Philippines

SERVICE CONTRACT 44 ("SC 44"): Gas2Grid Limited - 100%

(Updated 26 May 2015)

Location of SC44 on Cebu Island in the Philippines

Location of SC44 on Cebu Island in the Philippines

SC44 Exploration Overview

Gas2Grid Limited holds a 100% interest in SC 44, located onshore Cebu in the Philippines. Petroleum exploration wells drilled during the 1960s on surface anticlines, within the area now covered by SC 44, have flowed natural gas to surface and/or recovered significant volumes of oil during open-hole testing.

There had not been any further evaluation of these discoveries since the 1960s and because the price of natural gas and electricity has increased significantly over the last 40 years it was decided to evaluate the oil and natural gas flow potential of the original discoveries and assess their potential for oil field development and also as a fuel supply for a natural gas fired power station. Electricity from a power station located within SC 44 would be sold on the island of Cebu, which has a total population of approximately 4 million people. The island of Cebu and the Visayan region has a shortage of electricity supply with most of the electricity being sourced from geothermal fields from the nearby island of Leyte or from local, coal fired power stations.

In 2013 Malolos-1 successfully tested oil from two separate sandstone intervals at rates likely to be commercial. The oil bearing sandstones have been intersected over a 496 m (1,627 feet) vertical interval in Malolos-1 & 4 wells. If the oil bearing reservoirs are continuous between the two wells then Malolos could be a very large oil field.

In 2014, the Company received the approval of the Philippine Department of Energy (“DOE”) of an application to declare Malolos-1 an oil discovery, under the terms and conditions of the Service Contract. Under the terms of the approval the Company was issued a 12 month extension to SC 44 in order to conduct test oil production with the aim of establishing a commercial oil field. The approval covered the period 28th January, 2014 to 28th January, 2015.

The DOE’s recognition of Malolos-1 as an oil discovery represents the first time that the field has been independently certified. Successful longer term oil testing will enable the DOE to approve Malolos as a commercial oil field and allow production from the retained areas of SC 44 for a period of 25 years.

Additional oil flow testing of Maolos-1 conducted in the first half of 2014 with fit for purpose equipment demonstrated that the well is capable of producing oil at commercial rates. The well has produced at a rate of approximately 200 barrels of oil per day on several occasions but only for short periods of time. Oil flow has been impaired by blockage of the perforations by formation fines.

Well testing has determined that the two objective sandstones are oil bearing, established an oil-water contact for the lower oil sandstone indicating a minimum 500 metre vertical oil accumulation (when Malolos-1 is correlated with the oil sands in Malolos-4) and established that oil production rates are being impeded by fines migration and sand production.

Malolos-1 production testing by swabbing was suspended on the 17th June 2014 after sufficient test data had been gathered to support an application to the DOE for a 2 year Technical Moratorium to complete further work to establish the appropriate completion technology for sustained production and full appraisal and development of the oil field.  The application was submitted in accordance with the terms of the Service Contract for the 2 year moratorium to commence on the 28th January 2015. The well currently continues to be produced under natural flow conditions.

DOE approval for the 2 year Technical Moratorium was received in December, 2014 and the forward plan for 2015 centres on studies to identify the best drilling and completion technologies to be employed so as to maximise sustainable oilproduction rates. Further work will then include the deepening of Nuevo Malolos-1 or the drilling of a new well, to reach the oil producing sandstones and apply the completion technique that will solve the issue of fines migration and sustain oil production. Future work could also include seismic acquisition to locate a site to drill a new appraisal well on the crest of the anticline which forms the Malolos Oil Field.

Additional technical data recently gathered from the 2014 production flow test has been combined with vintage data and used to attract a farminee to fund field appraisal and development.

The political climate within the Philippines is stable, production sharing terms for commercial oil and gas production offer the Contractor some of the best returns anywhere in the world and the Gas2Grid Board has a wealth of experience working within the Philippines.

