Key Petroleum Limited (Key) provided Monday an exploration update on Exploration Permit EP448 (Permit) in addition to the Company’s future exploration programs in the Canning Basin, Western Australia.
EP104 TREND, CANNING BASIN
Key has held a number of joint venture meetings over recent weeks pertaining to the EP104, R1 and L15 permits to discuss and determine work programs and future workovers as part of the company’s strategic exploration plans in the area.
The Company plans to assess the infrastructure in R1 and L15 during this year’s dry season before the venturers approve any work programs for 2015.
Last year the Company announced the pursuit of increased exploration activity and equity interests in the area in addition to other project synergies with other companies.
CURRENT EXPLORATION STATUS OF EP448, CANNING BASIN
A two well shallow oil conventional program is planned to be conducted this year in Key’s frontier Canning Basin block, EP448. Drilling is dependent on Native Title approvals and the timing of these approvals before the onset of the wet season.
To date, Key has liaised with the WA Department of Mines and Petroleum (DMP) on its exploration plans and is confident they will grant approvals for vegetation clearance as a result of flora and fauna studies carried out over March and April. Any approvals are subject to heritage clearance and appropriate approvals by the Traditional Owners.
Last month, two proposed well locations, Patterson-1 and Griffiths-1, were surveyed for infrastructure locations and environmentally sensitive areas in parallel to identifying sources of gravel for civil engineering. Proposed drilling pads and an airstrip locations were also inspected.
Fauna Studies were undertaken during March to comply with the appropriate Environmental Plan (EP) requirements by the DMP.
Flora Studies are underway and should be completed within the fortnight prior to the lodgement of the EP for drilling activities.
TECHNICAL AND EXPLORATION STUDIES WITHIN EP448, CANNING BASIN
Technical and source rock maturation work on the permit has recently been completed by independent experts in the United States. This work confirmed that source rocks within EP 448 are in the peak oil window.
The source rock confirmation was carried out analyzing Conodont fossils abundant in Ordovician Nita and Goldwyer Formations. Conodonts are significant paleothermometers and important in analysis due to their color change with temperature. They are frequently used as indicators of thermal alteration of sedimentary rocks and is used to determine oil and gas windows.
Concentration and accumulation of oil occurs at prolonged temperatures between 50 degrees and 120 degrees Celsius before hotter temperatures result in oil becoming broken down into wet gas. In the samples analyzed to date, a Conodont Alteration Index of 2 suggests source rocks were exposed to heat between 90-120 degrees Celsius.
Reservoirs studies and a Carbonates Report on the Nita Formation is expected to be completed in the next fortnight. The Report will include data from offset wells Calamia-1, Woods Hill-1 and Darriwell-1, which lie directly north of the Patterson and Griffiths prospects. The Report notes there are good quality sandstones found in the Willara Formation of Calamia-1 and residual oil staining observed in some intervals of the Nita Formation in Darriwell-1. The Nita Formation is regarded as a largely unexplored source and reservoir rock in the Canning Basin.
GRIFFITHS AND PATTERSON PROSPECTS, EP 448, CANNING BASIN
The EP448 permit is approximately 4 million acres in size containing a number of conventional leads identified on trend with currently mapped prospects and the unconventional Ambrose prospect in the southeast. Current technical work has been expanded to include the L12-10 block and this data will be used in potential venture opportunities.
The Griffiths and Patterson prospects have an estimated Un-risked Prospective Resource of recoverable oil with a Best Estimate of 30 million barrels and 14 million barrels (in accordance with Clause 7.3 of ASX Guidance Note 32).
The wide range in the volumes below reflects the widlcat nature of the prospects in a frontier area with little well control.
Un-risked Prospective Resource Volume Estimates for the Griffiths and Patterson Oil Prospects
- Griffiths: 8 million barrels (Low Estimate), 30 million barrels (Best Estimate), 129 million barrels (High Estimate)
- Patterson: 0.5 million barrels (Low Estimate), 14 million barrels (Best Estimate), 61 million barrels (High Estimate)
The shallow nature of these objectives, being approximately 3,937 feet (1,200 meters) in true vertical depth, means that drilling and completion costs will be lower than drilling unconventional wells. Any discovery could be commercialized in a shorter time frame due to the proximity to the Great Northern Highway.
EXPLORATION AND OPERATIONAL ACTIVITIES IN THE CANNING BASIN
As part of the Company’s strategic drilling objectives, Key has acquired camp and ancillary services equipment including a forklift to facilitate mobilization of the camp between Canning Basin well sites. This equipment is currently in the Perth Basin and will be mobilized upon the grant of relevant approvals for the 2014 drilling campaign.
Managing Director Kane Marshall said key would continue to plan and drill wildcat wells in the Canning even though the current state of affairs in WA’s petroleum industry meant uncertainty on operational timing due to rigorous heritage clearance and government regulatory approvals.
“Of the small cap exploration companies Key is one of the very few genuine wildcat exploration companies with a healthy cash position and the drive to explore and drill in prospective acreage in a hostile environment,” Marshall said. “We are dynamic wildcat exploration company and will continue to plan and drill these wells for our shareholders.”
Marshall said that the Company had put in development options during the planning of Canning Basin exploration activities in the instance that Key had success.
“We can transform the Company from a wildcat company to an operating development and production company in a relatively short period of time,” he said. “The Board’s proactive management and exploration strategy can be seen in recent media attention the Company has received available on our website and the commencement of exploration activities in the Perth Basin.”
Further information on timing of Key’s exploration activities will be disclosed in due course.