Beetaloo Basin, Australia

Map of well locations

 

Falcon Oil & Gas Australia Limited (ABN 53 132 857 008) (''Falcon Australia'') is a 98% owned subsidiary of Falcon Oil & Gas Ltd (''Falcon'')

Falcon Australia is an unlisted public company engaged in the exploration and development of world class conventional and unconventional oil & gas resources the in Beetaloo Basin, Northern Territory,Australia. The Beetaloo Basin is a Proterozoic and Cambrian age tight oil and gas basin that the Board believes is well suited for unconventional oil and gas projects.Connected to the major industrial and export markets in Darwin 600km ti the north, Falcon Australia us uniquely positioned in the Northern Territory to achieve commercial production. Existing infrastructure includes a major highway, two gas pipelines and a railway.

Falcon Australia holds 30% interest in 4.6 million gross acres in exploration eermits 98,76, and 117 covering the majority of the Beetaloo Basin.

 

Four additional potential plays in the Beetaloo Basin, Australia

On 15 May 2018 Origin Energy Limited (“Origin”) presented a technical paper, headlined - “Australia’s premier shale basin: 5 plays 1,000,000,000 years in the making”, at the Australian Petroleum Production and Exploration Association (“APPEA”) Conference in Adelaide earlier today. The key findings are summarised below.

Overall

  • Origin has identified four additional potential plays in the Beetaloo sub-basin in addition to the existing and explored Velkerri shale dry gas play, namely;
o Velkerri shale liquids rich gas play,
o Kyalla shale and hybrid liquids rich gas plays, and
o Hayfield sandstone oil/condensate play.
  • The Velkerri shale dry gas remains the most materially and technically mature resource.
  • Origin stated, “as such, the Beetaloo provides the JV with a diversified portfolio of material multi-TCF plays, each with the potential to redefine Australia’s energy market.”

Velkerri shale liquids rich gas play

  • Located along the northern and south-eastern flanks of the Beetaloo sub-basin.
  • Indications that porosity and permeability are higher in these areas.
  • Gas composition and maturity modelling indicate a possible condensate to gas ratio (“CGR”) in the region of 5-40 bbl/MMscf.
  • A horizontal fracture stimulated well to test the deliverability of the play is required to assess technical viability.

Kyalla shale and hybrid lithology liquids rich gas play

  • Two related liquid rich gas play types have been identified for further appraisal:
o shale play targets, and
o hybrid play targets.
  • Prospective areas are interpreted to be confined to the JV’s permits.
  • There is likely a cost advantage over the Velkerri shale dry gas play as it is shallower.
  • Liquid yields could be in the range of 15-60 bbl/MMscf.
  • Additional work is required to rank these plays for further appraisal.

Hayfield sandstone oil/condensate play

  • Interpreted as a thin but regionally extensive sandstone confined to the north of the JV permits.
  • Strong wet gas shows in the Amungee NW-1 and other regional wells suggest the presence of liquid hydrocarbons without significant formation water.
  • The Hayfield Sandstone is a tight sandstone with a significant secondary porosity network (but low matrix permeability) and potentially the presence of open, uncemented, hydrocarbon filled natural fractures.
  • Anticipated to have the highest liquid yields and lowest well costs that could contribute to improved economics of a stacked play development.
  • Success will be dependent on the combination of system permeability and resource density.
  • Would require a horizontal fracture stimulated well to assess the technical viability of the play.

 

Kyalla Formation Evaluation

On 21 February 2018, Origin presented a technical paper on the potential of the Kyalla Formation in the Beetaloo Sub-basin at the Australia Exploration Geoscience Conference (AEGC) in Sydney. The key conclusions by Origin were as follows:

  • Reservoir and geomechanical analysis acquired at the Beetaloo W-1 well indicate the presence of two potential Source Rock Reservoir (“SRR”) intervals; the middle Kyalla SRR and the lower Kyalla SRR.
  • Geomechanical properties of the lower Kyalla SRR suggest it has the greater potential and could be conducive to successful hydraulic fracture stimulation.
  • Development of the lower Kyalla SRR, if viable, could have significant cost advantages over that of the middle Velkerri SRR due to expected lower drilling costs.
  • Mudgas and core analysis indicate the reservoir is likely to be wet gas which could also improve the economics considerably.
  • There is also the possibility that a successful lower Kyalla SRR test could lead to a ‘stacked’ play development with the middle Velkerri SRR. Infrastructure sharing synergies, with a greater portion of centralised infrastructure, could result in significant cost savings and an optimised surface footprint.
  • Further appraisal work is required to determine the deliverability of the identified Kyalla SRRs

2017 Joint Venture update

On 5 May 2017, Origin announced it had acquired Sasol's interest in the Beetaloo joint venture, bringing its interest to 70%. Sasol departs the joint venture to focus its capital investment on its African and North American footprint. This transaction is subject to the satisfaction of certain conditions, including Government approval.

The transaction will not impact Falcon's 2014 farm-out agreement as Origin will now assume 100% of the future costs of the farm-out.

 

 2017 Beetaloo Basin Drilling Results Indicate Material Gas Resource

Origin has submitted the Results of Evaluation of the Discovery and Preliminary Estimate of Petroleum in Place for the Amungee NW-1H Velkerri B Shale Gas Pool to the Northern Territory Government.

Key Details of the Discovery Evaluation Report

Middle Velkerri B Shale Volumetric Estimates
  Gross Net Attributable
  Best Estimate Best Estimate
Area km2 16,145 4,751
OGIP (TCF) 496 146
Combined Recovery / Utilisation Factor 16% 16%
Technically Recoverable Resource (TCF) 85 25
OGIP Concentration (BCF/km2) 31 31

                 
In addition, Origin has prepared a contingent gas resource estimate using probabilistic methods and reservoir evaluation data, in addition to regional seismic data.

Assessment of 2C Contingent Gas Resource Estimates for the Middle Velkerri B Shale Pool within EP76, EP98 and EP117 as of 15 February, 2017
Measured and Estimated Parameters Units Best Estimate
Area km2 1,968
Original Gas In Place (OGIP) TCF 61.0
Gross Contingent Resource TCF 6.6
Net Contingent Resource TCF 1.94

For full details relating to the announcement of a material gas resource, please refer to the press release section in the investor section of the website.

 

Results of the 2016 Exploration Drilling and Testing Program

  Beetaloo W-1

  • Continuation of the regionally pervasive Middle Velkerri formation approximately 85 kilometers soth of the Kalala S-1 and Amungee NW-1H wells
  • A Gross interval of over 570 meters shale gas sequence with net pay exceeding 150 meters
  • Excellent gas shows at two prospective shale sweet spots at the top and base of the Middle Velkerri formation, comparable to those encountered during 2015 drilling programme
  • The Lower Kyalla formation, considered as a secondary shale target, provided excellent gas shows within a 150 meter thick liquid rich squence

  Amungee NW-1 Horizontal Well

  • 11 Hydraulic stimulation stages completed along the 1.000 meter horizontal section
  • Stimulation treatments executed, with 95% if programmed proppant placed
  • Main physical properties are:
    • thickness of 30 meters
    • between 4.0% - 7.5% porosity
    • a gas saturation range of 50% - 75%
    • permeability between 50 amd 500 nano-Darcy
  • Extented Flow test gas flow rates range between 0.8-1.2 MMscf/d
  • Initial estimates suggest a dry gas composition with 95% methane
  • Declaration of Discovery

An extended production test (“EPT”) was completed on Amungee NW-1H in December 2016  

  • Initial production over the first 30 days averaged 1.11 MMscf/d
  • 63 MMscf was produced over the 57 days of the EPT, at an average rate of 1.10 MMscf/d
  • The final rate of the EPT was 1.07 MMscf/d
  • Completed in line with a regulatory approved plan with no environmental incidents
  • The EPT concludes the 2016 drilling programme
  •  A final discovery report is being prepared for submission to the Northern Territory Government’s Department of Primary Industry and Resources in Q1 2017