SERVICE CONTRACT 44

Geological Setting The island of Cebu and the surrounding marine areas form part of the Visayan Basin which is a Tertiary-Recent age sedimentary basin. The Visayan Basin is interpreted to be a back-arc basin developed behind the Philippine Trench and island arc with overall east-west accretion. Sediment supply was from the north-west where a continental cratonic area was the provence. The island of Cebu is itself interpreted to be a large, north-south trending anticline that was uplifted and which has developed a series of smaller anticlines along the crest of the island. It is these anticlines, many of which have surface expression, that are the main targets for petroleum exploration.

 

STRATIGRAPHY

Late Miocene to Pliocene Barili Formation: The formation is characterised by limestone, cream to buff, sometimes white-light grey, soft, occasionally tends to marl, foraminifera and coral fragments are common with interbedded claystone, light-medium grey, slightly silty, very calcareous. Late Miocene to Pliocene Maingit Clastics: The Maingit Clastics are represented by clastic sediments interpreted to have been deposited in upper to middle bathyal conditions. The sandstones are interpreted to be turbiditic and potentially laterally extensive. The Maingit Clastics are composed largely of claystones, dark grey to black, soft, occasionally hard and often silty. Claystone occasionally grades to siltstone that is interbedded with sandstones that are up to 17 metres thick. The sandstones are typically light grey, very fine to medium grained, subangular to subrounded quartz grains, poorly sorted, trace coal fragments, dark mineral grains, pyrite, calcareous cement common, sometimes friable.

 

Middle Miocene Unconformity

Middle Miocene Toledo Formation: The Toledo Formation is dominated by claystone, interbedded with sandstone that rarely exceeds 17 metres in thickness. Thin limestone interbeds increase toward the base of the formation. The claystone is medium to dark grey, occasionally green/grey, silty, hard and fissile. The sandstone is generally light grey, fine to medium grained, subangular with subrounded quartz grains, feldspathic, with occasional calcite cement and sometimes friable. The limestone is cream, pink to white, dense and fossiliferous.

 

Early Miocene Unconformity

Early Miocene Malubog Formation: The Malubog Formation is composed primarily of claystone and shale at the base of the formation and the interbedded sandstone content increases upward within the formation. The shale is dark grey to brown, occasionally black, containing carbonaceous fragments, dense, hard, with some slickenside surfaces. The sandstones are typically grey, very fine to medium grained with subangular to subrounded quartz grains, feldspar, rock fragments and calcite with trace pyrite. The sandstones are generally good quality reservoirs and they comprise the major target in SC 44.

 

WELLS

MALOLOS-1

Hydrocarbon Shows

Malolos-1, drilled in 1960, is located onshore central Cebu and approximately 50 kilometres west-southwest of Cebu City (2 million people) to a total depth of 2,748 metres (9,016 feet) targeting Tertiary age marine sandstone reservoirs. It is sited on the mapped crest of a surface anticline, spudded into limestone of the Barili Formation prior to penetrating the Maingit Clastics, Toledo Formation and eventually reaching total depth in the Malubog Formation. Major regional unconformities occur at the top of the Middle Miocene Toledo Formation and the top of the Early Miocene Malubog Formation. 

Bedding dips of up to 60o - 80o were measured in Malolos-1 and these high dips are related to sedimentary dip and thrust faulting, that cores the anticline. Hydrocarbon shows occur in almost every porous reservoir interval in Malolos-1 from the Early Miocene to Pliocene Maingit Clastics where sandstone cuttings and core material were described as bright, yellow to whitish yellow, good kerosene odour, with pale straw cut and high total gas. Again in the Middle Miocene Toledo and the Early Miocene Malubog Formations, hydrocarbon shows were once again in sandstone where they were described as bright, pale yellow fluorescence, kerosene odour and pale straw yellow cut with high total gas. Zones of interest were subsequently drill-stem tested. Malolos-1 was drilled to a total depth of 2,748m and 7 inch casing run to total depth, cased hole testing may have been conducted but there are no records indicating such a program was undertaken.

