Otto Energy to to drill SM71 #1 well

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

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/30032016/otto-opts-to-drill-sm71-1-well/