411 North Sam Houston Parkway East, Suite 400, Houston, Texas USA
T +1 281 448 6188 F +1 281 448 6189 W www.rpsgroup.com/energy
William Kelleher: Chairman and CEO
Georges Sztyk: Executive Director, Finance
Peter Sztyk: Executive Director
New World Oil & Gas Plc
Ogier House
St. Helier
Jersey
JE4 9WG
UK
Nominated Advisor: Beaumont Cornish
Attn: Roland Cornish
2nd Floor, Bowman House
29 Wilson Street
London
EC2M 2SJ
January 20th 2012
Re: Competent Person Report in the form of a Letter of Opinion regarding the
prospectivity and exploration of Danica Resources’ 1/08 Licence,
onshore/offshore southern Denmark.
Dear Sirs,
On 28th December 2011 RPS Energy (‘RPS’) was engaged by New World Oil & Gas Plc
(‘New World’) to provide a Competent Persons Report (“CPR”) in the form of a formal
Letter of Opinion (‘Letter’) regarding the prospectivity and future exploration program of
the 1/08 Licence, which covers both onshore and offshore acreage in Southern
Denmark. The licence is currently operated by Danica Resources and New World has
signed a letter of intent to farm-in to the block pending successful due diligence. New
World is an AIM listed company and, as such, the Letter has been written in accordance
with the requirements of the AIM Guidance Note for Mining, Oil and Gas Companies
dated June 2009 (the “AIM Guidance Note”).
In accordance with your instructions to us and the requirements of the AIM Guidance
Note, we confirm that we:
1. are professionally qualified and a member in good standing of a self-regulatory
organisation of engineers and/or geoscientists including SPE, SPEE, EI, AAPG,
Geological Society and EAGE;
2. have at least five years’ relevant experience in the estimation, assessment and
evaluation of oil and gas assets;
3. are independent of the Company, its directors, senior management and advisers;
4. will be remunerated by way of a time-based fee and not by way of a fee that is linked
to the Admission or value of the Company;
5. are not a sole practitioner;
6. have the relevant and appropriate qualifications, experience and technical
knowledge to appraise professionally and independently the assets, being all assets,
licences, joint ventures, farmouts, or other arrangements owned by the Company
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New World / DR
and its subsidiary undertakings (the “Group”) or proposed to be exploited or utilised
by it (“Assets”) and liabilities, being all liabilities, royalty payments, contractual
agreements and minimum funding requirements relating to the Group’s work
programme and Assets (“Liabilities”); and
7. consider that the scope of this Letter is appropriate, given the Group’s Assets and
Liabilities and includes and discloses all information required to be included therein
and was prepared to a standard expected in accordance with the AIM Guidance
Note; and,
8. Save as disclosed in this Letter, there has been no material change in the data and
information provided herein.
Neither RPS Energy, nor any of its directors, staff or sub-consultants who contributed to
this report has any interest in the Company; or any of the advisers to the Company; or
the Assets; or the outcome of the Offer.
In compiling this Letter we have used the definitions and guidelines set out in the
Petroleum Resources Management System (“PRMS”) by the SPE/WPC/AAPG/SPEE in
2007 as the internationally recognised Standard required by the AIM Guidance Note as
above.
1.
BACKGROUND
Danica Resources ApS is a Danish company formed for the purpose of obtaining and
exploring the northern fringe of the Southern Permian Basin covered by licence 1/08 in
southern Denmark along trend to the west of proven oil and gas fields in a similar
geological setting in Poland and Germany. The licence covers an area 1.586 million
acres (~6,420 km2) and Danica Resources has an 80% working interest (“WI”) with a
single partner, Danish North Sea Fund, entitled to the remaining 20%. Danica
Resources is a sister company to Danica Jutland, with whom New World is already
partnering on the 1/09 and 2/09 licences a few miles to the north-west of licence 1/08.
The farm-in terms are similar to those that were successfully negotiated and fulfilled for
the Danica Jutland licences. New World intends to acquire Danica Resource’s entire WI
and immediately take over Operatorship (subject to government approval and approval
by Danish North Sea Fund) in the following stages:
New World to complete the permitting, acquisition, processing and interpretation
of a minimum of 150 km of 2D seismic over the onshore portion of the licence.