 

NUEVO MALOLOS-1

Well Objectives and Play Concepts

Nuevo Malolos-1 was drilled in late 2006 - early 2007 to a total depth of 1,945 metres and it was designed to test for commercial gas and oil in the Malolos anticline, being sited about 15 metres west and twinning Malolos-1. The new well aimed to test and produce from the gas sandstones encountered in Malolos-1 at 762 - 914 metres and 1,006 -1,067 metres. Shallow gas sandstone was tested by DST-6 in Malolos-1 and flowed at estimated rates of up to 5 million cubic feet/day. Nuevo Malolos-1 was not designed to appraise the deeper (approximately 2,300 m) gas sandstone tested by DST-8 in Malolos-1 at 1,844 -1,875 metres nor the oil bearing sandstones of the Malubog Formation which on drill-stem tests recovered clean, waxy oil of approximately 39o API.

Hydrocarbon Micro-Seepage Survey

An "Onshore Hydrocarbon Micro-seepage Survey" was completed within SC 44 in December, 2007 with encouraging results which recorded significant levels of hydrocarbon seepage. 270 samples were collected for microbial analysis and 36 samples were analysed for sorbed soil gas over an area within SC 44 that covered the Malolos and Barili surface anticlines. The sample interval was +/- 250 - 500 metres with the principal survey objectives being to:

  • Determine the presence and location of significant hydrocarbon micro-seepage anomalies;
  • Determine the composition of the hydrocarbons; and
  • Identify areas that require additional geological and geophysical surveys to assist with exploration/appraisal well locations.

Microbial Results: Three significant micro-seepage anomalies were identified which in total covered parts of both the Malolos and Barili areas. The anomalies have a linear distribution when mapped and are likely to be located along existing faults which in turn core the anticlines. This is interpreted to mean that the micro-seepage survey has the capacity to identify key fault systems that core potential sub-surface hydrocarbon traps, which in turn will assist with future seismic line location, among other things.

Sorbed Gas Results: Sample analysis yielded results that are consistent with hydrocarbons that have been sourced from oil with associated thermal gases. This is consistent with previously acquired Malolos well test data in which wet gas and oil have been recovered.

 

MALOLOS-1 WELL WORKOVERS

The well flowed gas to surface and recovered oil during open hole drill-stem testing and the recent re-entry and workover efforts have focussed on recompleting the shallow (above 3,000 feet - 915 m) hydrocarbon bearing intervals that had previously tested hydrocarbons. It was assessed that the sandstone bearing intervals may have been damaged during the drilling and completion process in 1960.Following the drilling of Neuvo Malolos-1 and the 2006 workover of Malolos-1, it was considered by management that a workover on the fully cased Malolos-1 well, offers the Company the lowest cost and nearest term, low risk operation to try to produce commercial gas and oil flow rates. The type of formation damage interpreted to occur in this well is common and similar to damage that has been successfully overcome in other hydrocarbon-bearing sandstones deposited within Tertiary age sedimentary basins worldwide.

2006: Immediately prior to drilling Nuevo Malolos-1 in December, 2006 the rig was set up over the Malolos-1 well and cement plugs drilled out to a depth of 1,012 metres (3,320 feet). Gas was recorded as percolating in the wellbore during the re-entry operations including drilling out cement plugs; gas was circulated out of the hole. Cased hole electric logs were run (GR-CBL-CCL-Caliper). A cement squeeze was attempted (1,132-1,581 feet; 345 – 482 m) over previously perforated intervals. A cement plug was set and polished with a top at 3,159 feet (963 m).Tubing and a packer were run into the hole with the packer set at 2,498-2,500 feet (761.5 – 762 m). Perforated the interval 2,696 - 2,775 feet (821.8 - 845.8 m) in order to conduct a cased-hole test; the well flowed gas to surface for approximately 5+ minutes followed by water and then the well died. A swabbing unit was mobilized from Australia a few months later. Fluid level on day 1 was 164 feet (50 m) from surface (formation pressure 1,105 psi); final swab of day tagged fluid level at 262 feet (80 m). Fluid level on day 2 was 187 feet (57 m) from surface (1,095 psi). A total of 52.2 bbls of water was swabbed over 2 days but no gas. Water salinity was increasing throughout the swab test and it was analysed at 6,000 ppm at the end of swabbing.

