MEO Australia (ASX: MEO) is seeking a partner to fund planned drilling over its Marina-1 discovery and large Breakwater in the Joseph Bonaparte Gulf offshore northern Australia just 18 months after it was awarded the assets.
The farm-out of WA-454-P, which contains the two targets, is scheduled to conclude by the end of the first quarter of 2013.
Marina was discovered by ExxonMobil and Drillsearch Energy (ASX: DLS) in 2007 and is independently assessed to contain high estimate (3C) Contingent Resources of up to 302 billion cubic feet (Bcf) of gas and 29.5 million barrels (MMbbl) of oil.
The nearby Breakwater prospect could potentially host enough gas to support a liquefied natural gas project along with significant liquids and is located near discovered resources with plans for development using floating liquefied natural gas technology. It is also close to Eni's producing Blacktip gas field that supplies Darwin's domestic market.
Breakwater has prospective resources of up to 2.7 trillion cubic feet (Tcf) of gas and 87MMbbl of condensate in the "gas only case" or 2.4Tcf of gas and 276MMbbl of oil/condensate in the "gas and oil case".
"It is a credit to MEO's technical team that this permit is offered for farmout merely 18 months after being awarded by the Australian Government. The prospects for significant gas resources and potentially for liquids as well should ensure strong interest from industry," managing director Jürgen Hendrich said.
MEO was awarded WA-454-P on 14 June 2011 as part of Australia's 2010 gazettal round.
It subsequently shot the 601 square kilometre Floyd 3D seismic survey over Marina, Breakwater and two additional leads, which is now being interpreted.
Senergy Limited, which was commissioned by MEO to conduct an independent assessment of the Marina discovery and Breakwater prospect based on the existing 2D seismic and well log data, had concluded that Marina contained Contingent Resources in up to five zones.
Gas is considered to be proven in four of these zones and possible in Zone 5 while oil pay is considered to be probable in Zone 1 and possible in Zone 2. There is also additional potential for oil in Zone 4 though no volumes were assessed.
Initial interpretation of Marina on the Floyd 3D seismic confirms and supports this assessment and significant changes are not expected. However, the 3D seismic did highlight additional potential for hydrocarbons deeper in the section below the total depth at Marina-1.
Breakwater is a large, 4 way dip structure with an Early Permian Keyling sandstone reservoir objective. The trap is interpreted to be the response to a salt swell structure originating in the late Permian to early Triassic, and is therefore analogous to the Blacktip, Petrel and Tern gas fields which are also salt related structures.
Initial interpretation of Breakwater on the Floyd 3D confirms and supports the presence of a
large structure in the hanging wall block, and an independent fault trap in the foot wall block.
Senergy concluded that in the event of successful discovery and appraisal, the best estimate (2C) volumes of 751BCf of gas and 13MMbbl of condensate in the "gas only case" or 636Bcf of gas and 52MMbbl of oil/condensate in the "gas and oil case" would likely be commercial.
Possible development scenarios include tie-in to the existing Blacktip production facilities, GDF Suez and Santos' (ASX:STO) proposed FLNG infrastructure to develop the Petrel and Tern gas fields, or a stand-alone development.
Further potential in WA-454-P could lie in the seven additional salt structures in the permit while the Blacktip reservoirs have not been penetrated on any of these features. Additional stratigraphic trapping potential for these same proven reservoirs also exists on this block.
With their proximity to existing and planned gas developments, both Marina and Breakwater have the potential to be tied into these projects to provide additional resources or production.
In the event of a large discovery, Breakwater also offers the option of a standalone development that would give MEO more control over its destiny.
Finding the right partner will allow MEO to move ahead with proving up both Marina and Breakwater while reducing or eliminating its drilling risks.
With its current shares price of A$0.22, market capitalisation of A$118.78 million and cash of A$55.3 million as of 30 June 2012, MEO offers a compelling buy prior to the farm-out of WA-454-P as well as the results of the wells it is drilling offshore Australia, Indonesia and Thailand.
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