This work is to be completed by 30th September 2012 to fulfil the Phase 2a work
commitments and in return for which New World will receive 12.5% WI in the
licence.
As of 1st October 2012, Phase 2b commences and New World will complete the
permitting, acquisition, processing and interpretation of further 2D and/or 3D if
needed to retain the hydrocarbon prospective onshore and offshore areas of the
licence, the size and design of which shall be mutually agreed between Danica
Resources and New World. This work is to be completed by 30th September
2013 in return for which New World will receive a further 12.5% WI in the licence.
The Phase 3 work program (see below) requires an exploration well to be drilled
by 30th September 2015 (“drill or drop” option). In accordance with the farm-in
Agreement, if New World elects to drill a well on the licence, the well must be
drilled by 30th September 2014 in return for which New World shall receive the
remaining 55% WI in the licence. The farm-in Agreement specifies that a further
well will be drilled by 30th September 2015, provided a further drillable seismic-
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based prospect can be defined.
Once New World has assumed Danica Resources’ 80% WI, Danica Resources
shall remain entitled to a 5% overriding royalty from any production of
hydrocarbons. In addition, a further staged cash and share payment of $500,000
has been agreed between New World and Danica Resources to cover previous
sunk costs. $250,000 of these costs are to be paid in cash and $250,000 are to
be paid in New World shares.
The licences were granted to Danica Resources on 31st March 2008 with a 6 year
exploration period with provisions for extension.
The minimum work program required by the Danish government is as follows:
Years 1 & 2 (“Phase 1”) – Collate available data, conduct geochemical soilsurvey and create geological model using available seismic and literature
references. This phase has been successfully completed albeit after an 18
month extension and one prospect has been developed called the “Als
Prospect”.
Years 3 & 4 (“Phases 2a & 2b”) – Acquire 2D to better delineate certain leads
(both onshore and offshore) followed by a 2D or 3D survey over selected leads.
At the end of year 4 (30th September 2013 after the extension to Phase 1) a drill
or drop decision must be made.
Years 5 & 6 (“Phase 3”) – A well must be drilled on the license by the end of year
six (30th September 2015).
A summary of the assets in question is shown as Table 2 below.
Licence
1/08
Notes
Operator Working
Interest
New World
1
80%
2
Status
Licence
Expiry
th
Exploration
30 Sept.
3
2015
Licence
Area
Comments
Current commitments
6,420 sq km are seismic and/or the
drilling of a well on the
license
1
Subject to approval by the Danish government and partner, Danish North Sea Fund, New World will be granted
Operatorship upon the completion of the transaction between New World and Danica Resources.
2
New World plans to acquire up to 100% of Danica Resources’ working interest (80%) in the licence in accordance with a
staged timetable which is established for the completion of certain work commitments required by the government. Upon
completion of the various work commitments, New World shall have a 12.5% WI in the licence by 30th September 2012,
25% WI by 30th September 2013 (at the latest) and 80% WI once the licence has been drilled.
3
Provisions for extension exist.
Table 2: Summary Table of Assets
2.
DESCRIPTION OF GENERAL PROSPECTIVITY
2.1. Geological Setting
The 1/08 licence is located onshore/offshore southern Denmark consisting of part of
Blocks 5410, 5411 and 5412 (see Figure 1). Figure 2 shows the licence outline in more
detail and the location of the 4 wells drilled on the licence to date.
The licence is situated on the northern flank of the Southern Permian Basin (“SPB”) just
to the south of the Ringkøbing-Fyn High (“RKH”) where the early Zechstein cycles are
prognosed to contain reef and shoal trends similar to those seen on the northern flank of
the Southern Permian Basin in Poland and Germany which have proven to be effective
and productive oil and gas reservoirs (see Figure 3).
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Throughout the SPB in Poland, Germany, Denmark, Holland and UK, the deposition of
Zechstein Z1 and Z2 carbonates and evaporites formed a prograding platform which
was subsequently covered by the thick halite deposits of the Z2 and later Zechstien
cycles. The Z1 and Z2 carbonates in this progradational setting have are proven
productive oil and gas reservoirs in Poland and Germany (i.e. along trend to the east of
the licence) and a similar play is prognosed within the licence area.
None of the four wells drilled on the licence have penetrated the Z2 carbonate although
Orslev-1 did reach the underlying Rotliegendes interval.
Source: Danica Resources
Figure 1: Regional Location Map
Source: Danica Resources
Figure 2: Licence 1/08 outline showing on-block wells to-date.
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Source: Danica Resources after Ziegler 1982
Figure 3: Location of 1/08 Licence relative to Southern Permian Basin Margin
2.2. Prospectivity
Zechstein Potential: Danica Resources has been studying the area for some time and
has developed a geological model along with a drillable prospect (the Als Prospect) and
a number of leads based on available seismic data, an extensive surface soil
geochemical survey, some well data and a number of academic papers. The current
seismic coverage is shown on Figure 4.
Source: Danica Resources
Figure 4: 1/08 licence with existing seismic database
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The development of a prograding carbonate platform on the northern (and southern)
flank of the SPB in early Zechstein times is well documented (e.g. Stemmerik and
Frykman, 1989 and Strohmenger, Voigt and Zinders, 1996). The Z1 and, in particular,
the Z2 carbonates, which vary with depositional setting on the platform edge from reefal
build-ups
ups to shoals, form productive reservoirs along the basin margin, most notably in
Poland and
nd Germany but also in the Netherlands. Likewise, a Z1 and Z2 carbonate reef
and shoal trend has been mapped in outcrops and shallow wells in NE England
England.
Figure 5 shows an early schematic prepared by Danica Resources which demon
demonstrates
the trend that places the 1/08 licence in an attractively analogous geological setting in
close proximity just 20 km to the west of a number of Zechstein oil and gas fields in
northeastern Germany and across into Poland. Danica Resources has identified a
drillable prospect and a number of leads that could have very similar properties to the
discovered fields in Germany and Poland.
Source: Danica Resources
Figure 5: 1/09 and 2/09 licences and expected depositional trends (schematic)
Using the available seismic, Danica
Danica Resources has interpreted a Z2 marker surface and
developed a more detailed picture of the carbonate platform edge (Figure 6) within the
1/08 licence. This interpretation is a ‘work-in-progress’
‘work progress’ and more seismic data is
required to fill in several gaps
aps where data are poor or non-existent.
non
Certain features are visible on the available seismic which might be
b e reefal build
build-ups (see
Figure 7)) but most are seen on a single line and need further seismic coverage to
ascertain whether the geometries of the identified
identified leads support the hypothesis of reefal
build-ups
ups and/or carbonate shoals.
If drilling is successful and the reefs and/or shoal facies can be proved, it is likely that
they will make excellent reservoirs. However, they can be expected to irregular in shape
(“amoeboid”) and 3D is often required to successfully map and delineate these complex
structures. Zechstein dolomites form reservoirs to the west in the northern Danish
Central Graben (many Chalk fields are underlain by Zechstein carbonate reservoirs, and
also in the British sector (Auk and Argyll fields).
In the light
ght of the above, Danica Resource and
d New World’s forward plan is highly
appropriate.
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Source: Danica Resources
Figure 6: Danica Resources interpretation of Z2 showing platform edge in licence
1/08
Source: Danica Resources
Figure 7: Seismic line (0727601) across a potential Zechstein Carbonate Build-up
Rotliegendes Potential: In addition to the Z2 play, Danica Resources has identified a
Rotliegendes play similar to that seen extensively in the Southern North Sea and
eastwards across the Netherlands and Germany. The Rotliegendes reservoirs consist
of a mixture of aeolian and fluvial sandstones associated with early Permian desert
conditions that were variously present over the entire SPB (dune belts are prognosed to
have surrounded a playa lake that was fed by occasional flooding events). The
deposition of aeolian sandstones in the 1/08 licence area is confirmed by the Orslev-1
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well which encountered approximately 60 m of “fine to course, white to red, rounded to
sub-angular, frosted grains” – a typical aeolian grain description. Rotliegendes fields in
the rest of north-west Europe are typically tilted fault blocks within a complex horst and
graben setting which are laterally sealed by the thick halites of the overlying Zechstein
Z2 and later cycles in the adjacent hanging wall. The Rotliegendes fields are almost
always gas-bearing and are sourced from underlying Carboniferous coals (therefore
usually dry-gas). Danica Resources also prognoses that the Zechstein oil source might
be able to charge the Rotliegendes in this particular setting if juxtaposition across faults
places the Z2 adjacent to the Rotliegendes at the deeper part of a tilted fault block (with
more significant fault throw placing the halites against the Rotliegendes in the highest
part of any given fault block to provide seal. This is not impossible but would be a highly
unusual Rotliegendes trap and fluid configuration. Figure 8 shows an interpreted
seismic line which demonstrates a very familiar structural style at the Rotliegendes level
(and overburden).
