Preparations Made for Drilling of Oi-2 Exploration Well (New Zealand)

AWE Limited, as Operator of Petroleum Mining Permit 38158 offshore Taranaki, New Zealand, advises that due to operational challenges in managing near surface unconsolidated formations the Oi-1 exploration well will be abandoned and a new well, Oi-2, will be drilled from an adjacent location.

As at 06:00 hours (6.00am) NZDT today, the semi-submersible drill rig, “Kan Tan IV” had been moved 150 metres to the new well location and preparations were being made to commence drilling the Oi-2 exploration well.

The Oi-1 exploration well was drilled to a planned depth of 1,507 metres in a 17 ½ inch hole. Installation of a 13 3/8 inch casing was not completed due to well bore instability at a shallow depth. Subsequent attempts to sidetrack the well were unsuccessful and, consequently, the joint venture decided to abandon the Oi-1 well.

AWE has revised the drilling program for the Oi-2 exploration well to further mitigate risks of near surface well bore instability and to then continue the program as previously planned. A 17 ½ inch hole will be drilled to a shallower depth of approximately 550 meters and a 13 3/8 inch casing will be set to enable a drilling fluid system to be established and improve management of conditions in the well bore. A 12 ¼ inch hole will then be drilled to approximately 1,500 metres before a 9 5/8 inch casing is set. An 8 ½ inch hole will then be drilled to a planned target depth of 3,881 metres.

The Oi-2 exploration well is located approximately 12 kilometres northeast of the Tui Area Oil Fields in water depth of approximately 120 metres. The well objective is to evaluate the hydrocarbon potential of a 4-way dip closed structure similar to the producing Tui, Amokura and Pateke fields and it will target the same F10 reservoir sandstones.

The Oi prospect, in a discovery success case, represents a best estimate Prospective Resource of 11 million barrels of recoverable oil (gross, unrisked P50 estimate). In the event of a commercial discovery, it is envisaged that any subsequent development of the Oi field would involve a tie back to the nearby Tui production facility, the FPSO “Umuroa”, where sufficient production capacity is available.

AWE is participating in the Oi exploration wells at a reduced equity of 31.25% and has the option to increase its equity participation in any future appraisal drilling and development to 57.5% by exercising existing buyback provisions. Gross dry hole drilling costs for the Oi program have been revised and are now estimated at USD 40 million (net USD 12.5 million to AWE at 31.25%). The Oi drilling program is now estimated to take approximately 46-48 days to complete.

Press Release, June 10, 2014