 

Amungee NW-1 Horizontal well drilled during 2016

 

 

Results of the 2015 Exploration Drilling and Testing Program

  • 2015 saw the drilling of two vertical wells, Kalala S-1 and Amungee NW-1 along with the first horizontal well, Amungee NW-1H. All wells targeted the Middle Velkerri formation to assess hydrocarbon saturation and reservoir quality.
  • The Middle Velkerri and Kyalla shales offer stacked play fairways with continuity over a large proportion of the Beetaloo Basin and in various maturity windows (dry gas to liquid).
  • Three pervasive, organic rich shale intervals were identified and characterised within the Middle Velkerri formation with excellent reservoir and completion quality. The identified “B” and “C” shales have thickness in excess of 40 meters each.
  • Amungee NW-1H, the first horizontal well in the programme landed in the Middle Velkerri “B” shale encountering excellent gas shows and represents a highly prospective candidate for multi-stage hydraulic fracture stimulation.
  • Core analysis confirmed that the Middle Velkerri shale is organic rich, with average total organic carbon of 3%-4% and is gas saturated.
  • Diagnostic fracture injection test data revealed that the Middle Velkerri shale is 20% -25% overpressured, which is encouraging from both a volumetrics and reservoir productivity perspective.
  • Favourable geomechanics indicates good frackabability within the Middle Velkerri shale.
  • Estimated gas in-place density ranges within the Middle Velkerri shales are comparable to successful North American shale plays.

 

2014 Transformational Farm out of Beetaloo unconventional acreage

On 21 August 2014 Falcon Australia completed the Farm-Out Agreement and Joint Operating Agreements (collectively “the Agreements”) with Origin Energy Resources Limited, a subsidiary of Origin Energy Limited (“Origin”) and Sasol Petroleum Australia Limited, a subsidiary of Sasol Limited (“Sasol”), collectively referred to herein as “the Farminees”, each farming into 35% of Falcon’s Exploration Permits in the Beetaloo Basin, Australia (“the Permits”). 

Key transaction details were:

  • Falcon retained a 30% interest in the Permits.
  • Falcon received A$20 million cash from the Farminees.
  • Origin appointed as Operator with immediate effect.
  • Farminees to carry Falcon in a nine well exploration and appraisal program between 2015 to 2018, detailed as follows:
    • 3 vertical exploration/stratigraphic wells and core studies;
    • 1 hydraulic fracture stimulated vertical exploration well and core study;
    • 1 hydraulic fracture stimulated horizontal exploration well, commercial study and 3C resource assessment; and
    • 4 hydraulic fracture stimulated horizontal exploration/appraisal wells, micro-seismic and 90 day production tests.
  • Drilling/testing specifically targeted to take the project towards commerciality.
  • Farminees will pay for the full cost of completing the first five wells estimated at A$64 million, and will fund any cost overruns. This drilling programme commenced in 2015.
  • Farminees to pay up to the full cost of the next four horizontally fracture stimulated wells, 90 day production tests and micro seismic with a capped expenditure up to A$101 million, any cost overrun funded by each Party in proportion to their working interest.
  • As part of the agreements to reduce the overriding royalties from what was originally 12% to 1%, Farminees will pay their pro-rata share (US$14 million (approx. A$15 million)) of the two five year call options entered into by Falcon as part of agreements announced on 1 November 2013 with CR Innovations AG and 17 December 2013 with the TOG Group, should Farminees and Falcon decide to exercise the call options.
  • Farminees may reduce or surrender their interests back to Falcon only after:
    • the drilling of the first five wells or
    • the drilling and testing of the next two horizontally fracture stimulated wells.

   Kalala S-1 & Amungee NW-1 Wells

 

 

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