Two junior players join forces for exploration drilling off Australia

Australian Bounty Oil & Gas has signed a binding farm-in agreement with Coastal Oil and Gas for the drilling of three exploration wells in shallow waters of the Carnarvon Basin, offshore Western Australia.

The agreement will enable Bounty to obtain a 25 per cent interest in four permits – EP 475, EP 490, EP 491 and TP 27  – owned by Coastal. The permits – collectively known as Cerberus – are located in shallow water depths between 25 to 50 metres and cover a very large area of 3,200 square kilometres considered to be oil-prone. They lie directly adjacent to the prolific hydrocarbon production areas of the Carnarvon Basin, which are operated by oil majors and independent energy companies.

Bounty will need to fund A$6 million before 15 November 2021 – subject to certain milestones – towards the cost of drilling three exploration wells in return for a 25 per cent unencumbered participating interest in each of the Cerberus permits.

The agreement also gives Bounty the option to earn two additional unencumbered 25 per cent tranches during the next six months by funding A$9 million and A$12 million respectively towards this drilling programme. The companies will work in tandem on the exercise of these options and any additions to the programme, according to Bounty’s statement on Friday.

All four permits – with well commitments due in 2023 – are in good standing with the Department of Mines, Industry, Resources and Safety (DMIRS). Bounty assured that the drilling of these three wells would satisfy commitments for all permits.

Philip Kelso, Bounty Oil and Gas CEO,  commented: “This farm-in to the Cerberus Project West Australia will see Bounty shareholders participating in 3 relatively low risk very high impact oil exploration wells in 2022/23 as oil prices strengthen in the face of disinvestment by majors and in a very low sovereign risk State.”

The permits are situated south of the Jadestone Energy-operated Stag oil field, northeast of the Chevron Australia-operated Barrow Island oil fields and east of Santos-operated oil and gas fields on Thevanard Island.

“Bounty will be one of the only juniors in Australia with significant exposure to existing Australian oil production and hydrocarbon provinces with proximity to markets in the east (PEP 11, Sydney Basin gas) and the west coast (Cerberus Carnarvon Basin),” added Kelso.

Mapped at four different geological age levels, Cerberus prospects include the Lower Cretaceous, Lower-Middle Jisurassic, Lower-Middle Triassic and Permian levels. Coastal and Bounty are currently assessing other leads and prospects at these levels as well as at the Jurassic level where the Legendre, Murat and Athol Fields in the Carnarvon Basin have produced from the same geological intervals that are present in Cerberus.

Both companies have stressed that further work is required at the deepest Permian level where recent success in the Perth Basin with the Lockyer Deep-1 and West Erregulla-2 discoveries have upgraded the resource potential of the basin.

The Dorado oil field, which was recently discovered and is being developed by Carnarvon and Santos is a large Lower-Middle Triassic shallow marine and basin fan accumulation that has significantly upgraded the Cerberus prospect, according to the company.

The large Dorado lookalikes Stork, Parrot, and Honeybadger – already identified on 2D and 3D seismic – are three of Bounty’s preferred Triassic prospects for this drilling programme. They target 627 million barrels of gross mean unrisked prospective resources.

“Cerberus is an exciting play with some of the largest seismically defined drillable offshore oil prospects in Australia and proximity to production and transport infrastructure. Honeybadger and Stork are examples of prospects with the potential for hundreds of millions of barrels of oil to be found,” explained Kelso.

Operators of Cretaceous oil fields, which lie to the north – Stag with 85 million barrels and Wandoo with 100 million barrels – have active programmes in 2022 and Bounty and Coastal are assessing the possibility of utilising a jack-up from one of these campaigns to minimise mobilisation costs for the drilling programme on Cerberus.

The Gallant prospect – mapped at the same Cretaceous level as Stag and Wandoo – is favoured for drilling by both Coastal and Bounty with a gross unrisked mean prospective resource of 44 million barrels.

Coastal and Bounty will undertake seismic reprocessing to better define well locations for the drilling programme and understand the deeper potential of the area.

A team consisting of the new Chief Operating Officer of Bounty, Kane Marshall; Ted Jacobson, Founder of both Discovery Petroleum and Tap Oil as well as a former Director of both Tap Oil and Carnarvon Petroleum, Joseph Graham of Skye Energy Ventures and the explorationist Dariusz Jablonski will have a final say regarding the three prospects to be drilled.

“With Brent oil prices currently trading above $80 Bounty has entered an excellent venture with Kane Marshall who has joined the Bounty team and working alongside proven industry performers in the Coastal team comprising Ted Jacobson, Joe Graham and Dariusz Jablonski,” stated Kelso.

An expression of interest has been submitted to the rig market to assess jack-up rig suitability, timing and costs which are expected to be in the vicinity of $20-30 million. It is estimated that the entire campaign will not take longer than 40 days to be completed.

Bounty says that Coastal intends to engage Petrofac as the well project manager for the exploration drilling programme.