Byron SM 71 #1 Oil and Gas Discovery
Byron Energy Ltd (ASX: BYE) (“Byron” or the “Company”) is pleased to announce that the Byron Energy SM 71 #1 (“SM-71 #1”) well located in the Gulf of Mexico in South Marsh Island Block 71 (“SM 71”) has reached a final total depth at 6,843 feet (2,086 metres) Measured Depth or 6,477 feet (1,974 metres) True Vertical Depth. During drilling of the SM 71 #1 well three discrete hydrocarbon bearing sands were intersected. Preliminary evaluation has been completed using Gamma Ray/ Resistivity Logging While Drilling (LWD) tools. Indications of oil were seen on cuttings from the D5 sand interval and all hydrocarbon bearing zones demonstrate elevated wet gas readings. Based on preliminary interpretation of these results it appears that a significant proportion of these hydrocarbon bearing sands will result in net hydrocarbon pay, however net pay counts cannot be determined until a porosity log is run and may be determined to be less than the gross sand amounts reported here. Currently, Byron is running in to the hole with a bit to address excess wall-cake build up and verify the hole's condition prior to running porosity logs. Whilst drilling to TD below the D5 Sand, a pressure transition was intersected which required an increase in mud weight to control the well. The higher mudweights suppressed gas ingress, but will require additional conditioning of the wellbore. The D5 Sand, which was the primary target of this well exhibits excellent quality, is within the range of predrill expectations, and confirms the RTM technology used to delineate the prospect. The J Sand, which was a secondary target, was found within predrill expectations and was intersected 220 feet (67 metres) up-dip of the highest productive well in the J Sand interval. The I3 Sand, which was not included in the predrill estimates, will enhance the project economics. The I3 sand interval does not appear to have been produced in offset wells on SM 71. The preliminary results from these three discrete hydrocarbon intervals are considered of commercial value to warrant the completion and ultimate production of the well. This will be done by the running the 7 ?” production liner and suspension of the well for future production. Byron will now move forward with development planning and has already initiated discussions with an offset operator to cost effectively produce the hydrocarbons from this well. The SM 71 #1 well is the second well to be drilled as part of Byron’s farm-out to Otto Energy Limited (“Otto”) (ASX: OEL), announced on 11 December 2015. The SM 71 #1 well targeted two objective sands. The first target was the J Sand, which has been assigned by Collarini and Associates gross proved and probable undeveloped reserves of 0.8 million barrels of oil and 0.5 Bcf of gas, equivalent to 0.7 million barrels of oil and 0.4 Bcf of gas net to Byron’s existing 81.25% Working Interest (“WI”). The primary target was the D5 sand, which has been assigned, by Collarini and Associates, gross prospective resources of 5.6 million barrels of oil and 4.1 Bcf of gas, equivalent to 4.6 million barrels of oil and 3.4 bcf of gas net to Byron’s existing 100% WI and 81.25% Net Revenue Interest (“NRI”)*. Byron, through its wholly owned subsidiary Byron Energy Inc. (the operator), currently has a 100% working interest and an 81.25% net revenue interest in SM 71, located offshore Louisiana, 250 km southwest of New Orleans, Louisiana, USA, in water depth of approximately 131 feet (40 metres). Pursuant to the farm-out agreement, Otto will pay 66.67% of the SM 71 #1 estimated dry hole costs ($US 4.5 million) to earn a 50% working interest in the SM 71 and SM 70 leases. Otto’s promoted drilling exposure will be capped at $US 3.0 million net to Otto, after which both companies will bear their own proportionate share. The well has been drilled in line with the pre-drill cost estimate of $US 4.5m gross. Otto has also reimbursed Byron $US 0.9 million for past costs incurred at SM 71. If Otto earns an interest in the SM 71 and SM 70 blocks, Byron’s working and net revenue interests will be reduced by 50% at the earn-in point, to 50% and 40.625% respectively.