Permits
ONSHORE GIPPSLAND BASIN
PRL 2 – Onshore Gippsland Basin, Victoria
(Lakes Oil Group, Operator: 100% interest)
Field Operations
In early April, an initial flow test was conducted in North Seaspray-3 well to test the wellhead pressures and initial flow rates in preparation for extended flow testing to be conducted later. Results indicated that we may have fracced into water bearing Latrobe formation.
2009 Workover Program
An extended workover and testing program in PRL2 was conducted between 10th June and late August in three wells. Clean out operations are continuing at this date at the Wombat 2 site.
Results of the program to date are summarised below:
Wombat 2: following successful re-fracturing of the 1,470m gas zone the well flowed back fraccing fluid, gas and condensate to the surface. A maximum initial flow rate was recorded after the fracturing at 4.3 mmcfd which decreased to approx 1.4 mmcfd through a 1" choke as the frac built up in the wellbore. The flow was intermittent due to opening and shutting of the well to allow sufficient pressure build up to clean the well bore of the frac fluids. The well bore pressure builds up after each shut-in operation, indicating that there is good communication between the well bore and the formation, confirming the effectiveness of the re-fracturing.
Lakes Oil N.L. contracted U.S. tight gas consultants, Ely and Associates to design a chemical treatment that was implemented on 21st August in the well in order to remove a flowback blockage encountered following the re-fracturing operation. Flow back operations are continuing.
Wombat 3: this well was re-entered using coiled tubing in order to remove a valve and fraccing sand that was blocking perforations in the casing in order to flow test the oil zone at 2,106m and gas zone at 1,430m depth which were fracture stimulated in 2005.
On 19th June 2009, oil flowed freely into wellbore from the 2,106m zone after removal of some 50m of fraccing sand which was blocking recovery of gas or fluids from the perforations. It is believed that these samples represent the first unaltered live oil to be recovered from the Strzelecki Group.
Importantly the results show that the oil is of excellent quality. The samples were sent for analysis and confirmed that the oil is a non-biodegraded crude oil with an average of 38.91 degrees API gravity similar to Bass Strait crude oil.
Lakes Oil N.L. is now looking at ways to test the zone which will comply with regulatory authority requirements.
North Seaspray 3: this well was re-entered using coiled tubing unit to test the 1,010m gas zone that was fracture stimulated in 2004. Flow-back operations began in mid-July on the well but were suspended when it became clear that the original fracturing may have penetrated the Latrobe aquifers above and constantly impeded the gas flow from the fracture. The future of this well is now being evaluated.
Post-Seismic Survey Field Evaluations
Lakes Oil N.L. commissioned several independent expert reports to evaluate our Wombat and greater Trifon Field resources following the Wombat 3Dseismic survey. These are:
1. Gaffney, Cline and Associates provided an in-depth technical assessment of the commerciality of the lower Cretaceous Wombat Field in PRL 2. Their assessment of the Wombat Field estimated a potential P50 contingent resources in the Wombat field of 700bcf of gas in place and a potential recoverable resources of 293 bcf. This evaluation show that the Wombat Field is a highly prospective, undeveloped, unconventional gas resource contained in the Strzelecki Group in PRL 2.
Their Greater Trifon Field (incorporating Trifon, Seaspray and Gangell accumulations) estimate of 390 bcf along with 293 bcf for the Wombat Field gives a total 2C contingent resource of 683 bcf for these two areas with a total gas in place (P50) of 700+922=1.622TCF.
Details of the Gaffney, Cline and Associates evaluations are given later in this report.
2. Palliser Strategic Management provided asset evaluation of the Wombat, Macalister and Greater Trifon Field tight gas resources in PRL 2 which gave a range of values that could be assigned to the tight gas resource in PRL 2 based on existing data and industry-based assumptions for development of the resource. Based on a range of insitu risk-adjusted values calculated from the project modeling and implied trade sale values from recent CSM activity, their P50 value range for the Wombat Field 2C resource case is between AUD$50 million and AUD$88 million. The total P50 value range for the Wombat and the Greater Trifon Field assets (Gangell, Trifon, Seaspray) are now valued (P50 basis) at between AUD$104 million and AUD$217 million.
Note: Lakes Oil N.L. has a 50% interest in the Trifon, Seaspray, Gangell areas and 100% interest of the Wombat area.
Details of the Palliser evaluations are given in the tables shown later in this report.
3. Isis Petroleum conducted an independent seismic interpretation of the Wombat 3D seismic survey.
4. EnergyQuest provided an evaluation of the current South Eastern Australian gas prices in the context of the Wombat gas field.
Wombat 4: Lakes Oil N.L. is planning to drill Wombat 4 to test the up-dip potential of the Strzelecki Group located on a structural high about 1.5km to the South-West of Wombat 2. The 3D seismic mapping across the Wombat Field identified a possible 50-80 metres of additional up-dip potential at top Strzelecki level at the proposed well location.