Source: Danica Resources
Figure 8: Seismic Line showing Rotliegendes structural style and three leads
Triassic Potential: In addition to the Zechstein potential reservoir described above, the
Lower Triassic Bunter Sandstone, which is a productive reservoir in various fields in
Europe, and potentially the Upper Triassic Gassum Sandstone are also considered
likely reservoirs.
The Bunter Sandstone Formation has been recorded in the four wells drilled in the 1/08
license area (see Table 3 below). Regionally, the formation is typically developed as
four cycles, each comprising several sandstone units overlain by claystone sequences.
The sands were deposited in a fluvial system of braided streams. However, not all of
these cycles are recognized in all wells. Early movement of Zechstein salt triggered by
Triassic sediment loading can have created local topographic features that influenced
fluvial sand deposition.
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Generally, the Bunter sandstones are described as red-brown, yellow brown, and green
spotted, often fine to medium, occasionally coarse grained, locally calcareous
cemented, anhydritic and micaceous.
Well
Bunter S’st. Fm.
Interval
Thickness
Net Sand
Thickness
Average Porosity
(%)
(m)
(m)
Ørslev-1
115
49
20
Rødby-2
70
40
N/A
Søllested-1
291
68
N/A
Kegnæs-1
232
54
25
Source: Danica Resources
Table 3: Bunter sandstone properties from on-block wells
The Upper Triassic Gassum Formation is also recognized in all four wells drilled in the
1/08 license area. The Gassum sandstones formed a primary target in the Kegnæs-1
well (dry well) and have very high porosities (30-35%). The high porosities seen in the
Gassum sands could reflect their position just beneath the erosional Mid-Jurassic
Unconformity where porosity enhancement might have occurred during prolonged subaerial exposure during the early Jurassic.
The Bunter Sandstone has been interpreted on all the available lines and a number of
leads have been identified by Danica Resources (Figure 9).
Source: Danica Resources
Figures 9: Top Bunter Sandstone TWT Map with Danica Resources leads
Oil and Gas Source: In the SPB, the Z2 basinal facies has proved to be a reasonable
oil source-rock. Although chronostratigraphically equivalent to the reefal build-ups and
shoals expected at the basin margin, the deep basin sedimentation is thought to have
been a gradual build up of carbonaceous material deposited below a chemocline which,
9
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although generally relatively thin (a thickness of up to 180 m has been reported in the
Netherlands), was deposited over a vast area of the SPB. This carbonaceous
carbonate and shale of the Z2 (referred to as the “Stinkdolomit” and “Stinkschiefer”) is
thought to provide the source for most of the oil found in the platform equivalent
reservoirs of Germany and Poland in the SPB.
In the SPB migration into productive reservoirs appears not to be long distance. Both
German and Polish experts believe that migration is over a short distance and up-dip.
This would seem to indicate the possibility of source rock potential further up the shelf
slope rather than in the basin deep where most conventional source rocks are thought to
be accumulated in anoxic conditions. A paper by R.W. Jones (“Organic Matter
Characteristics Near the Shelf-Slope Boundary” SEPM Special publication No. 33 p.
391-405; June 1983) discusses the possibility that, in the right conditions such as were
prevalent in the Permian, either transgressions of deep-basin oxygen deficient water
over the shelf-slope break, or, an Oxygen Minimum Layer (OML) can be set up such
that oil-prone source rocks can be deposited on the shelf-slope rather than only in the
basin deep. If this is the case, the source rocks that have supplied the productive
Zechstein reservoirs in Germany and Poland may not be limited to the deep basin at all
but actually much more restricted to the shelf-slope which would reduce migration risk.
