Tap Oil Confirms Rig Slot For High-Impact Tallaganda-1 Well

Tap Oil said that the WA-351-P joint venture has approved the budget to drill the Tallaganda-1 well in WA-351-P. Furthermore, the Operator, BHP Billiton Petroleum Pty Ltd (BHP Billiton), has now secured the Atwood Eagle semi-submersible drilling rig to drill the well and expects to commence well operations at Tallaganda-1 in the first quarter of 2012.

The Tallaganda-1 prospect straddles both the WA-351-P and WA-335-P permits and will test the gas potential of sandstones in the prolific Triassic age, Mungaroo Formation, in a well defined horst block as imaged by high quality modern 3D seismic data. This is the primary play type of the gas prolific North West Shelf. Tap estimates the Tallaganda structure has a prospective resource range of 0.8-2 Tcf (P90 to P10 estimates) with more than 50% of these volumes in WA-351-P (mean prospective resource estimate of 0.8 Tcf in WA-351-P).

Tallaganda-1 is assessed as having a greater than 60% chance of success. This high chance of success for an exploration well is due to the strong seismic amplitudes within closure and good AVO support which are indicative of reservoir and gas. The well will be drilled as a vertical well in a water depth of 1,141 m and is expected to take 37 days (trouble free) to drill.

Following Tap’s farmout of 25% of its participating interest in the permit to BHP Billiton Petroleum (North West Shelf) Pty Ltd earlier this year, Tap’s cost for the well will be carried up to a cap of $10 million (net to Tap).

Tap’s Managing Director/CEO, Mr Troy Hayden, said, “By securing a rig working locally for drilling the Tallaganda-1 well it allows a clear timeframe to drill this highly anticipated gas well.”

“Success at Tallaganda-1 will also give greater certainty to the rest of the 2 – 3 Tcf of Triassic potential identified on the permit,” he added.

Background

The Operator completed a detailed assessment of the plays, prospects and leads in the permit in 2010 including the 3D seismic acquired in 2008. Over 10 leads and prospects were defined in the Triassic Mungaroo Formation which Tap estimates has a combined mean potential of 2-3 Tcf (gross recoverable, unrisked) of natural gas. A number of these targets, including Tallaganda-1, have an estimated probability of success over 50%.

Additional leads have been identified in WA-351-P in the Jurassic and Early Cretaceous, both of which are productive elsewhere in the Carnarvon Basin. Current indications are that this shallower potential is larger, but higher risk, than the Triassic in this permit. Further work will be done on these objectives.

The high chance of success in this permit is reinforced by Hess reporting 13 gas discoveries from 16 exploration wells drilled to date in the adjacent WA-390-P permit, immediately north of
WA-351-P.

In January 2011, Tap exercised its pre-emptive right under the joint operating agreement to acquire an additional 20% interest in WA-351-P for a cash consideration of US$15.75 million, increasing Tap’s holding in the exploration permit from 25% to 45%.

In May 2011, Tap announced the farm out of 25% of its participating interest in WA-351-P to Japan Australia LNG (MIMI) Pty Ltd (MIMI) for a cash consideration of US$30.154 million plus a carry on Tap’s 20% equity through the drilling of Tallaganda-1 (up to an agreed cap of US$10 million).

In June 2011, BHP Billiton Petroleum (North West Shelf) Pty Ltd, Tap’s existing joint venture partner, exercised its right of pre-emption to acquire Tap’s 25% participating interest in WA-351-P on the same terms and conditions as agreed upon with MIMI, providing further evidence of the value of this highly prospective permit. This transfer was approved by the Department of Mines and Petroleum on 9 December 2011.

The proximity of WA-351-P to many large-scale liquefied natural gas (LNG) projects being developed should provide the joint venture with many options for the commercialisation of any gas discoveries.

WA-351-P Joint Venture Participants

BHP Billiton Petroleum Pty Ltd (Operator)
BHP Billiton Petroleum (Northwest Shelf) Pty Ltd 80.00%
Tap (Shelfal) Pty Ltd 20.00%