Byron Energy Limited (Byron) (BYE) would like to provide the following update relating to the drilling of the SM71 F4 well.
As announced on 22 August 2019, Byron proposed the SM71 F4 well, a D5 Sand extension well designated the Sausage Prospect, to its 50% partner, Otto Energy group (OEL) (Otto). Under the terms of the SM71 Offshore Operating Agreement (SM71 OOA), Otto had until 30 September 2019 to respond with their election. Byron has been notified that Otto has elected not to participate in the drilling of the SM71 F4 well.
The D5 Sand target location of the SM71 F4 well has been defined by Byron’s proprietary Reverse
Time Migration (RTM) and full waveform inversion reprocessed seismic data, received earlier this
year, under the South Marsh Island Project Seismic Reprocessing project from WesternGeco, a
Schlumbergersubsidiary. Those combined datasets delineate an area ofstratigraphically isolated
D5 Sand that the Company believes will not be drained by the existing SM71 F1 or F3 wells (refer
to the attached schematics). The SM71 F4 well was assigned a gross 1.26 million barrels of oil
and 0.75 Bcf of gas as a prospective resource by Byron’s third-party engineers, Collarini and
Associates in the Company’s 2019 annual reserve and resource assessment, released on 19
September 2019. Under the SM71 OOA Byron has 120 days to spud the SM71 F4 well.
In August, Byron also submitted an Authority For Expenditure (“AFE”) to Otto for a compressor
upgrade to the jointly owned SM71 F Platform. Otto has approved the compressor upgrade AFE
and in order to minimise production downtime while drilling, the two companies have mutually
agreed the SM71 F4 well will not be drilled until after the new compressor is installed in late
November or early December this year. Byron expects to spud the SM71 F4 well in January of
2020 with completion operations to follow immediately if the well is successful. The SM71 F4
well is fully permitted and ready to drill and it is anticipated that the Enterprise 263 will be used
to drill the SM71 F4 well.
Under the SM71 OOA, Otto will be due certain onetime fees relating to the use of a well slot and
production facilities. As an Exploration Operation, Byron will have the right to recover 600% of
those fees and costs attributable to Otto’s non-consent interest, to drill and complete, as well as
100% of those costs attributable to such interest in utilising, operating and maintaining the
platform and facilities, including marketing & transportation of production, and the associated
lessor’s royalty. Upon such recovery, Otto will then have the right to regain their relinquished
interest in the SM71 F4 well.
During the 30-day election period, Byron and Otto also discussed the SM71 F5 well which was
not officially proposed due to restrictions on proposing multiple operations, under the Offshore
Operating Agreement. Byron will submit the SM71 F5 AFE and proposal in due course. If the
SM71 F4 well is not successful, the well will be left in manner that it can be used for future wells
such as the SM71 F5 well by side-tracking below surface casing.
Byron, through its wholly owned subsidiary Byron Energy Inc., is the operator of SM71 and has a
50% working interest and a 40.625% net revenue interest in the SM71 Lease. Otto Energy Limited
group (“Otto”) (ASX: OEL) holds the remaining interest in SM71.
CEO Comment:
Maynard V. Smith, Byron CEO, had this say about the SM71 F4 well:-
“The SM71 F4 well is an attractive target from both a reserve and risk standpoint and we look
forward to drilling it early next year. Our RTM seismic data does a very good job of delineating
the Sausage Prospect and if successful, will increase D5 Sand reserves We are disappointed that
Otto will not be a part of this well, but this is the right time to drill and bring on new production
in the life cycle of the SM71 platform and project.”