Underlying Carboniferous strata might also be a source but these are generally thought
to be gas or gas-condensate bearing. However, the presence of Namurian black shales
in the Orslev-1 well is also a positive indicator of the presence of oil prone source rocks
in the area. The Northern and Southern Permian Basins came into existence after the
deposition of Carboniferous sediments - in which there are both gas and these oil prone
sediments. Consequently, Namurian oil prone source rocks, as well as Westphalian
coals and deltaic deposits are widely distributed in NW Europe from the Irish Sea
eastwards through the Netherlands, Germany, Denmark and Poland (see Figures 10
and 11). Westphalian coal-bearing sediments with gas and condensate prone source
rocks are widely distributed in the NPB and across the Jutland license areas, as shown
on Ziegler’s paleogeographic map (Figure 10) and are generally recognized as the
primary source for the Rotliegendes gas fields of northwest Europe.
Seals: Seal issues are not thought to be a major risk for any of the potential reservoirs.
For the Zechstien, the trap style will be largely stratigraphic and the lateral facies
variation is practically assured in the depositional model. Top seal is provided by
overlying Zechstein evaporates (halite and anhydrite) and Lower Triassic shale. For the
Triassic leads, the juxtaposition of Triassic shales against sands across faults is the
main sealing mechanism. Many of the Triassic leads, while fault bounded, also have an
element of anticlinal structure and each reservoir sand is sealed above by thick late
Triassic and Lower Jurassic shale sections. In the case of the Rotliegendes, the tilted
fault blocks are usually side-sealed by juxtaposed Zechstein halites. Zechstein
evaporites provide excellent top-seal to the Rotliegendes sandstone reservoirs.
2.3. Leads
Danica Resources has identified 7 Zechstein leads (4 onshore, 3 offshore) and one
prospect (the Als Prospect) and these are shown on Figure 12. The Als Prospect also
has a Rotliegendes potential and Danica Resources has identified two further leads (see
Figure 8 – the Als Prospect is “R1” on the figure). In addition, Danica Resources has
identified at least 15 leads in the Triassic Bunter Sandstone (see Figure 9). Most of the
leads require further seismic work to become drillable prospects but the Als Prospect is
discussed in more detail in Section 2.4.
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Figure 10: Westphalian Paleogeography (Ziegler, 1982).
Figure 11: Namurian paleogeography (Ziegler, 1982).
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Source: Danica Resources
Figure 12: Zechstein leads and prospect locations
General Geological Risk for the 1/08 licence
With the exception of the Als Prospect (which is assigned a prospect specific risk), RPS
assigns a geological risk of approximately 1 in 12 to the current likelihood of discovering
a meaningfully sized oil or gas accumulation in either the Zechstein, Rotliegendes or
Triassic intervals within the 1/08 licence.
Otis and Schneidermann’s ‘Rule of Thumb’ for Geological Risk Assessment1 assigns a
range of risk of between 1 in 8 to 1 in 16 as an appropriate level of risk for a “proven
play in an unproved area”. RPS believes that the ranges assigned to the plays are
appropriate at this time for the following reasons:
The analogue to the Southern Permian Basin carbonate build-ups further to the
east on a prograding platform edge is yet to be proved. It is the Company’s
intention to prove up reefal build-ups and/or shoal deposits which are required
for reservoir to be present and effective in the Zechstein section.
Trap identification at any level is not proven at this time.
The relative distribution of Carboniferous source rocks and the over-lying
Rotliegendes reservoir is currently poorly understood at this point in time.
The relative distribution of Carboniferous source rocks and the over-lying
Triassic reservoirs is currently poorly understood at this point in time. The
migration through the overlying Zechstein halite (salt) has to be assigned a
higher risk than the migration to the Rotliegendes.
2.4. The Als Prospect
The Als Prospect is set up by a north-south horst block which could have been a
topographic high extending out from the generally WNW-ESE trending carbonate
platform of the early Zechstein promoting platform type deposits (shoals and/or
carbonate build-ups). Alternatively, the faulting could have been later such that the
Zechstein deposits are more likely to be slope deposits which are less likely to be
1
Otis, R.M. & Schneidermann, N. 1997. “A Process for Evaluating Exploration Prospects”, AAPG
Bulletin 81 (7) pp.1087-1109.
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reservoir quality. However, in that case, the Rotliegendes is likely to be side-sealed by
the Z2 halite and is more likely to be a valid trap itself.