This site gives the potential for a thicker weathered zone to be present in the upper part of the Strzelecki than we encountered in the other Wombat wells. The weathered zone has been the most production in all the Wombat wells drilled to date. Wombat 4 is planned for late September/early October 2009 subject to Government approvals. A suitable rig has been secured to carry out the drilling of Wombat 4 and is currently being assembled on site.
PRL 3 – Onshore Gippsland Basin, Victoria
(Lakes Oil Group, Operator: 100% interest)
Discussions are continuing with landowners and no further activities have taken place in this permit.
A comprehensive mapping project conducted combining historical and recent oil company data into a single database with the aim of constructing a composite model of the Lakes Entrance oil field that will assist in future mapping and developments in the area.
PEP 158 – Onshore, Victoria
(Lakes Oil Group, Operator: 100% interest)
Since supplying additional technical data in December 2008, supporting retention lease application, no further developments have occurred until 12 August 2009, when the Department of Primary Industries issued a second notice of intent to refuse our application, indicating that our previous application was not sufficiently robust in relation to terms defined in the Petroleum Act 1998. Lakes Oil N.L. will respond to the DPI's notice of intent to refuse a retention lease application after consideration of all available avenues.
PEP 166 – Onshore, Victoria
(Lakes Oil Group, Operator: 100% interest)
A regional mapping project across the Latrobe Valley is being conducted using all available well, seismic and other geophysical, data including the extensive Latrobe Valley coal bore datasets. This study will assist in the understanding of the regional basement trends and the tectonic history of the onshore Gippsland Basin.
Planning for a magneto-telluric survey across the Latrobe Valley region continued with the aim of imaging base Strzelecki/basement topography and providing a better understanding of the structure and geometry of the basin. This survey is planned for later in 2009 after required approvals have been granted.
ONSHORE OTWAY BASIN VICTORIA
PEP 163 – Onshore, Victoria
(Lakes Oil Group, Operator: 100% interest)
Evaluation of the potential Lower Cretaceous tight gas prospects in the permit is continued. Several prospects have been identified and will be further evaluated. A magno-telluric survey is being prepared to complement the existing seismic data and provide better depth imaging in the area. Timing for this survey will be co-ordinated with proposed work to be done in PEP166 in the Gippsland Basin.
PEP 164 – Onshore, Victoria
(Lakes Oil Group, Operator: 100% interest)
Term 2 renewal of the permit which required a 50% drop of acreage was granted during the latter part of the year. The program requires the drilling of a well in the second year. Detailed seismic and geological mapping will form part of the first year of the work program.
PEP 169 – Onshore, Victoria
(Lakes Oil Group, Operator: 100% interest)
Detailed seismic mapping of conventional structure plays in Late Cretaceous reservoirs continued and at least 5 new structural prospects have now been identified in the south and southwest of the permit.
This block contains significant potential for hydrocarbins, located as it is within and around the flanks of the Port Campbell Embayment and on the northern limit of the Shipwreck Trough, with successful testing of the Late Cretaceous Waarre Formation.
In addition to the Waarre targets, several secondary targets that have been mapped and identified in the Tertiary Pebble Point Formation and early Cretaceous Eumeralla Formation which occur at relatively shallow depths. These secondary targets are still being evaluated as there is less well control in this area.
EROMANGA BASIN - QUEENSLAND
ATP 560P – McIVOR BLOCK - Onshore, Queensland
(Lakes Oil Group: 50% interest; Operator: Victoria Petroleum N.L.)
This permit is being re-evaluated in the next context of coal seams gas potential.
ATP 560P – UELEVEN BLOCK - Onshore, Queensland
(Lakes Oil Group: 25% interest; Operator: Icon Oil N.L.)
This permit is being re-eveluated in the context of coal seam gas potential.
PEDIRKA BASIN - Northern Territory
EP 142
(Lakes Oil Group, Operator: 100% interest)
This permit was relinquished during the Financial year to allow Lakes Oil N.L. to concentrate on its core business activities being its Victorian permits. The exploration expenditure incurred in fulfilling permit obligations has been written off.
NEW ZEALAND - North Island
PEP 38350 – Onshore/Offshore, New Zealand
(Lakes Oil Group: Operator 100% interest)
Planning for a combined 50km offshore 2D seismic reflection and 25km onshore refraction survey continued during the latter part of 2008 with planned acquisition of data in February 2009 over the area and offshore in Palliser Bay. However, the planned Palliser Bay survey was cancelled as third party sharing of the mobilisation costs was unable to be confirmed in the time frame required and Lakes OIl N.L. deemed it was not in a position to sole fund these operations at this time of global financial downturn. Therefore, the company relinquished the block in order to focus on its tight gas permits in Victoria. The exploration expenditure incurred with respect to this permit has been written off in the Profit and Loss.