Thailand
(42.5% Interest)

The three highest-ranked exploration prospects selected for drilling from the Year-2 seismic program; had the potential to test in excess of 90mmbo of gross, recoverable speculative potential, if all three wells are drilled, in three different structural trap styles. Each well was expected to test multiple reservoir horizons where the potential for stacked oil pools exists.  During the third quarter of 2010, Carnarvon received Environmental approval for up to nine well locations and Sun Resources NL (“Sun Resources”) agreed with the Operator, Carnarvon, to increase the number of firm wells drilled in the maiden drilling programme to two (2), with one (1) additional well to be considered based on the results of the first two firm wells.  Site construction of the three well locations commenced during the fourth quarter of 2010 and was largely complete early in the first quarter of 2011.

The Asian Drilling Co. Rig #1 was mobilized to the first well site (Tapao Kaew #1), with the well spudded on 31 January 2011.  The Tapao Kaew #1 well was drilled to test the Tapao Kaew Prospect, a 4-way-dip anticlinal structure with stacked targets on the western edge of the basin, immediately adjacent to the interpreted hydrocarbon kitchen.  The Joint Venture estimated the Tapao Kaew Prospect to have a gross speculative potential resource of 21 million barrels. The Tapao Kaew #1 well tested three separate mapped horizons between 700metres and total depth of-1,792 metres.  The well has been plugged and abandoned by the Operator, after 22 days on location, as it failed to encounter hydrocarbon-bearing reservoirs.  However, the well did encounter good quality oil-prone source rocks.

The second well drilled in the multi-well drilling program was the Krai Thong #1 well, on the Krai Thong Prospect, a faulted anticlinal structure with multiple stacked targets.  The Joint Venture estimated the Krai Thong Prospect to have a gross speculative potential resource of 37 million barrels.  The Krai Thong-1 well targeted two separate mapped horizons between 600 metres and total depth at 1,294 metres and, despite recording some minor oil shows while drilling, wireline testing of several zones of potential hydrocarbon bearing intervals proved water as the mobile fluid phase.  The well was plugged and abandoned after 20 days on location and the drilling rig was released on 21 March 2011.  The lack of commercial success led the joint venture to the decision to release the rig and defer the drilling of Chalawan #1 to a later date.  The Joint Venture estimates the Chalawan Prospect to have a gross speculative potential resource of 32 million barrels.

Good quality sandstone reservoirs and thick, competent shale seals were identified from both of the exploration wells, as was a fracture network in apparent basement at the Krai Thong #1 well location.  The information acquired from the drilling of these two wells will be incorporated with previous drilling data into a revised seismic interpretation in order to determine the next phase of exploration for the block.  The completed well sites, including the unused well site at Chalawan #1, will be retained by the joint venture for possible future use.  The post-well evaluation work flow is continuing but preliminary results indicate evidence of oil migration through the reservoir roskc intersected near total depth in the Krai Thong-1 well.  This evidence gives the Joint Venture encouragement to continue to explore the permit area.

The year-5 work program obligation is for 100 square kilometres of 3D seismic and the Joint Venture currently believes this is required to further reduce trap risk before any future exploration drilling can be conducted.  Planning has begun for a seismic program to be conducted in the first half of 2012, subject to all relevant approvals, with the joint Venture targeting a second round of exploration drilling in 2013.

About Thailand – L20/50

The L20/50 permit lies in the onshore Phitsanulok Basin, located between Thailand’s two largest producing onshore field complexes, being the basin immediately west from Carnarvon Petroleum Limited’s Phetchabun Basin Oil Fields (producing up to 15,000 bopd with >60 mmboe estimated ultimate recovery) and 20 kilometres south, in the same basin as the prolific Sirikit Oil Field (producing ~20,000 bopd with >200 mmboe estimated ultimate recovery).  The L20/50 Joint Venture exploration program is targeting a resource of similar size to that of Carnarvon and Pan Orient who are producing up to 15,000 bopd (with >60 mmboe estimated gross ultimate recovery) from a number of oil pools in both the “new volcanic play” and in traditional sandstone reservoirs, in the adjacent Phetchabun Basin, 50 kilometres to the east.  The primary reservoir target within L20/50 and in the prospects tested with the two wells of the exploration drilling program is the traditional sandstone reservoirs that produces most of the oil from the prolific Sirikit Oil Field and is present in multiple levels in the Nong Bua #1 well within L20/50.

As a precursor to the 2009 2D seismic survey, Carnarvon Petroleum Limited (Carnarvon), the Operator of L20/50, evaluated the petroleum system within the L20/50 Block by utilising digitised 2D seismic data.  This work resulted in the delineation of thirteen significant structural leads.  The mapped leads vary in size, but preliminary calculations by Sun Resources indicate the largest of the leads could contain a gross, speculative resource potential in excess of 150 million barrels of oil in place.  These structural leads were the focus of the [2009] Year 2 seismic survey which was aimed at better defining the size and potential oil resources contained within each lead.  After acquisition and interpretation of the new 550km of 2D data, Carnarvon had identified 23 leads and prospects within 5 different play types over an area of 548km2 covered by the seismic survey.  Good quality seismic data was the key to Carnarvon unlocking the potential of its adjacent Phetchabun Basin Oil Fields in the fractured “volcanic play".

Sun Resources executed a binding Participation Agreement with Peak Oil & Gas Ltd (“Peak”) on 21 December 2010 to allow Peak to earn a 7.5% working interest only in the first exploration well, Tapao Kaew #1 in L20/50, onshore Thailand.  Peak ‘free-carried’ Sun Resources for up to US$1.3 million of Sun Resources’ share of well costs in the drilling of the first exploration well, Tapao Kaew #1.  Sun Resources retains a material 42.5% working interest in this well and a 50% interest through the remainder of the multi-well program.  This allowed Sun Resources to commit to the multi-well drilling program and retain a material working interest in the exploration block.  Sun retains a significant 42.5% interest in L20/50, providing maximum leverage to its shareholders in the ongoing exploration efforts for oil in Thailand.

The Joint Venture is now in Year 4 of the initial 6-year term and the work program for this permit year is ‘studies’. Those studies will involve integrating the results of the two exploration wells and commence planning for the Year-5 exploration commitment; 100 sq.km of 3D seismic data acquisition.  The last outstanding obligation is the Year-6 commitment of two exploration wells.  As two wells were drilled at the end of Year 3, the Joint Venture is in credit so only one exploration well remains to be drilled to meet all commitments.

 

 

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