January 9, 2015
Valley Energy Ltd (ASX: PVE) would like to update the market on the
Sillaro field’s remaining reserves and near-term production forecast.
In October we reported a significant reduction in Sillaro production from 50,000 to around 25,000 cubic metres per day1
. Since this time, together with specialist advisors, we have been
analysing the cause of the change and the implications for residual
reserves. The production reduction has been caused by depletion of
several reservoirs and water arrival and associated sand production from
some completions. Furthermore, the early water arrival in the major
C2-C1 completion has led to a significant reduction in the estimate of
remaining reserves on a directly comparable basis.
In light of the above, Po Valley has recently completed a comprehensive
re-evaluation of the residual potential of the field. A medium term plan
currently being developed for implementation is the redrill (sidetrack)
of Sillaro-1. This new deviated wellbore would provide a new depletion
point for the Sillaro Pliocene reservoirs and would additionally develop
the Miocene reservoir located in the Sillaro license. The
Miocene reservoir includes the western accumulation of the Fantuzza
structure (former Eni gas field called “Budrio”) which extends to the
exploration license Crocetta (100% owned by Po Valley).
Given the technical and commercial viability of this plan and in
accordance with SPE- PRMS standards Po Valley has reclassified 41 MMscm
(1.45 bcf) of gas from the Miocene reservoir, previously classified as
Contingent Resources (C2), to the Probable Reserves (P2) category.
The Sillaro-1 side-track project will optimize production of the
remaining reserves from the Sillaro Pliocene reservoirs along with the
development of the Miocene target. The current surface facilities will
be used for all production. Tentative plans are for this work to be
carried out late in 2015, it is anticipated that this project will
restore Sillaro production rates to above 60,000 cubic metres per day.
Importantly, implementation of the Sillaro-1 side-track development
requires regulatory approval and an adequate funding arrangement. These
are being progressed.
1 Refer to the September Quarterly Activities Report dated 31 October 2014
Estimates of recoverable volumes including the Miocene reservoir are set out in the table below:
Notes to the table:
||Reserve estimate as at
December 31, 2013
||Reserve estimate as at
December 31, 2014
|P1 ( “Proved”)
|P2 ( “Probable”)
|2P (“Proved + Probable”)
- The Company owns 100% of the Sillaro Field
- Reserve assessments are estimated in accordance with SPE‐PRMS standards.
- Further detail on the reserve assessment is outlined in the additional information contained on page 3 to 5
- We note that the reclassification of a portion of the Miocene target
(formerly the western accumulation of the Fantuzza structure) to
Sillaro Probable Reserves (P2) implies a consequent reduction in
2C Resources for Fantuzza. Specifically 41 MMscm (1.45 bcf) of
Fantuzza 2C Resources have been moved to Sillaro P2 reserves.
Consequently Fantuzza resource volumes as published in the Company’s
2013 Annual Report will change as follows: Fantuzza 1C 12 MMsmc (0.36
bcf); 2C 122 MMsmc (4.26 bcf); 3C 196 MMsmc (6.86 bcf).
Production is anticipated to continue at a rate of between 10,000 and 30,000 cubic metres per day for the next several months.
Po Valley Energy
+39 06 4201 62 75
In accordance with the new ASX Listing Rules (Chapter 5) applicable to
the reporting of oil and gas activities and reserves for oil and gas
projects, additional detailed information is provided in the table
Basis for confirming the existence of a significant quantity of potentially moveable hydrocarbons
The existence of a significant quantity of potentially moveable
hydrocarbons is confirmed by the historical performance of the field.
The Miocene reservoir has been previously intersected by 7
wells, with two wells extensively tested and produced between 1955
The entity must disclose the reference point for the purpose of measuring and assessing the estimated reserves
The reference point to measure and assess the estimated reserves
will be a turbine, located on the well’s site using non standard
cubic meters. The figure is standardised using a Fiorentini Fiomec
Calculator (FFC) which is a conversion consisting of gas temperature
and pressure with gas quality parameters. The outcome of this
conversion is the actual gas volume in
standard cubic metres injected in the SNAM gridline. The SNAM entry
point for Sillaro is 200 metres from site perimeters. The FFC prints a
production report which is authenticated by the Ministry of Economic
Development and this official data is then accepted by SNAM, the
Company’s customers and the Tax Authority.
Provide explanation as to the method used to prepare the estimates of reserves
The method used to prepare the estimates of Sillaro reserves is deterministic although guided by dynamic behaviour.
5. 32 The first time an entity reports estimates of petroleum
reserves in relation to a material oil and gas project that have
materially changed from when those estimates were previously reported:
The entity must provide an explanation of the new data and information
In 2014, there was a significant increase of the water production in Sillaro-1dir from the level C1+C2.
