Oilex Ltd Cambay-77H - Successful Well Test (0581Z)

TIDMOEX

RNS Number : 0581Z

Oilex Ltd

08 December 2014

8 December 2014

Cambay-77H - Successful Well Test

Commercial development of Cambay Field feasible

Oilex Ltd (ASX: OEX, AIM: OEX) is pleased to announce the preliminary results of the flowback and production testing of Cambay-77H. All proof-of-concept objectives have been achieved and the commercial development of Cambay Field using multi-stage frac technology is feasible.

Summary

   --     Cambay-77H was designed as a Proof-of-Concept well with a short 350m lateral 
   --     Initial production over a 24 hour period of 2.03MMscfe/d, 55% hydrocarbon liquids 

-- An oil to gas ratio ("OGR") of 100 bbls per MMscf of gas in the Cambay-77H area remains valid - some 250% higher than extrapolated from Cambay-73

-- Increased OGR adds 40% revenue per MMscf of produced gas using price assumptions of US$8.00/Mscf and US$70/bbl for gas and oil respectively

   --     Total production during flowback and testing - 62.3MMscfe 

-- Total operations water recovered - 23,732 bbls (88%) - no formation water has been identified during flowback and testing

Managing Director of Oilex, Ron Miller, said;

"Oilex is very pleased with the results of Cambay-77H flowback and test. With all the proof-of-concept objectives having been achieved, a significant milestone has been reached towards creating a profitable and sustainable business. It is also a first step for India, towards improving its domestic petroleum supply by using multiple fracture treatments in horizontal wells that have transformed the energy equation in North America. Oilex is proud of its first mover position, competitive advantage and achievement in initiating development of tight oil and gas using this technology in India."

Results

The key field results from Cambay-77H flowback and production testing are encouraging. The sustained initial 24 hour rate during flowback was 2.03MMscfe/d, comprising 55% light oil/condensate with concurrent operations water production of 1,867bbls/d. Flowing wellhead pressure was 1,261 psig. Rates are presented in energy equivalents converted at 5,800 scf of gas per bbl of oil because the well was originally designed as a gas and condensate producer.

Total hydrocarbon production was 43MMscf of gas and 3,372bbls of light oil/condensate (sold to a local refinery), giving an energy equivalent figure of 62.3MMscfe. The maximum liquid hydrocarbon to gas ratio was 349bbls/MMscf with an average of 77bbls/MMscf, likely governed by the well bore tubular size impacting the flow regime.

A total of 27,631bbls of operations water (frac water and coil tubing operations water) was used with 23,732bbls, or 88% recovered. The maximum recovery rate was 3,101 bwpd and no formation water was identified during flowback and testing.

Use of data

Oilex has the first, and currently the only model to be successfully calibrated using actual production and compositional data from a multistage frac'd horizontal well in the Cambay Basin.

The flowback and production test data has been used to analyse the performance of Cambay-77H, refine the calibration of the production model used to assess Y zone deliverability, predict ongoing recovery of oil and gas from Cambay-77H, review preliminary well designs and generate forecast "type curves" for the next drilling campaign.

The results clearly indicate recovery of significant volumes of oil and gas can readily be achieved. Importantly, Cambay-77H and the model confirm that the tight Eocene formation in the Cambay Field is amenable to this form of fracture treatment, leading to the conclusion that the Y zone can be commercially developed with this technology.

All proof-of-concept activities have been successfully completed and the objectives achieved. A full data package for Cambay-77H is being compiled and combined with other Cambay Field production data for an independent reserves and resource assessment update. This update may result in conversion of some current Contingent Resources to Reserves and the results will be disclosed to the market at that time.

Additional information is contained in the Explanatory Note appended to this announcement.

