 mmbbl
 Thin highly permeable reservoir with acquifer support – initial
rates of 25,000 bopd dropped to 8000 bopd
 AED 60% sold to Sinopec for $600 mill in 2008 and went
into adminstration in 2011
 Production limited by swivel , water handling and gas lift
capacity
Optimistic reserves estimate, horizontal wells a good
production solution, FPSO poorly designed for high water
cuts.
Jabiru Oil Field (1986 – 2012)
 Initial reserves 22 mmbbls, produced > 120mmbbl
 Highly permeable fault related structure was originally imaged
on 2 D seismic
 Initial production capacity of 60,000 bopd
 Vessel had to be resurveyed several times due to increases in
field life.
Field outperformed expectations, vessel design life significantly
exceeded, very profitable due to low cost development,
high initial rates and higher reserves
 Case Studies 2
Harriet Oil Field (1986 – now)
 First thin oil column < 22m
 Difficult to image top reservoir
 FID to first Oil in 18 months
 High perm Kv / Kh = 1?
 Initial reserves – 12 mmbbls, Produced 50 mmbbls +
 Low Opex project using nearby islands for storage and
accomodation sharing with gas project
Met Cost and Schedule Targets
Reservoir performance significantly outperformed
expectation field life extended with a gas project to share
late life opex
Basker Manta Field (2006 – 10 suspended)
 Commenced production with testing vessel and FSO ,
flaring gas. FFD planned with FPSO and gas export
 Initial reserves 24mmbbls, 200BCF of gas (Gummy)
 Produced 6mmbbls then shut in, 5mmbbls remaining
 Heterogeneous reservoirs, Net to gross over estimated
– subsequent wells confirmed depletions
15mmbbls down grade in reserves, large corporate Losses
(30% owned by ROC, A$140 mill loss in Value)
Cooper Energy now planning to redevelop oil and gas.
Note Eastern states gas prices have increased from A$
3.50 to $6.5 /mcf
 Case Studies 3
Tindalo Oil Project (2010 -11)
 Initial Reserves Est 6mmbbls
 Thin oil column in fractured carbonate reservoirs
 Leased Jack up, 20,000 BOPD (MOPU) + FSO
 US$ 40 million capex + US $ 250,000 /d lease
 Initial 18,000 BOPD from single well EPT. Produced
200,000 bbls over 3 mths. Well shut in due to high
water cut. Unsuccessful work over.
Appropriate concept for marginal field, reservoir
performance grossly over estimated, reservoir
fractures likely to extend to water leg
Key Take Away’s
 Many projects fail due to poor
understanding of reservoir or inability
to accurately map reservoir
 Insufficient data leads to uncertainties
which have not appropriately
quantified
 Underestimating has reserves has in
some cases led to highly profitable
developments
 In some cases corporate imperatives
have led to poor decision making
 Better uncertainty recognition should
have led to risk mitigation via
additional appraisal or testing.
Hindsight is 20: 20, Learn from the
mistakes of others!
 Tindalo Case Study

 Technical and Corporate Issues Combined to result in

large losses for shareholders
 Technical uncertainties – refer to recent third party
report
 Corporate overlay
 Company making project for small caps with out other
growth opportunities
 Buoyant capital markets providing high risk capital
 Uncertainties not recognised
 Risks underestimated >>> cultural issue!
 Tindalo Case Study
 SPS consulting Technical Audit
 Kairiki and Nido losses – Market Cap distruction
 Marginal field development harder than people think
 Vulnerable to
 Processing interruptions
 Water and gas lift facilities
 Oil price
 Delays very costly due to high opex environment
 Drilling cost over runs

 Model 6mmbbls and show vulnerability

 Corporate Effect
Tindalo Initial Rate
Yakal 18,600 BOPD Kairiki Energy @ Jun 2010
then water cut • Assets -30% of Tindalo + Yakal
Completion of • Debt = A$ 11.1 mill
Work over • Market Cap @ Jun 2010
Tindalo
560 million * 14 cents = $ 78.5 mill
abandonment • Enterprise Value = A$ 89.6 mill

• Implied field Value = A$ 298 mill

560 million Kairiki Energy @ Jul 2014
shares on
issue • Assets -30% of Tindalo + Yakal
Placement @ • Debt = A$ 0 mill
14 cents/share
• Market Cap @ Jul 2014
234 million * 0.01 cents = $ 2.4 mill
29 May 2009 announcement • Enterprise Value = A$ 1.9 mill
Contingent resources independently confirmed for the Tindalo and
Yakal discoveries
•Up to 24.5 million barrels oil in place at Tindalo • Implied field Value = A$ 7.5 mill
•Up to 10.7 million barrels oil in place at Yakal
•Early revenue and key appraisal information may be generated by
using a long-term production test at Tindalo-1. Value destruction = A$ 291
million
Other Industry Examples
A world Class Coal Region in
Mozambique
Extensive geological dataset.
• Intensive appraisal work program to reduced
development risk .
• Mozambique’s largest coal exploration drilling
programme.
• 1,700 exploration boreholes
• 800 open hole,
• 900 cored holes – 400km of core.
• Wireline logging of all open holes

Rio takes massive loss on Mozambique sale

PUBLISHED: 30 Jul 2014 16:38:00 | UPDATED: 31 Jul 2014 05:28:23

Rio Tinto has washed its hands of the disastrous $3.9 billion Riversdale Mining acquisition,
by announcing a sale of its Mozambique coal assets for just $US50 million.

Financial Review
WHY DID IT GO SO WRONG? .....Drop in Coal Price?
Underestimated development costs?
Poor fiscal terms? Difficult labour relations?
Big Companies get it very wrong too!
 Further Case Studies
11

1) Tindalo Reserves Estimate (NW Palawan Basin)

 Technical Audit and Assessment & Hydrocarbon Resource Potential - SPS
consulting June 2013. Source ASX release Kairiki Energy limited
 Used to support a Kairiki Board recommendation to settle a convertible note.
2) West Seahorse Reserve and Resource Estimation
(Gippsland Basin)
 Marginal Field under consideration for development
 Resolution of Corporate Stalemate. Source: ASX release 3D Oil Limited

3) Developing Risked Gas Off take (hypothetical Case)

 To be presented on the day!