BYRON Energy will deepen its SM71 1 well, located at the South Marsh Island block 71 in the Gulf of Mexico, after finding signs of oil and gas there.

A number of discrete hydrocarbon bearing sands were intersected while drilling and preliminary evaluation was completed using logging while driling (LWD) tools, Byron said.

Project partner Otto Energy announced discoveries the following discoveries were made: I3 Sand – a hydrocarbon saturated gross sand thickness of around six metres, J sand – a hydrocarbon saturated gross sand thickness of around nine metres and D5 sand – a hydrocarbon saturated gross sand thickness of around 30 metres.

Byron said a quad combo log recently run confirmed the presence of oil pay intervals across all three sands in the eyes of log experts, though analysis was still continuing.

Preliminary estimates of net true vertical thickness oil pay counts for the SM71 1 well are 5 metres for the I3 Sand, 7 metres for the J sand and 28 metres for the D5 sand, Byron said.

Byron and Otto have since decided to drill an additional 182 metres to its original planned total depth of of 2,272 metres to ensure the entire package of D5 sand lobes have been tested, as well as testing the D6 sands.

Byron chief executive Maynard Smith said regardless of the results obtained, the joint venture would now move forward the development planning.

“[It] has already initiated discussions with an offset operator to minimise development capital expenditure, shorten the cycle time to production and improve economic returns from this exciting project,” he said.

Otto managing director Matthew Allen said he was encouraged by the early results.

“We are seeing significant shareholder value being created with this drilling campaign and we look forward to achieving our goal of a return to production in 2017,” he said.

The SMI71 lease is part of a portfolio of low cost, high chance of success, conventional oil and gas opportunities located both onshore and offshore the Gulf of Mexico, Otto said.

In order to earn a 50 per cent working interest (equal to a 40.625% revenue interest) in the SMI71 lease, Otto will contribute 66.67% of the costs of the well, which is estimated at US$3 million net to Otto.

Any costs above this amount in respect of the SM71 1 well and all future expenditure on the license will be in accordance with Otto and Byron’s participating interest (Otto 50%).

Otto said it is able to fund all activities under the participation agreement with Byron Energy from existing cash resources.