For and on behalf of Oilex Ltd

Ron Miller

Managing Director

For further information, please contact:

 
 Oilex Ltd                    Strand Hanson Limited              Tavistock Communications 
  Ron Miller, Managing         Nominated Adviser and              Ed Portman 
  Director                     AIM Broker                         Email: [e-mail] 
  Email: [e-mail]    Rory Murphy/Ritchie Balmer         Tel: [phone] 
  Tel: [phone]              Email: [e-mail]    3150 
  3200                         Tel: [phone]              UK 
  Australia                    UK 
 

Qualified Petroleum Reserves and Resources Evaluator statement

Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr. Peter Bekkers, Chief Geoscientist employed by Oilex Ltd. Mr. Bekkers has over 17 years experience in petroleum geology and is a member of the Society of Petroleum Engineers and AAPG. Mr. Bekkers meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr. Bekkers also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion of this information in this report in the form and context in which it appears.

Explanatory Note on Cambay-77H Flowback and Test Results

The technical evaluation of the flowback and test data has been completed by RISC, a specialist oil & gas consulting company, with reservoir engineering personnel experienced in the Canadian Montney tight/shale gas play. The Montney Formation is a major productive unit and possible analogue for the Y Zone reservoir of the Cambay Field due to its hybrid siltstone and shale content. RISC designed the test programme to supplement the flowback data and acquire critical information that could be incorporated into a comprehensive production and deliverability model.

Key observations from the analyses of Cambay-77H flowback and test data are:

   --     Oil to Gas Ratio (OGR) 

-- Analysis of the data confirms that an OGR of 100 bbls of liquids per MMscf of gas in the Cambay-77H area remains valid. This ratio is 250% higher than expected, which was based upon Cambay-73 performance.

-- The significantly higher OGR has a material positive impact on the revenue stream from future Cambay horizontal wells. Increased OGR adds 40% revenue per MMscf of produced gas using price assumptions of US$8.00/Mscf and US$70/bbl for gas and oil respectively.

-- The high value and extensive gas market proximal to the Cambay PSC allows the Cambay JV to easily market the gas to accelerate oil production. Dual products, which are readily sold into a premium energy market, cushion the economic impact of one product decreasing in value.

-- The upcoming Independent Reserves and Resource Certification will review this important parameter in the context of Cambay-77H well results.

   --     Well Bore Configuration and Frac efficiency 

-- Efficient lifting of additional oil to surface can be resolved by appropriately sized production tubulars and/or the use of artificial lift techniques. Artificial lift techniques are common industry practice and already widely used in India. With the appropriately sized tubulars in-place, the calibrated model predicted an initial production rate of 3.2MMscfe/d for Cambay-77H inclusive of the higher OGR.

   --     The production test results confirm 

-- Frac stim operational data is correct, and all fracs were successfully executed

-- That despite successful execution of the fracs, overall frac efficiency is 25% according to the calibrated model

-- Partial impairment of the wellbore connection with the reservoir still exists and is currently being investigated

-- That mitigations, including core acquisition, should be incorporated into future well designs

   --     Cambay-77H future production 
   --     The calibrated model forecasts 360MMscfe to be recovered over 3 years 

Development Implications for the Cambay PSC Contract Area

-- Cambay-77H results provide a strong foundation for moving forward with development of the Cambay Contract Area and plans for the next drilling campaign are in progress.

-- The longer horizontal wells forming part of the next drilling campaign have been reassessed using the calibrated model and preliminary predictions of gas recovery are robust:

   --     700m lateral with a frac spacing of 80m is estimated to recover 3.5Bcf gas in 10 years 
   --     1400m lateral with the same frac spacing is estimated to recover 5.9Bcf gas in 10 years 

-- This frac spacing is approximately double that in Cambay-77H and leads to significant cost reduction and risk mitigation

-- Indicative economics for these wells are very robust at current market prices for oil and gas

   --     Analysis continues to achieve a suitable production history match for light oil/condensate 

Reservoir data results

-- The Y zone permeability has been confirmed to be 0.02mD and within the expected range. This property has now been validated by 3 independent analyses. This permeability is significantly better than classical "shale" plays in North America.

-- The reservoir pressure of 4,330 psig has again been validated by the production test. The overpressure has now been confirmed by a minimum of 3 different sources of data providing high confidence of its accuracy.