2010, Phase 1: In March 2010, well workover and testing program involved assessing the well status, swabbing the previously perforated interval (2,696 - 2,775 feet; 821.8 - 845.8 m) and running cased hole logs. Initial inspection discovered natural gas in both the annulus and the tubing with about 450 psi pressure and these accumulations were produced to depletion. The annulus built up gas storage a second time when the well was shut-in after the initial flow and depletion. The tubing did not re-charge with gas after being initially depleted.The well workover and testing program of the shallow hydrocarbon bearing intervals in Malolos-1 confirmed the presence of natural gas, the 2,696 foot (821.8 m) sandstone contains a gas interval that sits on water. It also established that reservoirs are of excellent quality and they have not been badly damaged during the drilling and completion process. The existing perforations have established contact with the underlying water bearing interval.

Malolos-1: Gas flare, June, 2011

Malolos-1: Gas flare, June, 2011

2011, Phase 2: Gas and oil bearing sandstones are present deeper in the Malolos-1 well but they were not targeted during the Phase 1 workover which was conducted in March, 2010. Following the successful completion of the Phase 1 workover the Company commenced the Phase 2 workover in April 2011. The Phase 2 workover involves:

  • a well re-entry;
  • nitrogen stimulation and flow testing of the shallow gas bearing intervals (which continue to produce gas and oil at low rates) - completed;
  • setting casing to isolate the shallow gas bearing intervals - completed;
  • drilling out the existing cement plugs and cleaning the cased hole from 1,000 metres to about 2,100 metres - completed but encountered junk at 2,190 metres;
  • cased hole electric logging - completed; and
  • a decision on recompletion and flow testing of selected oil and gas bearing sandstones at the deeper levels (below 1,000 metres) - to be done in 2014.

A ‘nitrogen enhancement’ was conducted on the shallow perforations (between 367 – 777 metres). This operation was conducted down the annulus, with a packer and the production tubing still in place, isolating the slightly deeper 822 metres sandstone interval.The nitrogen enhancement has improved gas production from the shallow reservoirs and it has resulted in natural gas flowing to surface from the annulus. Although the flow has not been continuous, gas immediately charges the annulus and pressure build up once the well is shut-in. Oil has also been recovered from the annulus. The well was cyclically flowed and shut-in over a few week period in order to try and induce continuous gas flow which was not achieved.

The essential equipment required to conduct the Phase 2 workover was eventually sourced with delays and access to and evaluation of the deeper hydrocarbon bearing intervals commenced on 30 October 2011.

Malolos-1, cased hole, workover operations involved using a coiled tubing unit with the well being cleaned out to a depth of 3,270 feet (996.8 metres). A cement plug was drilled out between 3,260 - 3,270 feet (993.7 - 996.7 metres) – continued clean out to 3,400 feet (1,036.3 metres) when traces of oil and gas were observed at the surface with about 20 psi surface pressure. The well was then cleaned out to 6,000 feet (1,828.8 metres) and a wiper trip conducted with slight resistance encountered between 3,512 - 3,518 feet (1,070.5 -1,072.3 metres). Surface pressure increased to 480 psi and oil and gas flowed to surface for over 1 ½ hours – total oil recovered was just over 20 barrels.

The clean out continued to a depth of 7,190 feet (2,191.5 metres). At this depth an obstruction was intersected in the hole which has been determined to be 2 7/8 inch tubing. It is likely that this tubing is attached to a packer, both of which (“junk”) form part of the original (1960) cased hole testing equipment which became stuck at that time and were left in the hole. Attempts to mill out the junk were unsuccessful and the mill bit plus some other equipment was left in the hole during this work. Fishing attempts with an overshot on the coiled tubing unit were unsuccessful but the mill bit has since been successfully fished out of the hole with the wireline unit.

2013, Phase 3: Malolos-1 successfully tested oil from two separate sandstone intervals at rates likely to be commercial. Recent technical work indicates that oil bearing sandstones have been intersected over a 496 m (1,627 feet) vertical interval in Malolos-1 & 4 wells. If the oil bearing reservoirs are continuous between the two wells then Malolos could be a very large oil field. At this stage the Malolos oil field warrants further appraisal by longer term oil flow testing, seismic acquisition and drilling.

