a488beed-7227-40a1-b3e5-48cdb5e88db5.pdf
ASX ANNOUNCEMENT
30 March 2016
OTTO COMMITS TO SM-71 #1 WELL - GULF OF MEXICO
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Otto exercises option to participate in drilling the SM-71 #1 well with Byron Energy
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Targeting a net Prospective Resource of 2,277 Mbbl of oil and 1,680 Mscf of gas and a net 2P Reserve of 343 Mbbl of oil and 185 Mscf of gas
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Drilling to commence within the coming week utilising the Hercules 205 drilling rig
Otto Energy Ltd (ASX: OEL) ("Otto" or the "Company") is pleased to announce that it has exercised its option to participate in the drilling of the SM-71 #1 well in the South Marsh Island 71 licence with Byron Energy Inc., a subsidiary of Byron Energy Limited (ASX:BYE) ("Byron").
The SM-71 #1 well is a salt dome play where over 116 million barrels of oil and 375 billion cubic feet of gas have already been produced. The Hercules 205 drilling rig which undertook the drilling of the SM-6
#2 well will be mobilised to the SM-71 #1 well location in the coming days with drilling operation expected to take approximately 20 days once on location.
The SMI-70/71 licences are approximately 50 kilometres south of the SMI-6 licence. Whilst the SM-6
#2 and the SM-71 #1 wells both target salt dome related features which have seen prolific oil and gas production, they are geologically and geographically distinct.
The SM-71 well will target the primary D5 sands at less than 7,000 feet in a benign pressure regime. Well design has been purposefully kept simple.
Bivouac Peak Prospect
West
Cameron East
Cameron
Vermilion
South Marsh
Island
Eugene Island
Main
Pass
SMI 6
Ship Shoal
South Pelto
South
Timbalier
Grand Isle
West Delta
South
Pass
SMI 70,71
50km
LA State Waters/Onshore opportunity GOM Near Term Activity
32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801
[email protected] ASX Code: OEL ABN: 56 107 555 046
SM 70/71 Location Map
Total Field Production 116 mmbo + 375 BCF
57 58
Salt Dome
WD: 131'
SMI 70
Production: 2mbo +.7bcf 70 69
Operator: Byron Energy (100% WI) Acquired : 01/08/2012
Byron #1 proposed location
WD: 131'
SMI 71
Production: 3.9mmbo +9.6bcf Operator: Byron Energy (100% WI) Acquired : 01/08/2012
71
72 73
Otto's Managing Director, Matthew Allen said: "Notwithstanding the disappointing outcome at SMI-6 #2, Otto considers the opportunity at SM-71 #1 to be a compelling and low-cost drilling
opportunity with the potential to yield strong value for its shareholders. It is important to note that the
SM-71 opportunity is geologically independent from the recently drilled SM-6 #2 well and Otto is satisfied that the team at Byron can successfully drill the SM-71 #1 well to the target interval.
Despite the setback intersecting an impenetrable shale interval in SM-6 #2, we have been very pleased with the performance of the rig and the operating team at Byron and look forward to commencement of operations at the SM-71 #1 well in the coming few days."
In order to earn a 50% working interest (equal to a 40.625% revenue interest) in the SMI-70/71 Leases, Otto will contribute 66.67% of the costs of the well (estimated at US$3.0 million net to Otto). Any costs above this amount in respect of the SM-71 #1 well and all future expenditure on the license will be in accordance with Otto and Byron's participating interest (Otto 50%). Otto has also reimbursed Byron for US$0.9 million in pre-effective date costs predominantly associated with the acquisition and processing of 3D seismic used to define the target at the SM-71 #1 well.
Otto is able to fund all activities under the Participation Agreement with Byron Energy from existing cash resources.
