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Byron Secures Agreement to Drill a SM69 E2 Development Well

Source: www.gulfoilandgas.com 4/1/2019, Location: North America

Byron Energy Limited (Byron) (BYE) is very pleased to announce it has executed a nonbinding Letter of Intent (LOI) with the South Marsh Island Block 69 (SM69) leasehold interest owners for the drilling of a SM69 E2 well off the recently acquired E Platform (see Attachment 1). The SM69 E2 wellbore will be drilled to a measured depth of approximately 8,750 feet (8,120 feet true vertical depth) and will target total mapped gross Prospective Resources* of approximately 2.0 million barrels of oil (Mmbo) + 2.3 billion cubic feet of gas (“Bcfg”), which equates to 1.6 Mmbo + 1.8 Bcfg NET to Byron at 100% working interest (at 80.33% NRI), in 6 stacked amplitude supported sands in fault block “B” on SM69. This fault block is interpreted to be an up-dip pool potentially fault separated from analogous production in the immediately adjacent fault block “A” on SM58. Fault block A has to date produced a combined gross total of approximately 3.4 Mmbo + 4.3 Bcfg from multiple wellbores completed in zones equivalent to these 6 target sands. The primary target of the E2 well, the B65 (K4) Sand, has to date produced approximately 13 Mmbo in the SM73 Field (see Attachment 2). Byron and the SM69 leaseholders are working to finalize documentation of a formal Joint Exploration Agreement relating to the E2 well and the north-east 1/4 of the north-east1/4 of SM69 lease block and related Production Handling Agreement in the next 45 days.

The drilling of a SM69 E2 well under a Joint Exploration Agreement would build on the recent SM69 E Platform acquisition by Byron and if successful adds to the E Platform area asset value. Byron previously announced on February 14, 2019 that it had closed on the acquisition of SM58 and associated SM69 E area assets for a sum of US$4.25million with an effective date of January 1, 2019; Byron further outlined future drilling opportunities and prospective resource potential on the SM58 lease block in their announcement of March 18, 2019. The SM69 E2 opportunity provides a near term, low risk drilling location in addition to those prospective resource opportunities previously identified on SM58 and is expected to be drilled by Byron in August 2019. The drilling of the E2 well off the existing E Platform provides a short timeline to first production (2-4 months) in a success case. Byron is currently finalising contract negotiations with rig contractor for the planned drilling of multiple wells within the SM73 Field area with a preliminary activity timeline outlined in Attachment 3.

As part of the recently announced SM58 transaction, Byron now holds a 53% WI (44.165% NRI) in the SM69 E Platform, the SM58 E1 wellbore, and the SM69 E to SM69 B flowlines located on adjacent SM69; all part of the greater SM73 Field (Attachment 1). Under the LOI Byron has the right to earn 100% WI (83.33% NRI) in the E2 and related reservoirs in the NE1/4NE1/4 SM69 less , and subject to, a 3% NRI Overriding Royalty Interest (ORRI) Before Project Payout (“BPPO”) , retained by the SM69 Leasehold interest owners, which is then convertible at their election upon Project Payout to either a 6% ORRI or a 30% WI After Project Payout (APPO) (i.e., the recovery by Byron of all E2 Project Costs, including but not limited to the E2 drilling, completion, construction, pipeline & facility modification, all leasehold burdens, and Lease Operating Costs attributable to the E2, until E2 Project Payout achieved). Byron shall operate the drilling and development of the E2 well with anticipated production operations provided by the SM69 operator, ANKOR E&P Holdings Corporation.

SM58 E1 Producing Asset:
Production from the existing SM58 E1 wellbore flows from the SM69 E Platform to the SM69 B Platform where separation and processing occurs. The SM69 E Platform is a recently constructed (2013) two slot structure with one well slot utilized, one slot available for the E2, and offers expansion potential of an additional third slot. The SM58 E1 well is currently producing approximately 120 barrels of oil per day (“Bopd”) and 0.150 million cubic feet of gas per day (“Mmcfd”), on a gross basis and 53 Bopd and 0.066 Mmcfd net to Byron.

CEO Comment
Maynard Smith, Byron’s CEO had this to say regarding SM69:
“The securing of this SM69 letter agreement provides a basis for additional drilling off the SM69 E platform and potential production growth in a success case. Byron is working with the SM69 operator and leaseholders to finalize a Joint Exploration Agreement and Byron will look to advance drilling on the northern flank of the SM73 Field starting with the E2 well in 3Q/2019 pending necessary permitting and rig availability. The SM69 E2 is one of several newly recognized lower risk opportunities in the SM58/69 area identified on Byron’s proprietary 2019 RTM/VIP data set.

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