Malolos-1: Phase 3 Workover with Rig 2 (July 2013)

Malolos-1: Phase 3 Workover with Rig 2 (July 2013)

Cased-hole Wireline Logging: Cased-hole wireline logs have been successfully recorded from above the junk in the hole located immediately above the oil sandstone reservoir (7,190 feet - 2,191.5 metres) to surface. Data quality is excellent. The main logging tool employed in the well is the pulsed neutron (PNN) which under good conditions has the ability to differentiate the sandstone reservoir intervals and also separately recognize oil, gas and water.

These data were processed and interpreted by the logging contractor with excellent results. Numerous sandstone reservoir intervals were identified and these intervals have a good correlation with those intervals interpreted from the original, open-hole wireline logs. In addition, previously perforated intervals (in 1960) have been identified.

T2014: The 2014 test program commenced on the 29th April, 2014 with clean out of cement plugs, casing and setting up the fit for purpose swabbing unit. Swabbing commenced on the 10th May, 2014 with the first oil being recovered on the 11th May. Initial influx rates ranged between 10-20 bopd, however oil influx rates decreased and fines production increased as swabbing continued.

A diluted hydrofluoric acid job was placed in the formation through existing perforations in an attempt to increase production. Testing immediately after the acid job resulted in a short period influx rate of nearly 200 bopd, but influx rates gradually decreased. This higher influx rate is similar to that recorded in 2013 - maximum oil production rate of 30 bbls in 2.5 hours. This is repeat evidence that the oil bearing formations are capable of commercial oil production.

Swabbing continued with an increase in sand and fines production with a commensurate decrease in the oil influx rate down to a few barrels a day. After a jet wash on the perforations the oil influx rates increased to 33 bopd. Continued swab testing recorded an increase in influx rate to between 100-200 bpd but associated with a significant amount of salty water (formation) being produced. The lower sand was then tested separately with a small influx of salty water recorded but swab fluid recoveries ended up being very low.  It was then decided to set a cement plug between the two sands and test the upper sand separately. This resulted in oil continuing to be produced, with no water, but there was no significant improvement in oil production rate.

Swab testing was suspended as no other immediate remedial options were available. The well continues to be produced under natural flow conditions with both oil and gas flowing to surface – a very encouraging development.

Malolos-1 was drilled and cased 54 years ago and there is little that can be done to manage fines migration, near well-bore formation damage and to determine down-hole casing condition with the existing completion.

Information that has been gathered  are as follows:

  • Swabbing has established that the 7,100 foot and 7,300 foot sandstone are oil bearing and
  • 100 – 200 bpd oil influx rates recorded from the lower two sandstones are regarded as commercial, provided it can be sustained.
  • High oil production rates (about 200 bopd) have been established but fines migration is blocking perforations.
  • Testing a well that was drilled 54 years ago has limited remedial options.
  • A 2 year moratorium from DOE is required in order to establish the best drilling and completion technology.
  • Proposal to deepen Nuevo Malolos-1 to cut a core through the reservoir interval, acquire reservoir petrophysical laboratory data, acquire modern open hole electric logs and trial a production completion to manage fines migration.
  • Malolos-1 was drilled down-dip on the eastern flank of the oil field with significant (>500m) updip and crestal oil potential.
  • Surface geological mapping in May, 2014 has identified outcrop of the main thrust fault and anticlinal crest which is located approximately 1 kilometre west of Malolos-1.
  • Integration of geological mapping with satellite imagery outlines a 10 square kilometre surface anticline with a minimum 500 metre vertical relief.
  • All technical data supports the 20 million barrel oil in place potential.
  • Field Development: Seismic data acquisition required before siting appraisal and development wells.

