Apache makes significant oil discovery offshore Australia

Carnarvon Petroleum has announced a significant oil discovery in the Phoenix South-1 well in the North West Shelf in Western Australia.

In a press release issued today, Carnarvon has said that the discovery represents “one of the most significant developments in Australian oil and gas in recent times.”

At this preliminary stage it is too early to quantify the recoverable volumes of oil. Further technical evaluation of log and core data will enable Carnarvon and its partners to be in a position to make that information public by the end of 2014, Carnarvon has said.

Apache also issued a statement in which it said that Wireline and formation pressure tools have confirmed at least four discrete oil columns ranging in thickness between 85 and 151 feet (26 to 46 meters) in the Triassic Lower Keraudren formation, within an overall, sand-rich section between 13,648 and 14,763 feet below sea level (4,160 to 4,500 meters).  Six light oil samples have been recovered from three intervals to date; permeability measurements from the sampled zones indicate a productive oil reservoir with preliminary estimates that there might be as much as 300 million barrels of oil in place.

“Although evaluation is at an early stage, Phoenix South-1 is an exciting result,” said Thomas E. Voytovich, Apache’s executive vice president and chief operating officer – International. “The oil and reservoir quality we have seen point to a commercial discovery. If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia. We look forward to working with our partners to continue evaluation of the area.”

Carnarvon Managing Director, Adrian Cook said; “Carnarvon is excited to be part of this major new oil discovery at Phoenix South-1. This is the most significant new oil play in the North West Shelf since the Enfield discovery opened up the Exmouth Basin almost 20 years ago. The implications on the rest of our acreage are still being assessed, but the potential is extraordinary.

“I’m very proud to be involved with the Carnarvon team in taking a very early position in this area with our initial partner, Finder Exploration. A great deal of credit for this discovery also rests with Apache Energy who is the operator of the Phoenix South-1 well. Despite some initial challenges and setbacks, this well has delivered a significantly better outcome than any of us could have imagined.”

The cost estimate for the well to completion, including additional drilling, is within the guidance previously articulated to the market, and Carnarvon’s net cost for this well is expected to be around A$6 million. Carnarvon reported cash holdings of $50 million as at 30 June 2014 and accordingly is in a strong position to fund these costs.

The discovery of oil in the Phoenix South-1 well in WA-435-P has significant implications for the rest of the permit and the surrounding 20,000 km2, of which Carnarvon is holding a material equity interest. Work is currently underway to re-evaluate the previous Phoenix-1 discovery, and also the implications for the prospects at Roc-1 well in WA-437-P (Carnarvon 20%) and other prospects in the adjoining acreage. The technical work on this well and the basin wide work will take some time to evaluate to discover the full potential in this new oil play fairway.

 Roc drilling

In a separate statement, Carnarvon said that Apache Northwest Pty Ltd (“Apache”) and JX Nippon have formally notified Carnarvon that they are committed to drilling the Roc prospect in WA-437-P in the North West Shelf of Western Australia. In doing so they will pay the earn-in costs to a cap of US$70 million (gross). The Roc prospect is a follow up exploration well to the new oil discovery made at the Phoenix South-1 well.

In addition to the above, Apache has exercised its option to acquire a 40% interest in WA-436-P and WA-438-P. Apache will assume operatorship of these permits and Carnarvon retains a 30% interest.

Adrian Cook said: “Following the recent and exciting oil discovery in the Phoenix South-1 well, I am delighted that Apache and JX Nippon have committed to drilling the Roc prospect and to join ourselves and Finder Exploration as we look for more exploration success in the area. At this stage I expect the Roc well will be drilled in 2015 with an Apache contracted Jack-Up drilling rig. Apache is a well-renowned global exploration and production company and we look forward to working with them as the operator of all four of the Permits we now share.”