Buru Updates on Resources Review for Canning Basin's Permit EP 371 in WA

Buru Energy Ltd. provided Monday an independent resources review for Permit EP371 in Canning Basin, Western Australia.

Background

Subsequent to the successful completion of the 2015 tight gas stimulation program at the Valhalla North1 and Asgard 1 wells, DeGolyer and MacNaughton (D&M), a specialist North American tight gas and unconventional resource assessment consulting group (www.demac.com), were commissioned to undertake an independent assessment of the gas and liquids resources of the Laurel Formation in the Valhalla area of the Canning Basin. This independent assessment has confirmed Buru Energy's view that the Valhalla area contains a nationally significant multi trillion cubic feet (Tcf) wet gas accumulation.

Contingent Resource and Prospective Resource Context

The assessment was carried out using the results of the recent TGS fracture stimulation program and was focused on the evaluation of the Contingent Resources and Prospective Resources around the two stimulated wells.

Defining initial Contingent Resources is a very important step forward in the route to commercialization of the tight gas resources in the Canning Basin. There is a well-defined pathway of increasing certainty from Prospective Resources to Contingent Resources to Petroleum Reserves, and this independent review is a significant step forward in that process. The Contingent Resources defined by D&M are located close to and surrounding the two stimulated wells. The Prospective Resources lie on the previously identified Laurel fairway along the EP 371 permit area.

The analysis also considered the Prospective Resources in the immediate area, and as part of the review there has also been an analysis by Buru Energy of the forward program required to convert Prospective Resources to additional Contingent Resources. This program could include, amongst other activity, and subject to further technical review and Joint Venture and all other necessary approvals; additional seismic data acquisition, a further well between the two stimulated wells, and further flow tests and potentially stimulation of additional zones in the Valhalla North and Asgard wells.

Resources Summary Highlights

(Buru Energy has a 50 percent equity share of the following gross resources)

  • D&M are of the opinion that the Valhalla accumulation immediately surrounding the Valhalla North and Asgard wells, contains a gross 2C unrisked contingent recoverable volume of 1.53 Tcf of gas and 32 million barrels of hydrocarbon liquids (condensate and liquefied petroleum gas or LPG), noting that this estimate includes both wet gas and dry gas zones combined. Full details of the range of resources estimated by D&M are set out in the table below
  • D&M are of the opinion that the unrisked mean recoverable Prospective Resource in the Valhalla accumulation on EP 371 is 13.02 Tcf of gas and 232 million barrels of hydrocarbon liquids
  • The resources estimated by D&M are consistent with Buru Energy's and previous independent reviewers previously announced estimates of the potential recoverable volumes from the Valhalla area, but now importantly include an estimate of Contingent Resources
  • Buru Energy is of the view that a work program including an additional well and flow tests has the potential to extend the Contingent Resources between the wells and add up to an additional 3 Tcf of Contingent Resources, depending on the outcome of further drilling and well testing

Resource Assessment

The resource assessment has been preparedusing the probablistic method and an evaluation date of March 31. Buru Energy's equity interest in the permits that D&M have assessed is 50 percent. The gross estimated recoverable volumes of Prospective and Contingent Resources for the Valhalla accumulation on the EP 371 permit, as determined by D&M are summarized in Tables 1 and 3 respectively.

Prospective Resources

Prospective Resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project (s) related to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. D&M's estimate of the range of the grosss estimated recoverable volumes of Prospective Resources fot the Valhalla accumuation is provided in Table 1.

Table 1

  • Product
    • Condensate
      • Unrisked: Low Case (million barrels or MMbbl / billion cubic feet or Bcf) - 79; Best (MMbbl / Bcf) - 191; Mean (4) (MMbbl / Bcf) - 232; High (MMbbl / Bcf) - 445
      • Risked: Mean (Mmbbl / Bcf) - 83
    • Natural Gas
      • Unrisked: Low Case (MMbbl / Bcf) - 5,607; Best (MMbbl / Bcf) - 11,482; Mean (MMbbl / Bcf) - 13,024; High (MMbbl / Bcf) - 22,368
      • Risked: Mean (Mmbbl / Bcf) - 5,234
    • Total Boe (3):
      • Unrisked: Low Case (MMbbl / Bcf) - 1,014; Best (MMbbl / Bcf) - 2,105; Mean (MMbbl / Bcf) - 2,403; High (MMbbl / Bcf) - 4,173
      • Risked: Mean (Mmbbl / Bcf) - 956
  1. The low, best, high and mean case estimates in this table are P90, P50, P10 and mean respectively
  2. Pg (chance of geological success) has not been applied to the unrisked volume estimates in this table
  3. Boe refers to barrels of oil equivalent - gas quantities are converted to Boe using 6,000 cubic feet of gas per barrel. Quoted estimates are rounded to the nearest whole boe
  4. The mean is the average of the probablistic resource distribution
  5. The unconventional prospective resources are based on the statistical aggregation method

In accordance with ASX Listing Rule 5.36 the following information is provided:

The previous Prospective Resource evaluation was carried out by McDaniel & Associates Consultants Ltd. (McDaniel) and was set out in a Buru Energy ASX release of May 7, 2012.

This evaluation covered the following areas and no specific evaluation was made of the EP 371 permit area:

  • Buru Interest
    • Permit / Application (percent)
      • EP 371 - 50
      • EP 428 - 50
      • L10-7 - 100
      • L10-8 - 100
      • L11-1 - 100

The McDaniel evaluation estimated the following quantities of Prospective Resources in Table 2 net to Buru over the permits set out above, of which the EP 371 was some 15 percent of the gross area evaluated.