Oil Resources: The two oil bearing sandstones that have tested oil are located within the eastern limb of the Malolos anticline where they are steeply dipping (60°). The crest of the anticline remains to be tested by drilling. Previously drilled wells, Malolos-1 and Malolos-4, recorded oil bearing sandstones over a 496 metre (1,627 feet) vertical interval. The recent oil test production rates (between 100 – 200 bopd) confirm Malolos-1 as an oil discovery well. Management is confident that further testing of Malolos-1 will result in commercial oil production from a much larger Malolos oil field than currently assessed.Initial assessment of the oil volume potential within the Malolos oil field is a “Contingent Resource” oil in place1 in the two oil productive sandstones in the range of between a “Low Estimate” (1C) of 6.8 million barrels and a “High Estimate” (3C) of 68 million barrels, with a “Best Estimate” (2C) of 20.4 million barrels of “Total oil initially in place”1.

1The Resources assessment follows guidelines set forth by the Society of Petroleum Engineers – Petroleum Resource Management System (SPE-PRMS). The Resource estimates used in this presentation were compiled by Mr Len Diekman (Member SPE), Energetica Consulting, who is a qualified person as defined under the ASX Listing Rule 5.11 and has consented to the use of Resource figures in the form and context in which they appear in this presentation.

Malolos-1: Tested Oil Intervals

Malolos-1: Tested Oil Intervals

 

SEISMIC ACQUISITION

A 54 kilometre seismic acquisition program Phase 1 was completed in March, 2010 with field operations being curtailed by the onset of the wet season. Phase 2 seismic acquisition commenced on the 9th November 2010 with data acquisition completed on the 16th December 2010 for a total 61.3 kilometres recorded (a total 115.3 kilometres in Phases 1 and 2). Field data quality is generally excellent except in those areas where limestone outcrops.

The newly acquired seismic data is of excellent quality where it has been acquired over ground not affected by outcropping limestone. The interpretation of the data has also been completed providing good geologic insight over selected areas of SC44. The new data has clearly identified, for the first time, the Cebu Limestone carbonate reef play and the younger turbidite sandstone traps, both structural and structural/stratigraphic. The newly acquired seismic data is generally of high frequency enhancing the ability to identify and map reservoir targets.

The Cebu Limestone reef targets were interpreted to be present within SC 44 before the new seismic data was acquired and it has been extremely pleasing to now, conclusively identify this exploration target, as it greatly enhances the value of SC 44.

The Cebu Limestone is of Miocene age and similar age limestone reefs are prolific oil and gas producers elsewhere in the Philippines (e.g. Malampaya, Nido) and they are also prolific oil and gas producers in neighbouring Indonesia.

The 2011 seismic survey acquisition commenced on 3 July 2011and has been completed with 66.9 kms of new data acquired and interpreted. The seismic program has delineated three new drilling prospects that was planned to be tested in the first half of 2012 plus numerous other potential prospects that warrant further investigation.

Saavedra Lead - Moalboal Field Mapping: a field geological survey over the Moalboal area located in the south-western part of the licence initiated because the Moalboal area has been interpreted as being a surface anticline and a potential hydrocarbon prospect. Field mapping confirmed westerly and northerly dip and the presence of a likely anticline. Although outcrop on the island is poor, consisting of massively bedded limestone, there is sufficient dip evidence to indicate anticline. A strike and dip seismic line will be required to further map the prospect.

Seismic Line 78-370: Saavedra-Moalboal Prospect

Seismic Line 78-370: Saavedra-Moalboal Prospect

2012 Seismic and Prospects Map

2012 Seismic and Prospects Map

Aloguinsan Anticlinal Prospect: a large surface anticline has been delineated by surface geological mapping located immediately west of the Malolos Oil Field. The anticline also has significant surface expression and is associated with surface geochemical anomalies. A nearby, offshore seismic line (78-485) also images the western end of the anticline.

Topographic Map – Aloguinsan Anticlne

Topographic Map – Aloguinsan Anticlne

Aloguinsan Anticline Seismic Section 78-485

Aloguinsan Anticline Seismic Section 78-485

 

DRILLING RIGS

Rig-2 a Gardner Denver 500 SCR (electric) 800 HP drilling rig was bought and delivered to Cebu from Taiwan. Rig-2 was located in Gas2Grid yard in San Fernando where it underwent maintenance prior to commencing drilling operations in late 2013. Rig-2 drilled both Jacob-1 and Gumamela-1 and then it was moved to Malolos-1 where it has completed the workover and testing program. 

