28 April 2017 PETREL ENERGY LIMITED ACTIVITIES REPORT FOR THE QUARTER ENDED 31 MARCH 2017 HIGHLIGHTS
  • Rig has cleared customs at Port of Montevideo and will spud once final onsite inspection processes are completed
  • Rig fitout completed mid-February departed Houston Harbour mid-March
  • Rig contract signed for 4 well programme in mid-December
  • $5.25m equity issue completed end-November to finance programme
  • Low cost exploration programme commencing in May 2017 will:
    • Confirm source rock maturity, quality & extent
    • Confirm conventional reservoir quality & extent - Darcy permeability (1000+md) already measured in core samples 30km apart
    • While not the primary objective, 3 of 4 wells are also targeting structures for oil and gas trapped in either the same sequence or up-dip of (fluorescence) oil shows and/or oil weeping from core samples
    • Fourth well to test large AVO gas target with more than 30 additional AVO's already identified
    • Address key questions of maturity and source rock quality and extent raised by "Majors" in farm out process
URUGUAY OPERATIONS

Targeting conventional oil targets in Piedra Sola and Salto Concessions (3.5million acres)

After Schuepbach Energy International LLC (SEI) (PRL 51%) finalised the drilling contract with New Force Energy Services Inc. in mid-December 2017 the final fitout and inspections of the new rig were undertaken at Service King Oklahoma during January and early February 2017. The rig and ancillary equipment were then trucked to Houston Harbour before departing for Montevideo in mid-March. The rig has been unloaded in the Port of Montevideo and has cleared customs. Spudding of the first well will commence in coming weeks once final onsite inspection processes have been completed.

The major objective of the drilling programme, which remains unchanged, is to address technical questions raised by various counterparties during the farmout process, such as source rock extent and development, maturation and reservoir quality. However as each well is associated with local or regional structural highs with potential closure, there is additional scope to confirm hydrocarbon migration and trapping mechanisms. One of the Salto wells will target a shallow AVO gas anomaly with a certified prospective P50 resource of 240BCF.

The other well in the Salto permit, Panizza-1 (Figure 1) is not only situated over a very large structure with considerable oil and gas potential across multiple zones, but also has an extensive very thick deeper Devonian section with an ideal sealing source rock overlying a potentially world class Darcy permeability reservoir.

Rig dockside in Houston Harbour Rig arrives in Montevideo

Figure 1 Cerro de Chaga 1 well (Panizza-1) schematic cross section

The 4 well programme and supporting geological model has been developed from the ongoing reinterpretation of the 597 kilometre 2D seismic programme successfully completed in late 2014. While initial interpretation of the seismic data completed in early 2015 revealed obvious geological structuring resulting in identification of an initial 20 conventional structural targets, and many at relatively shallow depths, it was also able to confirm the existence of a deeper sedimentary sequence in the Salto concession (Figure 1) which remains an attractive and very large target in its own right.

On the back of this work Netherland Sewell and Associates ("NSAI") was able to independently certify an unrisked gross Prospective Resource in the Salto and Piedra Sola concessions of up to 910 MMBBL oil and 3,105 BCF gas (up to 464 MMBBL oil and 1,583 BCF gas * to Petrel's net 51% interest) as outlined below.

Salto & Piedra Sola Concessions

51% Net to Petrel (Conventional only)

Prospective Resource

Original Oil & Gas In Place

Oil (MMBBL)

Gas (BCF)

Oil (MMBBL)

Gas (BCF)

Low Estimate (P90) *

75

293

285

456

Best Estimate (P50)

206

751

719

1161

High Estimate (P10)*

464

1583

1475

2412

The estimates of net volumes provided in this statement were derived from estimates of gross volumes for each prospect and lead determined by Mr Phil Hodgson, a full time employee of Netherland, Sewell and Associates Inc., Dallas, Texas, USA, on 14 May 2015, in accordance with Petroleum Resources Management System guidelines. Mr Phil Hodgson is a Licensed Petroleum Geologist in the State of Texas, a qualified person as defined under the ASX Listing Rule 5.41 and has consented to the inclusion of this information in the form and context in which it appears.

SPANISH OPERATIONS

Targeting conventional sandstone gas reservoirs in 94,000 acres in Southern Spain Tesorillo Project, Cadiz, Spain (51%)

The Almarchal-1 well drilled in 1956 is the discovery well of what is very likely a large by- passed gas field. It was drilled by the Spanish firm Valdebro, and intersected a thick section of gas pay which upon testing flowed gas to surface. The well is located 3km from the North African Maghreb gas trunkline providing ready access to high priced European gas markets.

The objective is to effectively twin the Almarchal-1 with Tesorillo-1 using modern drilling techniques. Approvals to drill Tesorillo-1 were submitted over 3 years ago and there is still no clear approvals process, although recent government changes would suggest a more favourable outcome is likely in the near future. In light of these delays the Joint Venture submitted yet further documentation to the relevant authorities to suspend all activities until complete approval is granted for Tesorillo-1.

Netherland Sewell and Associates ("NSAI") have independently certified an unrisked Prospective Resource of up to 2,289 BCF* (2.3 TCF) (1,116 BCF net to Petrel) for the Tesorillo Project as outlined below.

Tesorillo

51% Net to Petrel

Prospective Resource BCF

Original Gas In Place BCF

Low Estimate (P90)

112

374

Best (Median) Estimate (P50)

414

828

High Estimate (P10)

1,116

1,595

The estimates of net volumes provided in this statement were derived from estimates of gross volumes for each prospect determined by Mr Dan Walker, a full time employee of Netherland, Sewell and Associates Inc., Dallas, Texas, USA, on 5 May 2015, in accordance with Petroleum Resources Management System guidelines. Mr Dan Walker is a Licensed Petroleum Geologist, a qualified person as defined under the ASX Listing Rule 5.41 and has consented to the inclusion of this information in the form and context in which it appears.

FINANCIAL

Consolidated cash at 31 March 2017 was $1,655,000. Petrel funding for the 4 well Uruguay programme can be summarised as follows:

$1,655,000 Cash 31 March 2017

$1,382,000 Cash backed letter of credit (US$1m) with the drilling contractor

$ 640,000 21 April SEI contributions received from 49% partners

$3,677,000

The most significant expenditure during the quarter was rig mobilisation charges of

$446,000.

Petrel Energy Limited published this content on 28 April 2017 and is solely responsible for the information contained herein.
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