   --     Oil and gas properties 

-- Light oil/condensate averaged API 49.4 during the entire flow period. It appears to be light sweet crude but further analysis of the latest samples is required to distinguish oil vs. condensate. Stabilisation is readily achievable via simple separation after which it can be easily transported by truck to local refineries where it attracts a slight discount to Bonny Light crude oil.

-- Laboratory analysis indicates Cambay-77H gas has total inerts of 3% including CO2 and no H2S has been detected. Both of these results are very positive. The same analysis also reports 13% of the reservoir stream is Ethane, Propane and Butane (LPG's). Recovery of LPG's for sale as separate products will be evaluated as part of expanding the production from Cambay field. LPG's generally sell at a premium to the price of natural gas on an energy equivalent basis.

-- Subject to further engineering design work, minimal processing is anticipated to make the natural gas suitable for entry into the pipeline grid.

Key lessons

-- Oil and gas recovery started on the first day of flowback and gas sales during flowback operations in future wells is possible. Planning for integrated flowback and production facilities has commenced to ensure immediate gas sales lead to faster payback. Revenue during Cambay-77H flowback and testing would have been approximately US$750,000 with facilities in-place to sell gas.

-- Acquisition of geotechnical core data from the Cambay-77H area in a future well will form an essential part of the next drilling campaign. Operations to date have been conducted without the benefit of modern core. The detailed core analysis has been found to be very beneficial for optimisation of fracture treatments and production in North America.

-- The Plug and Perf completion method is appropriate for deployment in the Cambay Contract Area. Larger diameter perforations are seen as part of the optimization strategy to minimise impairment of the connection between the reservoir and the well bore.

-- Operations water recovery is likely to be at the high end of expectation and North American experience and large water handling facilities are essential given operations water recovery rates exceeding 3000bwpd from a short 350m lateral section in Cambay-77H.

