Barda Rash PSC
Of the total consideration, approximately US$418.75 million is in respect of the acquisition of a 60 per cent. interest in the Barda Rash PSC, and is inclusive of approximately US$63 million in repayment of back costs.
The Barda Rash PSC is located 55 km north west of Erbil, and holds the 14,174 mmbbls STOIIP / 1,470 mmbbls gross recoverable Barda Rash oil field (split 506 mmbbls light oil and 964 mmbbls heavier oil). The field is defined as an elongated anticline with surface expression of 20 km length and up to 7 km width. The reservoirs are principally fractured carbonates of various depositional settings.
Drilled in 2009, the BR-1 discovery well was drilled to 3,300 m and successfully encountered oil in Cretaceous to Jurassic reservoirs. Well tests were carried out on the Jurassic Mus and Adaiyah formations each yielded rates of around 3,200 bopd, with a subsequent extended test of the BR-1 well producing 440,000 barrels of 30° to 32° API oil over a three month period. During this time oil was trucked from on site storage and sent to local refineries. Export pipeline infrastructure is located approximately 55 km from the field location and has capacity available. Two further wells were drilled at the field in 2010, the BR-2 and BR-3 wells, both encountering oil full to base in all reservoirs. No oil water contact has yet been established.
The Company plans to undertake a phased development of the field with production start-up scheduled for 2012. Initial work will be on developing 506 mmbbls of recoverable light oil that is expected to deliver gross production of 125,000 bopd by 2017 (75,000 bopd net to Afren). Ongoing development will then focus on production of 964 mmbbls of recoverable heavier oil, offering further large scale production growth potential over the medium to longer term.
Ain Sifni PSC
Approximately US$169.5 million of the total consideration is in respect of the acquisition of a 20 per cent. interest in the Ain Sifni PSC, and is inclusive of approximately US$18.0 million of back costs and US$14.0 million of 2011 capital expenditure.
The Ain Sifni PSC is located approximately 70 km north west of Erbil, and holds the Jebel Simrit, Betnar and Maqlub structures In 2010 operator Hunt Oil drilled the Simrit structure, with the JS-1 well and logged continuous oil pay from 1,110 m to 3,077 m in Cretaceous and Jurassic reservoirs. Triassic reservoir targets were not penetrated by the well and no oil water contact was established. Independently certified gross 2C STOIIP and recoverable resources associated with the well are 391 mmbbls and 42 mmbbls respectively. The PSC has substantial upside over and above the volumes proved to date, with exploration potential being independently estimated at 7,493 mmbbls STOIIP and 917 mmbbls recoverable on a gross un-risked basis. This is primarily attributed to as yet un-drilled parts of the Jebel Simrit structure plus the Maqlub and Betnaar structures, located in the southern part of the PSC. The eastern extension of the Maqlub structure is interpreted to extend into the Barda Rash block.
Operator Hunt Oil Middle East is expected to shortly spud a well to appraise and test the western end of the Jebel Simrit structure, with the intention of progressing the opportunity to development status in the near term. Exploration wells are also planned to test the low risk Maqlub, Betnaar and East Simrit structures.
Impact of the Acquisition to Afren
The Acquisition represents a long term value growth opportunity for the Company. There are substantial contingent oil resources that have already been discovered that are expected to be progressively migrated into the 2P reserves category and produced through implementation of a phased development plan. The pro-forma impact on independently certified net 2C resources for the Company is substantial and, if converted as planned, could have a significant impact on net 2P reserves. In terms of production potential, the Company has a five year line of sight on realising 75,000 bopd on a net working interest (125,000 bopd gross) from Barda Rash alone, with the potential to incrementally boost field output further over the medium to longer term. In order to achieve this, the Company has put in place a team of regional experts with a long history of working on fracture carbonate reservoirs characteristic of those present in the Kurdistan region of Iraq.
The Acquisition has also introduced an attractive low risk exploration inventory to Afren, with near term drilling targets identified on the Ain Sifni PSC in particular. The resultant portfolio means that Afren is now strategically positioned in two of the world's fastest growing oil and gas plays, with Nigeria and Iraq both ranking in the world's top ten oil producers and top 12 proved oil reserves, complemented by a diversified inventory of exploration interests focused around high potential basins.
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