Oilex Ltd Cambay Basin demonstrates strong economics (6024Z)

TIDMOEX

RNS Number : 6024Z

Oilex Ltd

12 December 2014

12 December 2014

Cambay Basin demonstrates strong economics

   --     Cambay demonstrates robust economics, despite the recent sharp drop in oil prices 

-- Initial modelling indicates gas only well is economic, oil production provides significant upside value

   --     India domestic gas demand to continue to outstrip supply 
   --     Buyer bid system for gas offtake results in higher prices 
   --     Low commercialisation costs with existing infrastructure in place 

Oilex Ltd (ASX: OEX, AIM: OEX) is pleased to confirm that the Cambay Field is expected to have robust economics, despite the recent sharp drop in oil prices.

Initial production profiles modelled by the Company for the next three horizontal wells using the Cambay-77H data provide the following indicative value metrics per well:

 
  Well configuration     Product      10 Yr Assumed    Payback   NPV(10) /BOE 
                           slate      recovery (BOE)    (Mths) 
---------------------  -----------  ----------------  --------  ------------- 
 700m lateral with 
  9 fracs                      Gas       531,000         48          $1 
---------------------  -----------  ----------------  --------  ------------- 
 700m lateral with 
  9 fracs                Gas + Oil       680,000         22         $15 
---------------------  -----------  ----------------  --------  ------------- 
 1,400m lateral with     Gas + Oil     >1,000,000        12         >$20 
  18 fracs 
---------------------  -----------  ----------------  --------  ------------- 
 

The above modelling assumes a US$70 / Bbl oil and US$8 / MSCF gas price. The NPV calculation assumes utilisation of existing tax losses. Full field economics will be assessed after completion of the engineering studies, including determining the appropriate throughput rate for gas processing facilities. A well with 700m lateral and 9 fracs compares favourably with Oilex's previous commercial assessment for Cambay.

The "700m gas only" well shows the economic impact of no revenue from concurrent oil production. Initial modelling indicates that, even a gas well with no associated liquids is economic. A further positive from analysis of the Cambay-77H data is the significantly higher oil gas ratio (OGR), which has a material positive impact on the revenue stream from future Cambay horizontal wells.

The well economics are underpinned by the significant excess of demand over supply within the Indian domestic economy, which is forecast to grow. According to the US Energy Information Agency:

-- India is a significant importer of crude oil, as the country's demand growth continues to outstrip domestic supply growth; and

-- Natural gas serves as a substitute for coal in electricity generation and fertiliser production in India. The country began importing liquefied natural gas in 2004 and increasingly relies on imports to meet domestic natural gas needs.

Oilex has concluded 2 gas sale agreements (GSA) to date. Gas sale contracts are conducted via a bid system, with buyers submitting offers to purchase via a tender process. Given the demand for gas by nearby industrial users, strong pricing is secured, above the floor price recently established by the Indian Government.

Existing industry located within 15km of the Cambay Field means very low capital cost is associated with sales of gas to the local market and the tie-in to existing gas transmission pipeline network. The network has excess capacity for additional gas that can be used for gas from the Cambay Field.

Managing Director of Oilex, Ron Miller, said;

"The robust indicative economics of the Cambay Field remain, despite the sharp decline in oil prices. The fall in the oil price does impact the total revenue generated by the Cambay Field, but this is more than offset by the 250% increase in the oil gas ratio. The premium gas market in India also means that the Cambay Field is economic even when we exclude oil revenues from our modelling. "

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.

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 
--------------  ------------------------------------------------------------------------------------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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