Table 2

  • Product
    • Condensate
      • Unrisked: Low Case (MMbbl / Bcf) - 36; Median (MMbbl / Bcf) - 224; Mean (MMbbl / Bcf) - 432; High (MMbbl / Bcf) - 1,025
      • Risked: Mean (Mmbbl / Bcf) - 187
    • Natural Gas
      • Unrisked: Low Case (MMbbl / Bcf) - 2,326; Median (MMbbl / Bcf) - 9,858; Mean (MMbbl / Bcf) - 15,051; High (MMbbl / Bcf) - 33,409
      • Risked: Mean (Mmbbl / Bcf) - 6,502
    • Total Boe:
      • Unrisked: Low Case (MMbbl / Bcf) - 423; Median (MMbbl / Bcf) - 1,867; Mean (MMbbl / Bcf) - 2,941; High (MMbbl / Bcf) - 6,594
      • Risked: Mean (Mmbbl / Bcf) - 1,270

The following statements are provided in accordance with the requirements of ASX Listing Rule 5.36:

  • The changes to the types of permits or licenses held by Buru Energy in respect of the previously reported estimates of prospective resources by McDaniel are the relinquishment of the L10-7, L10-8 and L11-1 application areas and the current estimates by D&M apply to the EP 371 permit area
  • The new data and information relied upon for the changes in Prospective Resources include the hydraulic stimulation (frac) and flow testing of the Valhalla North 1 and Asgard 1 wells, and reinterpretation of geological and geophysical data in the EP 371 permit area
  • The frac and flow test data has provided definitive results in regard to the ability to fracture stimulate the reservoirs, and additional information regarding the composition of the gas, and the potential gas flow rates
  • The risked estimates have been derived by the probablistic multiplication of Pg (estimated geological risk) and the resource distribution. These results were then stochastically summed (zero dependency) to produce the statistical aggregate Pg-adjusted mean estimate of unconventional prospective resources

Contingent Resources

Contingent Resources are define as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the project is not yet considered mature enough for commerical development due to one or more contingencies. D&M's estimate of the range of the gross estimated recoverable volumes of Contingent Resources for the Valhalla accumulation on EP 371 are provided in Table 3:

Table 3

  • Product
    • Condensate
      • Unrisked: 1C (MMbbl / Bcf) - 9; 2C (MMbbl / Bcf) - 32; 3C (MMbbl / Bcf) - 66
    • Natural Gas
      • Unrisked: 1C (MMbbl / Bcf) - 455; 2C (MMbbl / Bcf) - 1,533; 3C (MMbbl / Bcf) - 2,981
    • Total Boe (1):
      • Unrisked: 1C (MMbbl / Bcf) - 85; 2C (MMbbl / Bcf) - 288; 3C (MMbbl / Bcf) - 563
  1. Boe refers to barrels of oil equivalent - gas quantities are converted to Boe using 6,000 cubic feet of gas per barrel. Quoted estimates are rounded to the nearest whole boe
  2. The estimates of contingent resources are the statistical aggregates of unconventional resources
  3. Application of any risk factor to contingent resources quantities does not equate contingent resources with reserves
  4. There is no certainty that it will be commercially viable to produce any portion of the resources evaluated
  5. Contingent resources in this report have an economic status of Undetermined, since the evaluations of those contingent resources are at a stage such that it is premature to clearly define the ultimate chance of commerciality

The following statements are provided in accordance with the requirements of ASX Listing Rule 5.33:

  • This evaluation is in relation to Exploration Permit 371
  • The basis for confirming the existence of a significant quantity of potentially moveable hydrocarbons and the determination of a discovery is that gas and condensate have flowed to surface from Asgard 1 and Valhalla North 1 wells following hydraulic stimulation. The Valhalla 2 well has been cased and suspended but not yet stimulated and is also considered to be a hydrocarbon discovery on the basis that this well had gas recoveries at surface and encountered significant over-pressure while drilling, petrophysical evaluation, and a detailed comparison with Asgard 1 and the nearby Valhalla North 1 well
  • The estimates of contingent resources are the statistical aggregates of unconventional resources
  • The analytical procedures used to estimate the contingent resources are based on Monte Carlo Stimulation using ranges for each parameter of the volumetric equation. The output of this stimulation is a range of original gas in place (OGIP) and gross contingent resources. The estimates of contingent resources were prepared by the use of appropriate geologica, petroleum engineering and evaluation principles and techniques that are in accordance with practices generally recognized by the Petroleum Resources Management System (PRMS) approved in March 2007 by the Society of Petroleum Evaluation Engineers
  • The key technical contingencies that prevent the contingent resources from being classified as petroleum reserves are that the discovery wells have not produced at sustained commercial rates, uncertainties exist about the extent of the prospective intervals over large areas, and the necessary facilities and infrastructure in the area are insufficient to support the development plan associated with these contingent resources
  • Further appraisal drilling and evaluation work to assess the potential for commercial recovery could include, amongst other activity and subject to further technical review and Joint Venture and all other necessary approvals, additional seismic data, a further well between the two stimulated wells, and further flow tests and potentially stimulation of additional zones in the Valhalla North and Asgard wells
  • In relation to this estimate for contingent resources of unconventional petroleum resources, the gross area of the permit of which this estimate was made is 908,000 acres (3,675 square kilometers), and the specific wells for which the assessment was made were Valhalla 1 and 2 and Asgard 1

Background and Geological Analysis


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