News & ASX Releases

Company Reserves and Resources Update

September 8, 2010

In May this year Po Valley Energy (the Company) advised the market that a comprehensive review of its gas reserves and resources was being undertaken. This review has involved a comprehensive review of all existing and newly acquired data and has been undertaken by external independent experts working with the company’s newly expanded technical team.

In July the Company announced the results of this review process for Castello field in Northern Italy.

The Company has now completed the review of the Sillaro and Fantuzza gas fields. Work by the independent experts to analyze newly-received information on the production history of the ex-ENI Correggio gas fields is ongoing.

Simultaneously with this activity, the Company’s technical team is also reviewing the portfolio of Prospective Resources and will update the market accordingly.

Key Conclusions

Key changes from the previously assessed reserves and resources are:

  1. Sillaro has been reevaluated utilising recent commercial production data and the results of the Sillaro-2. All geological and reservoir models have been updated utilising the new data allowing improved estimation of proven and probable reserves

  2. Sillaro Proven (1P) reserves of 230 million cubic metres (8.1 Bcf) are 22% down from the previous estimate of 295 million cubic metres (10.4 Bcf). This new estimate is consistant with the current production performance of the Sillaro wells, producing at a rate of 92,000 cubic metres/day (3.3 mmscf/d). Proven plus Probable (2P) reserves from the field have a higher degree of certainty and are evaluated at 248 million cubic metres (8.8 Bcf), down 40% from the previously estimated reserves of 408 million cubic metres (14.4 Bcf)

  3. The Fantuzza gas field dataset supports Proven (1C) Contingent recoverable resources of 53 million cubic metres (1.9 Bcf) and Proven plus Probable (2C) Contingent recoverable resources of 163 million cubic metres (5.8 Bcf), down 78% from the previously estimated 2C resources of 753 million cubic metres (26.6 Bcf).
Work completed

The following tables summarises the status of the Reserves and Resources assessment work undertaken by the company, together with external independent experts from Dedicated Reservoir Engineering And Management (an offshoot of the University of Turin) and Studio Ingegneria Mineraria (SIM).



Sillaro - Revised Gas Reserves

A reservoir study was carried out in the June-July 2010 period to re-assess the recoverable reserves from the field.

A static model was first generated from the seismic maps defining the reservoir structure, from well logs, and from a general geological understanding of the area. Based on this work, a dynamic model was then established and calibrated with the interpretation of numerous well tests and on the short production history of the field.

The results of the study indicates that the Sillaro field is comprised of 10 hydraulically separated gas-bearing levels. Interpretation of the seismic data and well logs prove that the reservoirs are continuous and extend over the whole field. Based on log and well test analysis, it was concluded that the levels are rather homogeneous with good or relatively good petro-physical characteristics, with the exception of one minor level.

Based on the new reconstruction of the reservoir geometry and on the position of the gas-water contacts (GWC) or gas down to (GDT), the Proven static GOIP (gas originally in place) of the field was estimated at 320 million cubic metres (11.3 Bcf). An additional gas volume of 75.7 million cubic metres (2.7 Bcf) was classified as Probable.

The dynamic GOIP of the Sillaro field following the history-matching process proved to be 302 million cubic metres (10.7 Bcf), an excellent match with the static GOIP evaluation.

The calibrated dynamic model was then used to forecast the field production and to estimate the recovery factor. The results of the simulated scenarios show Proven gas reserves (1P) of 230 million cubic metres (8.1 Bcf) and Proven plus Probable reserves (2P) of 250 million cubic metres (8.8 Bcf).

At the end of July 2010, the total gas production from the field was 5.3 million cubic metres (0.19 Bcf) at a rate of 92,000 cubic metres/day (3.3 mmscf/d).


Fantuzza Gas Field - Revised Contingent Resources

A reservoir study was carried out in July 2010 in order to quantify the volume of gas originally in place in the Fantuzza field and to estimate the recoverable resources from the field.

A static model was first generated from the seismic maps defining the reservoir structure, from the well logs, and from a general geological understanding of the area. However, no petro-physical characterization could be undertaken due to the lack of specific data.

A dynamic model was then set up and calibrated based on the limited production history of the field. Special attention was devoted to trying to capture the uncertainty in the reservoir depiction.

Based on the conclusions of the geological study, and on the analysis of the production tests, three different petro-physical scenarios were defined. Different NTG (net to gross) values were assigned for each scenario during the history-matching process to account for the uncertainty in the reservoir characterization.

Values of GOIP of the Fantuzza field were estimated from the dynamic model for the three different scenarios with Proven (1C) Contingent resources of 133 million cubic metres (4.7 Bcf) and Proven plus Probable (2C) Contingent resources of 293 million cubic metres (10.3 Bcf).

The calibrated dynamic model was then used to forecast the field production and to estimate the recovery factor, resulting in estimates for Proven (1C) Contingent recoverable resources of 53 million cubic metres (1.9 Bcf) and Proven plus Probable (2C) Contingent recoverable resources of 163 million cubic metres (5.8 Bcf).

Expected daily production was estimated to be in the order of 120,000 cubic metres/day (4.2 mmscf/d) for a period of more than three years, assuming two wells were drilled.


Summary

Over the last 6 months there has been a comprehensive review of the Company’s, Castello, Sillaro, Fantuzza and Bezzecca projects. These reviews in the case of Castello and Sillaro have incorporated initial production history. A summary of the updated Company’s reserves and resources is shown in the follow table.


Key priorities for the next 12 months will be to maintain steady production from Sillaro, drill Vitalba-1dirA to bring the Castello field back into production, farmout and drill Fantuzza-1, shoot new seismic on Sant Alberto, and progress the Correggio project.

Sillaro - Fantuzza cross section


MEDIA CONTACTS:

Michael Masterman
Po Valley Energy
0417 851 303

Kevin Skinner
Field Public Relations
(08) 8234 9555 / 0414 822 631


Competent Person’s Statement

Information in this report that relates to Hydrocarbon Reserves and or Resources is based on information compiled by Mr Giovanni Catalano, Deputy CEO and COO of Po Valley Energy who have consented to the inclusion of that information in the form and context in which it appears. Mr Catalano has over over 30 years experience in Exploration and Development in the Oil and Gas Industry. He is a member of SEAPEX and AAPG and holds a master Degree in Geology from the University of Ferrara. All information on this release has been prepared under Mr Catalano’s supervision in the form and context in which it appears.

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