LIST OF ABBREVIATIONS AND DEFINITIONS

 
 API             A unit of measurement established by the American 
                  Petroleum Institute (API) that indicates the density 
                  of a liquid. Fresh water has an API density of 
                  10. 
--------------  ------------------------------------------------------------------------------------- 
 Associated      Natural gas found in contact with or dissolved 
  Gas             in crude oil in the reservoir. It can be further 
                  categorized as Gas-Cap Gas or Solution Gas. 
--------------  ------------------------------------------------------------------------------------- 
 Bbls            Barrels of oil or condensate. 
--------------  ------------------------------------------------------------------------------------- 
 BBO             Billion standard barrels of oil or condensate 
--------------  ------------------------------------------------------------------------------------- 
 BCF             Billion Cubic Feet of gas at standard temperature 
                  and pressure conditions 
--------------  ------------------------------------------------------------------------------------- 
 BCFE            Billion Cubic Feet Equivalent of gas at standard 
                  temperature and pressure conditions. 
--------------  ------------------------------------------------------------------------------------- 
 BOE             Barrels of Oil Equivalent. Converting gas volumes 
                  to the oil equivalent is customarily done on the 
                  basis of the nominal heating content or calorific 
                  value of the fuel. Common industry gas conversion 
                  factors usually range between 1 barrel of oil equivalent 
                  (BOE) = 5,600 standard cubic feet (scf) of gas 
                  to 1 BOE = 6,000 scf. Oilex currently uses 5,800 
                  scf = 1 BOE 
--------------  ------------------------------------------------------------------------------------- 
 BOPD            Barrels of oil per day. 
--------------  ------------------------------------------------------------------------------------- 
 bwpd            Abbreviation for barrels of water per day, a common 
                  unit of measurement for the daily volume of produced 
                  water. 
--------------  ------------------------------------------------------------------------------------- 
 Condensate      A natural gas liquid with a low vapor pressure 
                  compared with natural gasoline and liquefied petroleum 
                  gas. Condensate is mainly composed of propane, 
                  butane, pentane and heavier hydrocarbon fractions. 
                  The condensate is not only generated into the reservoir, 
                  it is also formed when liquid drops out, or condenses, 
                  from a gas stream in pipelines or surface facilities. 
--------------  ------------------------------------------------------------------------------------- 
 Core Analysis   Laboratory study of a sample of a geologic formation, 
                  usually reservoir rock, taken during or after drilling 
                  a well. Economic and efficient oil and gas production 
                  is highly dependent on understanding key properties 
                  of reservoir rock, such as porosity, permeability, 
                  and wettability. Geoscientists have developed a 
                  variety of approaches, including log and core analysis 
                  techniques, to measure these properties. Core analysis 
                  is especially important in shale reservoirs because 
                  of the vertical and lateral heterogeneity of the 
                  rocks. Core analysis can include evaluation of 
                  rock properties and anisotropy; organic matter 
                  content, maturity, and type; fluid content; fluid 
                  sensitivity; and geomechanical properties. This 
                  information can be used to calibrate log and seismic 
                  measurements and to help in well and completion 
                  design, well placement, and other aspects of reservoir 
                  production. 
--------------  ------------------------------------------------------------------------------------- 
 CO(2)           Carbon dioxide 
--------------  ------------------------------------------------------------------------------------- 
 Contingent      Those quantities of petroleum estimated, as of 
  Resources       a given date, to be potentially recoverable from 
                  known accumulations by application of development 
                  projects, but which are not currently considered 
                  to be commercially recoverable due to one or more 
                  contingencies. 
                  Contingent Resources may include, for example, 
                  projects for which there are currently no viable 
                  markets, or where commercial recovery is dependent 
                  on technology under development, or where evaluation 
                  of the accumulation is insufficient to clearly 
                  assess commerciality. Contingent Resources are 
                  further categorized in accordance with the level 
                  of certainty associated with the estimates and 
                  may be sub-classified based on project maturity 
                  and/or characterised by their economic status. 
--------------  ------------------------------------------------------------------------------------- 
 Hydraulic       http://www.energy4me.org/hydraulicfracturing/inside-fracturing/tour-fracturing-site/ 
  Fracturing 
--------------  ------------------------------------------------------------------------------------- 
 OGR             Oil to gas ratio in an oil field, calculated using 
                  measured natural gas and crude oil volumes at stated 
                  conditions. The gas/oil ratio may be the solution 
                  gas/oil, symbol Rs; produced gas/oil ratio, symbol 
                  Rp; or another suitably defined ratio of gas production 
                  to oil production. Volumes measured in scf and 
                  bbls. 
--------------  ------------------------------------------------------------------------------------- 
 H(2) S          Hydrogen sulphide. An extraordinarily poisonous 
                  gas with a molecular formula of H2S. At low concentrations, 
                  H2S has the odor of rotten eggs, but at higher, 
                  lethal concentrations, it is odorless. H2S is hazardous 
                  to workers and a few seconds of exposure at relatively 
                  low concentrations can be lethal, but exposure 
                  to lower concentrations can also be harmful 
--------------  ------------------------------------------------------------------------------------- 
 LPG             (Liquefied Petroleum Gas) Gas mainly composed of 