The structure is imaged on a number of seismic lines but, critically, has no lines that
demonstrate closure conclusively to the north and north-west of the structure. The
Danica Resources interpretation is not unreasonable but relies on a sealing fault to the
north at Rotliegendes level which is not imaged at this time. The Zechstein closure is
closely linked to the underlying high but is similarly disadvantaged by the current line
configuration. This means that the trap risk has to be the most siginificant. RPS’ risk
analysis is tabulated below.
Risk Factor
Zechstein
Rotliegendes
Trap
50%
50%
Seal
90%
90%
Reservoir
60%
50%
Source (Play risk)
80%
60%
Migration
60%
80%
Overall GPoS
13% or 1 in 8
11% or 1 in 9
Table 4: Risk components and RPS GPoS for the Als Prospect
RPS has investigated with Danica Resources the low and high side closure possibilities
(Figure 13) and agreed on the areas and other reservoir parameters for input into a
montecarlo volumetric analysis of the Als Prospect (Table 5).
Figure 13: Map showing min/max closure polygons used for volumetric analysis
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Variable
Zechstein
P90
Area
10.8 km
Rotliegendes
P50
2
P10
Not input
28.8 km
P90
2
10.8 km
2
P50
P10
Not input
53.7 km
2
Thickness
30 m
45 m
60 m
60 m
80 m
100 m
Porosity
10%
15%
20%
14%
17%
20%
Sw
35%
30%
25%
35%
30%
25%
Bo / FVF
1.2
1.1
1.2
210
240
270
OIIP/GIIP
212 MMbo
495 MMbo
928 MMbo
775 Bcf
1877 Bcf
4444 Bcf
15%
20%
25%
65%
75%
85%
40 MMbo
97 MMbo
192 MMbo
575 Bcf
1401 Bcf
3380 Bcf
Rec. Factor
Recoverable
Oil / Gas
Table 5: Volumetric analysis input parameters and results
It is worth noting that at first sight the Als Prospect appears to have an immediate
problem in that the mapped closure at Zechstien and Rotliegendes levels contains an
unsuccessful well, Kognaes-1. However, the Kognaes-1 well was targeting the
stratigraphically higher Triassic (Gassum) interval and was TD’d in the Z2 halite without
ever penetrating the Lower Z2 and underlying Rotliegendes which form the present-day
target horizons.
2.4.1.
Conceptual Development Plan and Indicative Economics
Mark Roach, an independent engineering consultant, has worked up a conceptual
development scenario and associated indicative economics.
The key development / production assumptions are as follows:
Reservoir
Zechstein
Rotliegendes
Case
No. of prod. wells
Initial rate
Decline rate
P90
18
1,000 bopd
15.0
P50
24
1,250 bopd
12.5
P10
39
1,500 bopd
10.0
P90
26
10 MMcfd
15.0
P50
48
12.5 MMcfd
12.5
P10
67
15 MMcfd
10.0
Source: New World
The key fiscal assumptions are as follows:
Oil Price – A US$8/bbl uplift (Brent vs WTI) on the Nymex price forecast (WTI)
has been used with production commencing in 2015 at US$105.09/bbl then
escalated at 2.5% per year.
Gas Price – US$10 per MMBTU in 2015 then escalated at 2.5% per year.
Drilling and completion costs – US$15MM per well for exploration and US$11MM
for development wells.
Facilities costs – based on peak annual production rate at US$15/bbl or
US$1.5/Mcf.
Opex costs – US$15/bbl or US$1.5/MMBTU including well, facility, road and
surface costs.
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G&A – US$2.50/bbl for the oil case and US$0.25/MMBTU for the gas case.
Transportation pipeline tax – 5% of sales revenue.
Hydrocarbon tax – 40% of sales revenue (based on Ernst & Young tax book).
The resultant indicative success case economics calculated by Mark Roach are
tabulated below:
Reservoir
Zechstein
Rotliegendes
Case
Prospective
Resources
Indicative NPV10
Unit Value
P90
40 MMbo
US$419MM
10.59 US$/bo
P50
97 MMbo
US$1,039MM
10.71 US$/bo
P10
192 MMbo
US$2,007MM
10.46 US$/bo
P90
575 Bcf
US$569MM
0.99 US$/Mcf
P50
1,401 Bcf
US$1,400MM
1.00 US$/Mcf
P10
3,380 Bcf
US$3,310MM
0.98 US$/Mcf
Source: New World
st
The effective date of the indicative valuation is 1 January 2012. RPS has reviewed the
assumptions set out above and believes them to be reasonable.
