CARNARVON Petroleum Limited has entered into a binding agreement with AIM listed, Advance Energy Plc to enable the redevelopment of the Buffalo oil field off the north west coast of WA
Advance will acquire up to a 50% interest in the Buffalo project by funding the drilling of Buffalo-10 well up to US$20 million on a free carry basis. In addition to this, the newly formed joint venture will acquire development funding from third party lenders and any additional funding requirements (in addition to that provided by third party lenders ) will be provided by Advance Energy as an interest free loan.
Definitive transaction documentation has been executed and completion of this transaction is subject to:
- Advance transferring at least US$10 million to the joint venture bank account by March 31, 2021;
- Customary government approvals;
- Advance obtaining shareholder approval in accordance with AIM Rules
Advance must source and pay US$20 million into the Joint Venture bank account for a 50% interest in the Buffalo Project. In the event Advance raises less than US$20 million, but more than US$10 million, the transaction will still proceed, however at a lower equity level for Advance.
Advance’s equity level is 2.5% per US$1 milliom contributed to the joint venture. The Advance team is confident of raising the necessary funds to be able to attain their desired 50% equity in the project.
Carnarvon’s strategic objective has been to drill the Buffalo-10 well while carefully managing its balance sheet. This transaction enables Carnarvon to progress its portfolio with conviction, which includes the Dorado oil development, the Buffalo oil redevelopment and pursuing a number of high impact exploration wells near the Dorado field.
Advance’s strategic objective is to identify and unlock hidden value in discovered assets through a technical and commercial approach as non-operating partners, and they recognise the value in the Buffalo oil field redevelopment and the technical expertise of the Carnarvon team. The Advance team has a demonstrable track record of generating significant value.
Carnarvon Managing Director and CEO, Adrian Cook, said the Carnarvon and Advance team are a strong cultural fit and the Carnarvon team looks forward to a close working relationship with Advance as thet progress the drilling and redevelopment of the Buffalo oil field.
Under the terms of the agreement, Carnarvon will remain as the operator and is currently undertaking a tender process to contract an internationally recognised Drilling Management Services Company (DMSC) to assist Carnarvon in the drilling of the Buffalo-10 well. Carnarvon plans to contract the DMSC for commencement in early 2021.
The objective is for drilling operations to take place in late 2021, with a date to be determined once a rig has been identified and long lead items have been ordered, along with completion of any necessary regulatory approvals.
“Carnarvon is excited to welcome Advance Energy into the Buffalo joint venture and together we look forward to drilling the Buffalo-10 well next year and moving forward with the redevelopment of the Buffalo oil field,” Mr Cook said.
“The Buffalo redevelopment opportunity is well placed to succeed given its known production capability and low development cost and will be greatly enhanced as oil prices continue their recovery.
“We look forward to Advance completing their capital raise activities and the joint venture is eager to get started, with drilling planning already underway.
“Carnarvon is incredibly well placed for an exciting 2021 as we add drilling at the Buffalo Project to our Dorado FEED activities and the Bedout exploration drilling campaign.”
Carnarvon was awarded the WA-523-P permit in May 2016 for an initial six-year term which included the previously developed Buffalo field. The Field was discovered by BHP in 1996 and subsequently developed using four wells drilled from a small, unmanned wellhead platform installed in 25 metres water depth, tied back to an FPSO.
Production commenced in December 1999 at production rates up to approximately 50,000stb/d and terminated in November 2004 after the production of 20.5MMstb of highly-undersaturated, light oil (53°API) from the Jurassic-age Elang Formation. All existing facilities and wells were decommissioned and removed prior to Carnarvon being awarded the permit.
Carnarvon initially focussed its technical work on reprocessing of the 3D seismic dataset using state-of-the-art full waveform inversion (FWI) technology. This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using poorly processed seismic data.
Reservoir modelling has been conducted using the latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and water-cut development (governed by strong aquifer drive) observed during the original production period.
Based on this work, independently audited volumetric estimates of contingent resources in the Buffalo oil field are 31.1 million barrels (2C) with low estimates of 15.3 million barrels (1C) and high estimates of 47.8 million barrels (3C).