KINGSWAY OIL
Kingsway Oil was originally incorporated in 2001 specifically to undertake exploration of the Canning Basin, Western Australia. Kingsway has been actively exploring in the Canning Basin since 2003. The company currently owns permits or has applications pending under various arrangements, over some 78,407 sq km within the central and southern Canning Basin. The cumulative prospective resource potential is 272 MMbbl.
Kingsway has adopted an exploration methodology that utilises airborne magnetic data to identify structural closures and magnetotelluric (MT) data to help locate potential hydrocarbon-bearing zones and to provide a predicative tool for reservoir quality. This methodology was applied at the Sally May-1 well location prior to drilling and Kingsway have stated that their predictions were consistent with the well results. Kingsway drilled the Sally May-1 exploration well in EP429 in early 2005. The well encountered good oil shows in the Ordovician Nita Formation within the aerially extensive Sally May anticline. The structure has a prospective resource potential of between P90 - 2MMbbl and a P10 - 139MMbbl; the mean prospective resource potential volume is 65MMbbl. The probability of geological success is estimated at 32%.
The Sally May-1 well intersected an oil column however, it was not adequately tested. Consequently there is a lack of information on which to base a detailed and reliable economic model for the potential development of the Sally May Anticline. In order to deal with the current level of uncertainty a conceptual development with a mean resource that could support an ongoing production rate was used. The development concept is based on maintaining a production rate of 10,000 BOPD for a period of 10 and 15 years. The nominal NPV at US $100 per barrel at a constant rate of 10,000 BOPD for 10 years, as at 1st January 2008, is A$425MM and A$500MM at a constant rate for 15 years. In both cases a nominal discount rate of 10% and mid-year discounting was used.
Additional exploration potential exists within the Sally May anticline for an accumulation in the deeper Acacia Sandstone, which was below the total depth of the Sally May-1 well. Based on the information available, a mean prospective resource of 73 MMbbl has been calculated for the Acacia Sandstone target and a mean prospective resource for the Elsa Sandstone of 85 MMbbl has also been calculated.
Aeromagnetic data interpretation completed to date in Exploration Permit EP449 has revealed four major anticlinal features. MT data has been acquired and interpreted over three of the four anticlines. The results give positive indications of the possibility of oil in the structures. The Mirbelia-1 well was drilled on one of these structures in 1985 and recovered oil from the Devonian Mellinjerie Limestone. The MT data suggests significantly improved reservoir quality may occur elsewhere on this structure. Kingsway has allocated prospective resources based on three of the four anticline features defined in permit EP449.
Kingsway is undertaking an aeromagnetic survey in SPA-AO 3/05-6 over the southern Canning Basin. The area is remote and has had no exploration since the early 1970s. The prospectivity of the area is enhanced by the results of the Patience-2 well which was drilled in 2001. The initial petrophysical evaluation by Crocker Data Processing suggested that the well may have intersected a possible untested hydrocarbon column of up to 42.9m, with 4.5m gas and 38.4m oil. The Patience-2 well lies in the L07-5 license which is surrounded by the SPA-AO. Kingsway’s exploration of the SPA-AO is at an early phase and leads have yet to be identified.
Kingsway applied for L07-5 (sub register number 14/07-8) and L07-3 (sub register number 13/07-8) in the southern Canning Basin in October 2007. Most wells previously drilled in the permits, with the exception of the Patience-2 well, were all drilled to shallow depths and are not valid tests of the deeper prospectivity. Prior to application Kingsway identified leads in the licenses from aeromagnetic data. The licenses have been offered to Kingsway subject to Section 31 of the Commonwealth Native Title Act (1993). The Section 31 process was commenced on the 21st February 2008 and this process can take between 6 months and >2 years. When the process has been completed Kingsway will be reofferred the permits. If Kingsway takes up the permits they have committed to the acquisition of 600km 2D seismic and the drilling of 2 exploration wells within the first two years of being awarded each licence. Kingsway is currently evaluating the available data to identify additional leads. Kingsway’s exploration of the licence areas is at an early phase and the prospective value of the leads within them has yet to be quantified.
The Canning Basin in general and the Kidson Sub-basin in particular, are lightly explored. There is strong evidence to support the existence of a working petroleum system within the area with the potential for significant hydrocarbon accumulations. Kingsway has assembled an acreage portfolio that provides a diverse variety of opportunities to explore the areas hydrocarbon potential. Kingsway’s use of aeromagnetic data for identification of structures combined with magnetotelluric data to identify possible porous hydrocarbon bearing zones may prove to be a cost effective exploration strategy.