Rig-2 has the capacity to drill to 2,750 metres with 114 mm drill pipe and 3,660 metres with 89 mm drill pipe. Gas2Grid used its own drilling engineers and rig crews sourced locally in the Philippines. In addition, the Company has acquired a Brewster N2 workover rig which was upgraded. This rig is capable of setting surface conductor and surface casing as well as completing wells for production and conducting and workovers. 

RIG 2: Gardner Denver 500 SCR

RIG 2: Gardner Denver 500 SCR

Rig 1: Brewster 200

Rig 1: Brewster 200

 

2012-2013 Drilling Program

Two wells were drilled in the 2012-2013 exploration drilling program.

Jacob-1 was designed to test the Miocene age Cebu Limestone trapped as a pinnacle reef. Secondary targets were the Miocene age Malubog-Toledo Formation marine sandstone reservoirs, trapped in a drape anticline above the reef.

Jacob-1 spudded on 23rd October, 2012 and it was drilled to a total depth of 664.5 metres (KB). The top of the main limestone reef objective was intersected at a depth 340 metres (KB), close to pre-drill prognosis. This limestone lithology continued to the well total depth of 664.5 metres. Unfortunately the limestone reservoir objectives did not have any significant porosity or permeability development (“tight”). The secondary objective, sandstone reservoirs in the section above the reef, were not encountered. The section overlying the reef was comprised of calcareous marl (lime rich mudstone) which while providing an excellent sealing unit for the reef it was devoid of any sandstone reservoirs. Minor hydrocarbon shows (slightly increased gas levels, fluorescence and cut) were observed while drilling the limestone reef.

The well was terminated at a shallower than programmed depth due to a significant lost circulation zone being encountered as the result of fracture development within the reef. The content of the fracture system (water, oil, gas) is unknown as significant mud was lost into it immediately upon penetration, with no returns. The well was suspended pending a decision to swab the fracture system using Rig-1 in order to determine the fluid content.

Gumamela-1 was designed to test an Oligocene-Miocene age Cebu Limestone trapped in a pinnacle reef. Secondary targets were Miocene age Malubog-Toledo Formation marine sandstones, in the section overlying the reef.

Gumamela-1 spudded on the 23rd December, 2012 and it was drilled to a total depth of 1,051.6 metres (KB). The top of the main limestone reef objective was intersected close to prognosis at a depth of 774.8 metres (KB) and continued to a depth of 876.3 metres (KB), being 101.5 metres thick. The formation changed at a depth of 876.3 metres into an inter-bedded claystone, siltstone and minor sandstone lithology. The well reached a total depth of 1,051.6 metres (KB) still within these lithologies.

There was no reservoir quality porosity or permeability development (“tight”) within the limestone reef section. There was also no reservoir quality sandstones developed in the section immediately overlying the reef, where they had been prognosed before drilling commenced. The section overlying the reef was comprised of calcareous marl (lime rich mudstone) which while providing an excellent sealing unit for the reef, it was devoid of any sandstone reservoirs.

Very high levels of methane (1,195 units or 12% by volume on a background of 5-6 units) was recorded at a depth of 535 metres (KB) although there was no associated lithology change. Subsequent electric logging indicated no reservoir development at this depth and the gas was likely associated with a small fracture system. The well has been plugged and abandoned.

Ilang-1 is designed to test the Early Miocene aged, marine turbidite sandstones within the lower part of the Upper Malubog Formation trapped in an anticline with 5 million barrels of potential. Both Jacob-1 and Gumamela-1 penetrated the equivalent section that comprises the main Ilang-1 objective. The lithology in these wells was composed completely of marl with no sandstone reservoir development.

A detailed technical study incorporating the recently acquired Jacob-1 and Gumamela-1 results confirmed the technical robustness and risk profile of the Ilang Prospect. The review concluded that there is a high chance that the reservoir quality sandstones intersected in the Malolos well, located approximately 3 kms to the west, extend as far as the Ilang prospect. This means that Ilang will be worth testing by drilling in the future.

Ilang-1 Seismic

Ilang-1 Seismic