                  propane and butane, which has been liquefied at 
                  low temperatures and moderate pressures. The gas 
                  is obtainable from refinery gases or after the 
                  cracking process of crude oil. Liquefied petroleum 
                  gas is also called bottle gas. At atmospheric pressure, 
                  it is easily converted into gas and can be used 
                  industrially or domestically. The term is commonly 
                  abbreviated as LPG. 
--------------  ------------------------------------------------------------------------------------- 
 mD              (Millidarcy) A darcy (or darcy unit) and millidarcy 
                  (md or mD) are units of permeability, named after 
                  Henry Darcy. They are not SI units, but they are 
                  widely used in petroleum engineering and geology. 
                  Like other measures of permeability, a darcy has 
                  dimensional units in length(2). 
--------------  ------------------------------------------------------------------------------------- 
 MSCFD           Thousand standard cubic feet (of gas) per day 
--------------  ------------------------------------------------------------------------------------- 
 MMscfd          Million standard cubic feet of gas per day. 
--------------  ------------------------------------------------------------------------------------- 
 MMbbls          Million barrels of oil or condensate. 
--------------  ------------------------------------------------------------------------------------- 
 MMBO            Million standard barrels of oil or condensate 
--------------  ------------------------------------------------------------------------------------- 
 MMSCFD          Million standard cubic feet (of gas) per day 
--------------  ------------------------------------------------------------------------------------- 
 MMscfe/d        Million standard cubic feet equivalent of gas a 
                  day 
                  (172.4 bbls of oil per day using 5,800 scf per 
                  bbl) 
--------------  ------------------------------------------------------------------------------------- 
 MMscfe          Million standard cubic feet equivalent of gas 
                  (172.4 bbls of oil using 5,800 scf per bbl) 
--------------  ------------------------------------------------------------------------------------- 
 PSC             Production Sharing Contract 
--------------  ------------------------------------------------------------------------------------- 
 psig            pounds per square inch gauge 
--------------  ------------------------------------------------------------------------------------- 
 MD              Measured Depth. 
--------------  ------------------------------------------------------------------------------------- 
 Prospective     Those quantities of petroleum which are estimated, 
  Resources       as of a given date, to be potentially recoverable 
                  from undiscovered accumulations. 
--------------  ------------------------------------------------------------------------------------- 
 Plug and        The wellbore for a plug and perf job is generally 
  Perf            composed of standard steel casing, cemented or 
                  uncemented, set in the drilled hole. Once the drilling 
                  rig has been removed, a coiled tubing unit or wireline 
                  truck is used to perforate near the bottom of the 
                  well, and then fracturing fluid is pumped. Then 
                  the coiled tubing unit or wireline truck sets a 
                  plug in the well to temporarily seal off that section 
                  so the next section of the wellbore can be treated. 
                  Another stage is pumped, and the process is repeated 
                  along the horizontal length of the wellbore. 
--------------  ------------------------------------------------------------------------------------- 
 Reserves        Reserves are those quantities of petroleum anticipated 
                  to be commercially recoverable by application of 
                  development projects to known accumulations from 
                  a given date forward under defined conditions. 
                  Proved Reserves are those quantities of petroleum, 
                  which by analysis of geoscience and engineering 
                  data, can be estimated with reasonable certainty 
                  to be commercially recoverable, from a given date 
                  forward, from known reservoirs and under defined 
                  economic conditions, operating methods and government 
                  regulations. 
                  Probable Reserves are those additional Reserves 
                  which analysis of geoscience and engineering data 
                  indicate are less likely to be recovered than Proved 
                  Reserves but more certain to be recovered than 
                  Possible Reserves. 
                  Possible Reserves are those additional reserves 
                  which analysis of geoscience and engineering data 
                  indicate are less likely to be recoverable than 
                  Probable Reserves. 
                  P90 refers to the quantity for which it is estimated 
                  there is at least a 90% probability the actual 
                  quantity recovered will equal or exceed. 
                  P50 refers to the quantity for which it is estimated 
                  there is at least a 50% probability the actual 
                  quantity recovered will equal or exceed. 
                  P10 refers to the quantity for which it is estimated 
                  there is at least a 10% probability the actual 
                  quantity recovered will equal or exceed. 
--------------  ------------------------------------------------------------------------------------- 
 SCF/BBL         Standard cubic feet (of gas) per barrel (of oil). 
--------------  ------------------------------------------------------------------------------------- 
 Tight Gas       The reservoir cannot be produced at economic flow 
  Reservoir       rates or recover economic volumes of natural gas 
                  unless the well is stimulated by a large hydraulic 
                  fracture treatment, a horizontal wellbore, or by 
                  using multilateral wellbores. 
--------------  ------------------------------------------------------------------------------------- 
 Undiscovered    Is that quantity of petroleum estimated, as of 
  in place        a given date, to be contained within accumulations 
  volume          yet to be discovered 
--------------  ------------------------------------------------------------------------------------- 
 

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The company news service from the London Stock Exchange

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