P2170 Blocks 20/5b & 21/1d (Verbier) – JOG 100% Working Interest*

*Subject to completion of the acquisition of CIECO V&C UK Limited as announced on 26 November 2020

20_5b_21_1d

On the 9th October 2017 JOG announced an oil discovery in the Verbier sidetrack well, 20/05b-13Z drilled in Licence P2170. The well was drilled safely and within budget to the planned total depth of 3811m and a suite of log data had been acquired via Logging While Drilling (“LWD”), including pressure data.

Preliminary analysis indicated

  • The well proved a hydrocarbon accumulation in good quality sands, up dip of the water bearing sands encountered in the initial well
  • Evaluation of the well results, together with the existing 3D seismic data was undertaken
  • Initial Operator estimates of gross recoverable resources associated with the Verbier discovery were between 25 and 130 million barrels of oil equivalent, with a minimum proven recoverable volume, in the immediate vicinity of the wellbore, of 25 million barrels of oil equivalent

In addition to confirming the presence of oil in the Verbier prospect, this discovery provided valuable information to help better understand the prospectivity of the licence area, which includes the Cortina prospect and the Meribel lead.

Background

Blocks 20/5b and 21/1d were awarded as a Traditional Licence in the 28th Licensing Round. The blocks lie approximately 100km northeast of Aberdeen, close to the Buchan and Tweedsmuir North and South oilfields and straddle the western end of the North Buchan Trough.

Prospectivity was identified in the Late Jurassic and the technical studies were focused on seismic reprocessing, remapping and petroleum charge studies. The completed work programme improved the delineation and risking of the identified prospectivity.

Post completion of a farm-out, Statoil (now Equinor) funded all costs up to US$25 million in respect of the first exploration well and became Licence Operator with a 70 per cent. working interest.  The Company retained an 18 per cent. interest, of which 10 per cent. continued to be carried by CIECO, pursuant to the pre-existing arrangements between the parties, through the first two wells to be drilled in the Licence, and CIECO retained a 12 per cent. interest.

On the 27th March 2017, JOG announced that an independent assessment of resource estimates in relation to Licence P2170, Blocks 20/5b & 21/1d had been completed by ERC Equipoise Ltd (“ERCE”).

Highlights of the CPR

  • Mean Prospective Resources attributed to Licence P2170 for the Verbier prospect increased to 162 Million barrels of oil equivalent (“MMboe”) from 118 MMboe and the chance of success increased to 29% from 26%
  • Contingent Resources relating to discovery well 20/5a-10Y identified
  • Mean Prospective Resources for the Cortina prospect increased to 124 MMboe from 91 MMboe with a chance of success of 19%

Effective the 14th August 2017 and further to internal restructuring, CIECO changed its name from CIECO Exploration and Production (UK) Limited to CIECO E&P (UK) Limited to CIECO V&C (UK) Limited.

On the 11th September 2017 JOG announced that the Statoil operated 20/05b-13 exploration well drilled to test the Verbier prospect had been safely drilled, reaching the planned target Total Depth of 4,267m on 10 September 2017. The well encountered water-bearing Upper Jurassic sands, deeper than anticipated. A decision on whether to drill a sidetrack would be taken after evaluation of wireline logs, although at the time JOG considered this to be unlikely.

On the 18th September 2017 JOG announced that, further to the Company’s announcement of 11 September 2017, the wireline log data from the initial exploration well, received late on 12th September 2017, had been evaluated by the P2170 Joint Venture led by the operator Statoil. Indications of the potential for hydrocarbons to be present in a smaller accumulation up dip of the 20/05b-13 Verbier exploration well could not be ruled out. Accordingly, agreement was reached by the P2170 Joint Venture to target this resource with a sidetrack exploration well. The successful results of this well were announced by the Company on 9th October 2017, as described above.

On the 24th April 2018 JOG announced that the co-venturers in respect of UKCS Licence P2170 (Blocks 20/5b & 21/1d) had committed to pre-fund a 3D seismic survey over the P2170 licence area and certain offset acreage (the “Area of Interest” or “AOI”), which was to be conducted as part of a wider GeoStreamer MultiClient 3D seismic survey by Petroleum Geo-Services ASA (“PGS”) during Q2 2018 in the Moray Firth area.

JOG further advised the Company’s share of the survey costs in respect of the AOI was to be funded from its existing cash reserves, with total Capex for 2018 now expected to be towards the upper end of the previously announced range of £9 million to £11 million.

Effective the 16th May 2018 operator changed its name from Statoil (U.K.) Limited to Equinor UK Limited (“Equinor”).

Effective 24th November 2018, the Oil & Gas Authority confirmed the licensed area would be replaced by the new licence area in order to satisfy the Mandatory Surrender Area required, under the terms of the Licence, at the end of the Initial Term. The licensed area retained all identified prospectivity including Verbier, Cortina and Meribel. The licence has entered the Second Term, which has a four-year duration.

On the 4th March 2019, JOG announced that drilling operations had commenced on well 20/05b-14 (the Verbier appraisal) well utilising the semi-submersible rig West Phoenix.

On the 3rd April 2019 JOG announced that the 20/05b-14 appraisal well had been safely drilled, ahead of schedule and within budget to a total depth of 3,784m. Based on preliminary observations during drilling, the well did not encounter Upper Jurassic sands as anticipated. As a result, contingent resource volumetric estimations for the Verbier discovery would likely be revised towards the lower end of the initial resource estimate of 25 million barrels of oil equivalent (“mmboe”) announced following the discovery in October 2017.

A full subsurface re-evaluation of the licence area, combining the recent appraisal well results and data collected during operations with the fully processed 3D broadband seismic data has now been completed.

On the 27th January 2020, JOG announced that it had entered into a conditional Sale and Purchase Agreement (“SPA“) to acquire operatorship of, and an additional 70% working interest in, Licence P2170.

On the 19th May 2020, JOG advised it had completed the transaction to acquire operatorship of and a 70% working interest in Licence P2170, bringing JOG’s equity in the Licence to 88%.

Effective 26th November 2020, JOG announced that it has entered into a conditional sale and purchase agreement to acquire the entire issued share capital of CIECO V&C (UK) Limited which is currently owned by ITOCHU Corporation and Japan Oil, Gas and Metals National Corporation.

Effective 30th November 2020, and further to an application to the OGA for a discretionary partial surrender of acreage, the licensed area as defined at Schedule 1 to the Licence was replaced by the new licence area, as published on the Company’s website. The retained licensed area includes the four drill-ready prospects identified as shown and affords a significant saving in respect of annual licence rental payments.

On the 14th December 2020 JOG advised it had undertaken and completed a comprehensive subsurface evaluation across all of the Company’s licensed acreage including Licence P2170. This evaluation has validated existing prospectivity and has identified a significant new prospect named Wengen located directly west of the producing Tweedsmuir field.

Three prospects identified in Licence P2170 have been matured to drill-ready status, namely Verbier Deep, Cortina NE (J64) and Wengen. In the success case, upside potential to Cortina NE (J64) could be tested by an initial exploration well and a side-track well.

Subject to funding, a drilling campaign is planned from 2022. In the success case, it is envisaged that development would be made via short distance, subsea tiebacks to the planned GBA facility.

Verbier Deep

The Verbier Deep prospect is mapped as an elongated arcuate feature located underneath the Verbier West oil discovery (well 20/05b-13Z) at Upper Jurassic, Sgiath Formation (J52) stratigraphic level. The top Sgiath sandstone is represented by a seismic amplitude response just above the Pentland Formation (coal) and is seismically analogous to the J2 (well 20/05a-10Y) and Finlay (well 15/26b-9) oil discoveries.

The trap is formed by dip closure to the east with up dip stratigraphic pinchout to the west where the sand thickness is beyond seismic resolution. The Kimmeridge Clay provides the top, and lateral seal whilst Pentland Formation Coal forms the base of the sandstone. The prospect is charged by the Kimmeridge Clay in the North Buchan Graben.

The principal risk associated with the Verbier Deep prospect is thought to be up dip lateral seal however no sands of Sgiath Formation age are present in well 20/05b-3 drilled up dip and to the west of the prospect.

Cortina NE (J64)

The Cortina NE (J64) prospect forms part of the “Cortina cluster” of prospects (Cortina NE (J64), Cortina NE (J66), Cortina North (J62) and Capri (J66)) that are located immediately to the north east of the Buchan oil field. Cortina NE (J64) is mapped at Upper Jurassic, Kimmeridge Clay Formation (J64) Burns Sandstone Member stratigraphic level and is identified by a distinctive amplitude anomaly, similar to the seismic expression of the Tweedsmuir field reservoir. It is thought the reservoir has been eroded from the adjacent Buchan High and deposited in the Cortina prospect area.

The trap is formed by up dip stratigraphic pinch out to the south west toward the Buchan High whilst top, bottom and down dip lateral seal are provided by the Kimmeridge Clay which also provides the hydrocarbon charge. Cortina NE (J64) appears to represent a compensational stacking of three overlying reservoirs that together demonstrate differential compaction on the seismic.

The principal risk associated with Cortina NE (J64) is thought to be top seal, where the potential presence of younger and partly overlying “thief zones“ might result in the leaking of hydrocarbon. These potential younger reservoirs represent valid exploration objectives and are mapped as Cortina NE (J66) and Capri (J66) both of which are identified as robust amplitude responses on the seismic data.

A well drilled to test Cortina NE (J64) can be located to also penetrate the younger Cortina NE (J66) prospect and, in the success case, can be sidetracked up dip, to test the Capri (J66) and Cortina North (J62) prospects.

Wengen

The Wengen prospect is located to the immediate west of the Tweedsmuir oil field and is identified as an amplitude anomaly on the recent PGS seismic volume, which is not evident on legacy seismic volumes, at the Upper Jurassic, Kimmeridge Clay Formation (J64) Burns Sandstone Member stratigraphic level. The reservoir in Wengen (J64) is mapped as being older than the Tweedsmuir reservoir (J65-J66). Seismically, a similar response to the Tweedsmuir sandstone can be observed on the Wengen prospect, however it is dimmer which could be due to a better reservoir quality as similarly observed with the Verbier discovery (well 20/05b-13Z) sandstone (J64), or a thinner and seismically tuned sand layer.

Wengen is a structural-stratigraphic trap with up dip pinch out of reservoir to the west, east and south and constrained structurally by a fault up dip to the north. The Kimmeridge Clay provides the top, bottom and lateral seal and also the hydrocarbon charge. The reservoir is thought to have been derived from structural highs located to the north and north east.

The principal risk associated with the Wengen prospect is thought to be the effectiveness of the lateral seal with possibility of hydrocarbon leaking up dip  to Tweedsmuir via sub-seismic faults.