Carnarvon Petroleum Limited (“Carnarvon”) (ASX:CVN) is pleased to provide the following update on work being undertaken and planned in the WA-435-P, WA-436-P, WA-437-P and WA-438-P exploration permits, collectively referred to as “the Phoenix Blocks”, located in the North West Shelf of Western Australia.

Macquarie / Brookfield led Consortium

On 5 June 2015 the Macquarie / Brookfield led Consortium successfully completed the acquisition of Apache’s Western Australian business. This business includes all of Apache’s Australian production assets, exploration permits and the management team and staff. They also announced that they would rename the business and it will now be called Quadrant Energy (“Quadrant”). Carnarvon has been in ongoing communication with the Quadrant team and is looking forward to continuing its business relationship with them at Phoenix and potentially other projects in the future.

Drilling

Since completing the Apache asset acquisition, the Quadrant team have confirmed the intention to drill the Roc-1 well in the fourth quarter of calendar 2015. The Roc-1 well is situated in around 80 metres of water depth and the plan is to drill the well with a jack-up drilling rig. Quadrant and JX Nippon will fund drilling and testing costs within WA-437-P to US$70 million (gross cost). The current estimate to drill the Roc-1 well is around US$45 million (gross). Any shortfall can be carried over into subsequent testing or drilling activities within the permit.

It is anticipated a successful Roc-1 well will be suspended to allow for re-entry within six to twelve months to complete more extensive well sampling and to flow test the well. This decision is based on factors pertaining to government approvals, cost and drilling processes. Given the probability of success estimated for the Roc prospect, planning is also underway for the drilling of additional exploration and appraisal wells in late 2016. These will likely be subject to a successful Roc-1 result, joint venture and government approvals and rig availability.

Seismic plans

As previously reported (ASX: 13 January 2015), two new multi-client seismic programs are being acquired over the four exploration permits that make up the Phoenix Blocks. The multi client (MC) 3D seismic project (referred to as the Capreolus MC3D) is one of the largest single site surveys ever undertaken in Australian waters, and reflects the exploration interest within and around the Bedout Sub basin.

The joint venture will license approximately 5,100 km2 of the Capreolus MC3D and approximately 60% of this has now been acquired. The 3D data is expected to be processed and ready for interpretation early in 2016. The new 3D will complement the 1,100km2 Phoenix MC3D acquired in 2010/2011 and the 3,854 km2 Zeester MC3D acquired in 2011/2012. Reprocessing of the Phoenix MC3D is also nearing completion.

New 2D seismic data is being acquired over the majority of the remaining approximately 12,000 km2 of the Phoenix area. Acquisition of this data, Bilby MC2D, is approximately 45% complete. Prospect generation is the key activity following seismic acquisition, processing (including reprocessing) and interpretation. Given the timing of the different 2D and 3D surveys, it is anticipated that further prospect maps will become available at different times over the next 18 months.

Prospect mapping within the Zeester MC3D area is expected to be complete before the end of this year. Prospect generation within the Phoenix MC3D area is anticipated to be complete by early 2016. Prospect mapping for the Bilby MC2D and Capreolus MC3D areas are not expected to be complete until mid to late 2016 or possibly early 2017.

Technical work

The Quadrant led joint venture continues to work through post-well analysis of the Phoenix South-1 well and the surrounding wells in the permit. This work addresses many geological aspects including reservoir development and quality, the type and potential source of the oils discovered and where it may occur further in the permit. The amount of technical work being undertaken to evaluate a newly discovered hydrocarbon province necessitates a more thorough evaluation than for more established basins such as the Carnarvon and Dampier sub basins within the North West Shelf.

Two broad areas of study are currently being undertaken – those related to regional work around understanding this new hydrocarbon province and secondly those related to the reservoir characteristics with a view to understanding the potential development of the Phoenix South oil discovery and other prospective oil reservoirs in the province. For the former, fluid inclusion studies are complete on all the previously drilled wells in the region which, when finalised around the middle of this year, will be incorporated into regional interpretation. Along with petroleum system modelling and newly acquired seismic data, this will generate regional mapping and ultimately a portfolio of prospects across the Phoenix Blocks.

For the Phoenix South discovery, “special core analysis” (SCAL) is ongoing and expected to be complete by the end of calendar 2015. This allows for better delineation of the flow characteristics and recovery from the reservoir rock.
This work will be integrated into static and dynamic computer models with a view to having a better handle on the range of possible recoverable oil by the end of this year.

Forward planning summary

The joint venture has sufficient time to fully evaluate the recent Phoenix South-1 oil discovery, drill and assess the upcoming Roc-1 well and complete the regional petroleum review within the exploration permits. Given the extent of the work being undertaken the government recently agreed to extend the licence term until August 2017. This is beneficial to the joint venture because no portion of the acreage has to be relinquished before this newly extended date.