Otto Energy Ltd is to commence drilling the SM-71 #1 well in the South Marsh Island 71 licence with Byron Energy Inc., a subsidiary of Byron Energy Limited (ASX:BYE) (Byron).
The SM-71 #1 well is a salt dome play where over 116 million bbls of oil and 375 billion ft3 of gas have already been produced.
The Hercules 205 drilling rig which undertook the drilling of the SM-6 #2 well will be mobilised to the SM-71 #1 well location in the coming days with drilling operation expected to take approximately 20 days once on location.
The SMI-70/71 licences are approximately 50 km south of the SMI-6 licence.
Whilst the SM-6 #2 and the SM-71 #1 wells both target salt dome related features which have seen prolific oil and gas production, they are geologically and geographically distinct.
The SM-71 well is to target the primary D5 sands at less than 7000 ft in a benign pressure regime. Well design has been purposefully kept simple.
Otto’s Managing Director, Matthew Allen said:
“Notwithstanding the disappointing outcome at SMI-6#2, Otto considers the opportunity at SM-71 #1 to be a compelling and low-cost drilling opportunity with the potential to yield strong value for its shareholders. It is important to note that the SM-71 opportunity is geologically independent from the recently drilled SM-6 #2 well and Otto is satisfied that the team at Byron can successfully drill the SM-71 #1 well to the target interval.
Despite the setback intersecting an impenetrable shale interval in SM-6 #2, we have been very pleased with the performance of the rig and the operating team at Byron and look forward to commencement of operations at the SM-71 #1 well in the coming few days.”
In order to earn a 50% working interest (equal to a 40.625% revenue interest) in the SMI-70/71Leases, Otto will contribute 66.67% of the costs of the well (estimated at US$3.0 million net to Otto). Any costs above this amount in respect of the SM-71#1 well and all future expenditure on the license will be in accordance with Otto and Byron’s participating interest (Otto 50%).
Otto has also reimbursed Byron for US$0.9 million in pre-effective date costs predominantly associated with the acquisition and processing of 3D seismic used to define the target at the SM-71 #1 well.
Otto is able to fund all activities under the Participation Agreement with Byron Energy from existing cash resources.
For more information please visit: http://www.ottoenergy.com/IRM/content/default.aspx
Adapted from a press release by Louise Mulhall
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/30032016/otto-opts-to-drill-sm71-1-well/