Neon Energy’s Farmout of Vietnamese Exploration Blocks to Eni Receives Final Approval

Neon Energy Limited  announces that the Company’s farmout of Vietnamese exploration blocks 120 and 105-110/04 (“105”) to Eni Vietnam B.V. (“Eni”), a wholly owned subsidiary of Eni SpA, has received the full and final approval of Petrovietnam and the Government of Vietnam.

As disclosed to the market on 25 June 2012, the key commercial terms of the farmout are as follows:

– Neon assigns a 25% working interest in both blocks to Eni, thereby retaining a 25% working interest

– Eni carry Neon on 800km2 of 3D seismic and one exploration well in Block 105

– Eni carry Neon on 250km2 of 3D seismic and one exploration well in Block 120

– Joint venture partner KrisEnergy assigns a 25% interest in each block to Eni on same terms

– Eni assumes Operatorship

Eni has initiated the establishment of an operational presence in Ho Chi Minh City and will begin the process of formally assuming operatorship of the Joint Ventures, which are comprised as follows:

– Eni Vietnam BV 50%

– Neon Energy 25%

– KrisEnergy 25%

Neon’s Managing Director Ken Charsinsky commented: “We are pleased to have reached this important stage in exploring our Vietnamese assets, and welcome Eni as Operator of the Block 120 and Block 105 joint ventures. It is clear that the new 3D seismic data will greatly help to de-risk prospects in both blocks, and we look forward to the drilling programme later this year.”

3D Seismic Interpretation

Neon has received preliminary data volumes for the new 3D seismic surveys completed in both blocks, and early interpretation supports the significant prospectivity identified from 2D data acquired in 2010. Data quality is excellent and the benefits of 3D data over 2D data are already apparent. Interpretation of the 3D data, combined with other studies such as Amplitude vs Offset analysis, will lead to identification of an optimal drilling location for the Cua Lo prospect in Block 105 and will aid prospect ranking and well location for drilling in Block 120.

Procurement of Drilling Rigs

The Joint Venture is fast tracking procurement of suitable drilling rigs, i.e. a “jackup” rig for shallow water drilling in Block 105, and a “semi-sub” floating rig for drilling in the moderate water depths of Block 120. A number of options are being progressed for each type of rig, with the drilling programme expected to commence mid year.

Significant Prospectivity of Block 120 and Block 105

As previously announced by the Company, Netherland Sewell & Associates Inc. (NSAI) completed a Prospective Resource Assessment of blocks 120 and 105.

Block 120: NSAI reviewed the twelve oil leads identified by Neon, of which three were targeted by the recent 3D seismic programme. NSAI concluded that the twelve leads offer total unrisked prospective resources of between 633 MMBBLS (low estimate) and 7,947 MMBBLS (high estimate). Two of the leads currently under consideration for drilling offer unrisked prospective resources of 461 MMBBLS and 611 MMBBLS (best estimate), and 1,311 MMBBLS and 1,724 MMBBLS (high estimate).

Block 105: NSAI reviewed the seven gas/condensate leads identified by Neon, of which one lead is currently the primary target for drilling. NSAI concluded that the seven leads offer total unrisked prospective resources of between 1.7 TCF gas (low estimate) and 21.4 TCF gas (high estimate). The lead which Neon regards as the most likely candidate for drilling offers unrisked prospective resources of 3.9 TCF (best estimate) to 13.9 TCF (high estimate).

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Press Release, January 22, 2013; Image: