Lion Energy Provides Update on Operations at Seram PSC in Eastern Indonesia

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Lion Energy reported Tuesday that the company’s CEO Kim Morrison noted “Oseil-21 continues the positive news from the Seram Production Sharing Contract (PSC) on the island of Seram in eastern Indonesia. Combined with the Oseil-26 well it has significantly increased production from the Oseil field complex. We now look forward to the appraisal of the exciting Lofin gas/oil discovery.”

The Oseil-21 development well is a follow-up to the successful Oseil-26 well that continues to produce strongly, at a rate of approximately 600 barrels of oil per day (bopd) on a 23/64 inch choke, with less than 1 percent water cut.

Lion, via its wholly owned subsidiary, Lion International Investment Ltd, holds a 2.5 percent participating interest in the Seram (Non-Bula) PSC, located onshore Seram Island in eastern Indonesia. The major equity holder and operator of the joint venture is CITIC Seram Energy Ltd (51 percent). Other partners are KUFPEC (Indonesia) Ltd (30 percent) and Gulf Petroleum Investment (16.5 percent).

The block contains the Oseil oilfield and surrounding structures that have produced cumulative crude oil production of 12,394,564 barrels since the initial field start-up in January 2003 through to May 11.

OSEIL-21

The Oseil-21 development well was spud Feb. 24. Seven inch casing was set at 7,190 feet (2,191 meters) measured depth (MD) and 6.125 inch open hole was drilled to a total depth of 7,793 feet (2,375 meters) MD (6,391 feet or 1,948 meters total vertical depth, or TVD).

The well was drilled within schedule and on budget.

As of May 11, the well is producing above expectations at 526 bopd on a 24/64 inch choke with less than 2 percent water.

The primary objective Manusela Fm was encountered at 6,403 feet (1,952 meters) (-4,957 feet/-1,511 meters subsea, or ss, TVD), 113 feet high to prognosis. This follows on from the Oseil-26 well where the Manusela was encountered 393 feet high to prognosis.

RESERVES UPDATE

As announced in Lion’s quarterly report April 30, the Seram joint venture recently received an updated reserves report for the Seram (Non-Bula) PSC from DeGolyer and MacNaughton (one of the most respected companies in reserves consulting services and resource evaluations for energy companies worldwide). The updated report to Dec. 31, 2013 was based on 2013 gross production of 894,000 barrels (2,450 bopd). A positive revision to proven reserves (1P) partially offset production for the year (> 55 percent RRR in 1P in 2013) driven by appraisal drilling success in the Oseil area. Taking into account the results of Oseil-26 and now Oseil-21, it is likely that a further positive revision in reserves will be the outcome in the report to Dec. 31.

D&M Reserves Evaluation (Gross in million barrels)

  • EOY 2012: 6,525 (1P); 10,815 (2P); 15,318 (3P)
  • Production: -894 (1P); -894 (2P); -894 (3P)
  • Revision: 472 (1P); -559 (2P); 654 (3P)
  • EOY 2013: 6,103 (1P); 9,362 (2P); 14,898 (3P)

D&M Reserves Evaluation (Net to Lion in million barrels)

  • EOY 2012: 163 (1P); 270 (2P); 378 (3P)
  • Production: -22 (1P); -22 (2P); -22 (3P)
  • Revision: 12 (1P); -14 (2P); 16 (3P)
  • EOY 2013: 153 (1P); 234 (2P); 372 (3P)
  1. Hydrocarbon 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 affect the company’s operations.
  2. Incremental probable and possible reserves are unlikely to be produced before the expiry of the PSC in 2019, and success of the planned joint venture application to extend the PSC beyond this date is likely to be required in order for these reserves to be produced.
  3. Reserves have been estimated using the deterministic method.

COMPETENT PERSONS STATEMENT: QUALIFIED PETROLEUM RESERVES AND RESOURCES EVALUATOR

Pursuant to the requirements of the ASX Listing Rules Chapter 5, the technical information, reserve and resource reporting provided in this document are based on and fairly represent information and supporting documentation that has been prepared and/or compiled by Kim Morrison, CEO of Lion Energy Ltd. Morrison holds a B.Sc. (Hons) in Geology and Geophysics from the University of Sydney and has more than 28 years of experience in exploration, appraisal and development of oil and gas resources – including evaluating petroleum reserves and resources. Morrison has reviewed the results, procedures and data contained in this release. Morrison consents to the inclusion of this announcement of the matters based on the information and context in which it appears. Morrison is a member of the American Association of Petroleum Geologists (AAPG).

 

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