Armour Energy Updates on ATP 1087 Operations, Australia

Armour Energy provided the following update on the company’s operations in ATP 1087 in Queensland.

Egilabria 2DW1 lateral – hydraulic stimulation

The hydraulic stimulation of the E2 DW1 lateral well is now complete. The well is testing the Lawn Shale, as well as fractured gas intervals immediately overlying the Lawn Shale. A total of eight stages were originally targeted and twelve zones were hydraulically stimulated. The majority of proppant was placed in the middle four stages covering the top 66mofthe organic rich 137m thick Lawn Shale. The historic Egilabria 1 well to the west recorded a 125m thick section of Lawn Shale with highest gas noted (up to 8%) in this upper most section in 1991.

In addition to placing proppant at intersections with known gas shows, Armour performed a number of additional diagnostic injections in adjoining and alternate intervals. The data is being analysed and will enable Armour to better understand the permeability and stress regime of the gas bearing rocks to optimise the targeting of future laterals, a key deliverable of this proof of concept well.

The well is currently being cleaned out in preparation for production testing. Results should be available around mid‐October, depending on clean up time. Clean up time on stimulated laterals can vary greatly and is dependent on a number of factors. As there have been no previous tests of this nature in this basin, Armour is not able to accurately forecast the likely result and timing.

The aim of the production test at Egilabria 2 is to prove the concept that horizontal well technology, together with hydraulic stimulation, can flow hydrocarbons to surface from the Lawn Shale formation. The Lawn Shale formation contains a prospective resource of 22.5 TCF of high quality gas, which could potentially feed 6mtpa of LNG production.

Egliabria 2 is a pioneer well in a frontier basin and it should be noted that the results from this well may not accurately reflect future production performance, schedules and costs. Armour has already identified a number of improvements which will be implemented in the next stimulated lateral well.

Egilabria 4 vertical well

Since encountering gas at the base of the Mesozoic Carpentaria Basin section, drilling proceeded to intersect the Lawn Shale as expected at 1,055 metres to the current depth of 1,312 metres with similar gas shows observed throughout the interval to the Lawn Shale in Egilabria 2. A stronger than expected buildup of pressure has been noted in a number of desorption canisters filled with Lawn Shale cuttings from the Egilabria 4 well. This substantiates the presence of a continuous gas‐charged shale sequence between the two wells.

The drilling bit is currently being changed out prior to re‐commencing air drilling to a planned depth of 1800m and is expected to test the prospective Riversleigh Shale in western ATP1087 which had gas shows of up to 2.5% in Desert Creek‐1 in 1991.

No resource assessment has been completed for the Riversleigh Shale, potentially adding significant upside to the prospectivity of ATP 1087. Drilling results from Egilabria 4 combined with airborne geophysical survey results and the gas shows at the 1990’s Comalco Argyle Creek 1 and Desert Creek 1 wells in the Riversleigh Shale will amass a data set targeting a Prospective Resource Area up to 18 TCF of contained gas, based on the Company’s previously announced in‐house review of ATP 1087.

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LNG World News Staff, September 19, 2013; Image: Armour Energy