3.
CONCLUSIONS
New World has the option to earn up to 80% WI and become Operator in the 1/08
licence, onshore/offshore southern Denmark (subject to government and partner
approval).
The licence is located in an under-explored area and on trend to the west of the wellestablished northern platform edge of the Southern Permian Basin. The current licence
Operator, Danica Resources, has developed a geological model which draws on their
extensive research and experience of the SPB to explore this potential extension to the
established play.
In our opinion, this is an interesting opportunity to access early to mid stage exploration
in a well thought through but, as yet, unproven extension to a number of potential plays.
As such the terms and forward commitments are reasonable, manageable and
appropriately scaled to high grade the existing leads into drillable prospects should the
results prove positive.
The plan to acquire more seismic is an essential next step to identify a robust prospect
(or prospects) but elements of the remaining geological risk will only be mitigated by
drilling one or more wells. Key risks are the presence of reservoir quality rocks in the
Zechstein and robust structural closure in the Rotliegendes and Triassic. All three plays
have an element of trap, source and migration risk.
The planned acquisition of seismic and the identification of robust structures could
reduce the current geological risk to approximately 1 in 8 (or better) for the Zechstein
and Rotliegendes as has been proved for the Als Prospect.
The Als Prospect could benefit from further seismic data to prove the closure at both
Zechstein and Rotliegendes intervals but, given the relative cost of seismic data versus
that of drilling a well, it may well be the case that the value of data regarding the
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reservoir quality and potential hydrocarbon content may well make the Als Prospect
‘drill-ready’, particularly as both intervals can most likely be targeted from an onshore
location.
The scoping economics run on the Als Prospect suggest that even a moderately sized
discovery could be highly economic under the current terms and conditions.
Qualifications
RPS Energy is an independent consultancy specialising in petroleum reservoir
evaluation and economic analysis. Except for the provision of professional services on
a fee basis, RPS Energy does not have a commercial arrangement with any other
person or company involved in the interests that are the subject of this report. Andy
Kirchin, VP of Consulting (US) with RPS Energy’s Houston office, has evaluated the
previous reports and data available to form this opinion.
Mr Kirchin has 24 years of oil and gas experience. Other RPS Energy employees
involved in this work hold at least a degree in geology, geophysics, petroleum
engineering or a related subject and have at least five years of relevant experience in
the practice of geology, geophysics or petroleum engineering.
Consent
RPS Energy will not unreasonably withhold consent for the use of this Letter or
information extracted from this Letter, provided that New World and/or its advisors
comply the with extraction of information paragraph above and in accordance with
Clause 7 of the Letter of Engagement covering this assignment.
For the purposes of paragraph (a) of Schedule 2 of the AIM Rules, RPS Energy accepts
responsibility for the information contained in the Letter.
This Letter relates specifically and solely to the subject assets and is conditional upon
various assumptions that are described herein. This Letter must therefore be read in its
entirety.
Yours sincerely,
Andy Kirchin – RPS Energy
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APPENDIX A: GLOSSARY OF TECHNICAL TERMS
AAPG
American Association of Petroleum Geologists
AIM Guidelines
Guidance covering the preparation of documentation for
Disclosure purposes for Mining, Oil and Gas Companies
dated June 2009 (the “AIM Guidance Note”)
AVO
Amplitude variation with offset
B
Billion
BTU
British Thermal Unit
bbls
Barrels
bo
Barrel of oil
DHI
Direct hydrocarbon indicator
EAGE
European Association of Geoscientists and Engineers
EI
The Energy Institute
GPoS
Geological Probability of Success
km
Kilometre
m
metres
M
Thousand
MM
Million
Mstb
Thousand stock tank barrels
MMstb
Million stock tank barrels
MMscf/d
Millions of standard cubit feet per day
MMstb
Million stock tank barrels
sq km
Square kilometres
stb
Stock tank barrels
scf
Standard cubic feet
SPB
Southern Permian Basin
SPE
Society of Petroleum Engineers
SPEE
Society of Petroleum Evaluation Engineers
TD
Total Depth
TVD
True vertical depth
TVDSS
True vertical depth (sub-sea)
WPC
World Petroleum Council
WTI
West Texas Intermediate
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