32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801
[email protected] ASX Code: OEL ABN: 56 107 555 046
Appendix 1
Overview of SM-71 #1 Well and Development Opportunity
Drilling of the SM-71 #1 well will earn Otto the rights to the following net revenue interests (as determined by independent consultants, Collarini and Associates):
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Oil Mbbl (1P-2P-3P)- (249 - 343 - 520) and a prospective oil resource of 2,277 Mbbl; and
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Gas Mscf (1P-2P-3P)- (134 - 185 - 322) and a prospective resource of Gas 1,680 Mscf
The main D5 target sands (classified as a prospective resource), are updip from a legacy well (Shell #2) and a secondary target in the J sands contains attic potential (classified as reserves) updip from the #JC5ST1 well. As a result, Otto assigns a 70% chance of success to this opportunity. Further details on the well are set out below:
South Marsh Island-71 #1 Well
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Reservoir type
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Pleistocene to Pliocene
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Total Depth
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7,451 feet (2,271m) MD/6,900 feet (2,100m) TVD
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Water Depth
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130 feet / 40 metres
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Geological Chance of Success
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70% chance of intersecting oil or gas within net reserve and prospective resources range
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Key Risks
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Drilling program
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The Hercules 205 drilling unit has been contracted by Byron Energy and will be mobilised from the drilling currently being executed at SMI-6.
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Planned target interval:
D5 sands on the western flank of the salt dome
Salt Dome
Map
Existing D5 sand production: Over 20.5Mbbl of oil and 15.2Bcf of gas have been recovered from SM72/73 D5 sand interval
D5 Sand ARTM Amplitude Map
ARTM Seismic line through SMI-71 well showing main target (D5) and analogues in the same interval on the salt dome
32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801
[email protected] ASX Code: OEL ABN: 56 107 555 046
Competent Persons Statement
The information in this report that relates to oil and gas reserves and resources was compiled by technical employees of independent consultants Collarini and Associates, under the supervision of Mr Mitch Reece BSc PE. Mr Reece is the President of Collarini and Associates and is a registered professional engineer in the State of Texas and a member of the Society of Petroleum Evaluation Engineers (SPEE), Society of Petroleum Engineers (SPE), and American Petroleum Institute (API). The reserves and resources included in this report have been prepared using definitions and guidelines consistent with the 2007 Society of Petroleum
Engineers (SPE)/World Petroleum Council (WPC)/American Association of Petroleum Geologists (AAPG)/Society of Petroleum Evaluation Engineers (SPEE) Petroleum Resources Management System (PRMS). The reserves and resources information reported in this Statement are based on, and fairly represents, information and supporting documentation prepared by, or under the supervision of, Mr Reece. Mr Reece is qualified in accordance with the requirements of ASX Listing Rule 5.41 and consents to the inclusion of the information in this report of the matters based on this information in the form and context in which it appears.
Reserves & Resources
Reserve and resource estimates in this release are prepared as at 30 June 2015 (reference: Byron Energy Limited ASX announcement 4 September 2015). The resource estimates have been prepared using internationally recognised Petroleum Resources Management System to define resource classification and volumes. The resource estimates are in accordance with the standard definitions set out by the Society of Petroleum Engineers, further information is available at www.spe.org. The estimates are un-risked and have not been adjusted for both associated chance of discovery and a chance of development. Otto is not aware of any new information or data that materially affects the assumptions and technical parameters underpinning the estimates of reserves and resources and the relevant market announcements referenced continue to apply and have not materially changed.
Prospective Resource Cautionary Statement
The estimated quantities of petroleum that may be potentially recoverable by the application of future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Reserves cautionary statement
Oil and gas reserves and resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates that were valid when originally calculated may alter significantly when new information or techniques become available. Additionally, by their very nature, reserve and resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional drilling and analysis, the estimates are likely to change. This may result in alterations to development and production plans which may, in turn, adversely impact the Company's operations. Reserves estimates and estimates of future net revenues are, by nature, forward looking statements and subject to the same risks as other forward looking estimates.
32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801
[email protected] ASX Code: OEL ABN: 56 107 555 046