The entity must provide an explanation of how it has affected the estimates of petroleum reserves
By consequent, the level C1+C2 has been suspended and led to a
significant reduction in the estimate of remaining reserves on a
directly comparable basis.
The company subsequently carried out an evaluation of the residual
potential of the field. A medium term plan currently being developed
for implementation is the redrill (sidetrack) of
This new deviated well would provide a new depletion point for
the Sillaro Pliocene reservoirs and would additionally develop the
Miocene reservoir located in the Sillaro license. The remaining
reserves have been revised accordingly.
The entity must report any additions or changes to the information
provided under rules 5.31.1 to
While some of the information below does not
constitute a change, for the sake of completeness all relevant
information that was not disclosed prior to the adoption of the ASX
Listing Rules (Chapter 5) applicable to the reporting of oil and gas
activities and reserves for oil and gas projects is included below:
5.31.1 — Reserve estimates (under 1P, 2P and
3P scenarios) have been based on the future expenditure related to the
redrill (sidetrack) of Sillaro-1. Capital expenditure for this redrill
has been based off recent drilling and completion experience and
verified with key suppliers.
It is assumed that the life of the field is 11 years.
Economic considerations in confirming commerciality of the relevant
reserves include deducting from estimated revenues the estimated
operating costs, royalties and taxes. Operating costs have been forecast
based on current operating cost levels with a decline towards end of
Gas pricing assumptions are derived from market based (Brent futures) low and high price decks.
A post tax discount rate of 10% has been used.
5.31.2 - The Company holds a 100% equity interest and operatorship.
5.31.3 - The Sillaro Production Concession, located in
the Bologna province, was awarded in 2008. The Sillaro structure
consists of seven vertically stacked, gas charged Pliocene sands above
the Top Miocene reservoir of the former Budrio Field.
5.31.4 - Sillaro volumes estimates are reported in accordance with SPE/WPC/AAPG/SPEE Petroleum Resource Management System
The probable reserves for Sillaro are related to four levels: E2, D2+D3,
C0 and A which have been intercepted by the existing wells. Hence, the
hydrocarbons in these levels have been classified as Probable.
The possible reserves for Sillaro are based on better production
performance of the following levels: A, B, C0 and C1+C2. Estimates of
recoverable volumes are partly based on a simulation study for the Lower
Level of the Miocene.
The Company has conducted an economic evaluation to establish the value
of the Sillaro field with the revised reserves (1P, 2P, and 3P)
estimates. A point forward valuation has been generated using the
industry standard net present value (NPV) calculation determined from
the estimated future net cash flows of the Sillaro. The results of the
evaluation cconfirmed commercial producibility and booking petroleum
5.31.5 — All reported quantities will be recovered
through a deviated well of Sillaro-1 (sidetrack) or the currently
producing Sillaro 2 well. The current surface facilities (which are
already connected to the SNAM grid) will be used for all production.
5.31.6 - Tentative plans are for this work to be
carried out late in 2015. The development plan will require approval
from the Technical Office within the Italian Ministry of Economic
Development. Commercialisation of the gas will be achieved through the
existing off-take agreement or an alternative arrangement if deemed more
5.31.7 - The reported estimates of reserves do not relate to unconventional petroleum reserves.
There are no further changes or additions to information to report.
For first time reporting, an explanation of the new data and
information, how it has affected the resource estimates and any changes
Fantuzza volume estimates are reported in accordance with
SPE/WPC/AAPG/SPEE Petroleum Resource Management System.
Changes to the Fantuzza resource estimates are the result of a
simple reclassification of those volumes which lie directly under the
Sillaro field, can be accessed through the deviated well Sillaro-1 and
are located within the Sillaro Production Concession (i.e. the western
accumulation of the structure). There is no further new data or
information regarding Fantuzza to report.
As detailed in the table in the body of the media release, the
consequent reduction in Contingent Resources for Fantuzza when compared
to the Company’s 2013 Annual Report can be summarised as follows:
1C 12 MMsmc (0.36 bcf)
2C 122 MMsmc (4.26 bcf)
3C 196 MMsmc (6.86 bcf)
Bcf: Billion standard cubic feet
MMscm: Million Standard Cubic Metres
Qualified petroleum reserves and resources evaluator:
The information in this announcement that relates to Hydrocarbon
Resources is based on, and fairly represents, information and supporting
documentation prepared under the supervision of the Qualified Petroleum
Reserves and Resources Evaluator, Mr. Greg Short. Mr Short is a
Non-Executive Director of Po Valley Energy Limited, a geologist with
over 40 years of oil and gas industry experience and a member of AAPG.
He has consented to the form and context in which the
Reserves and the supporting information are presented in this
About Po Valley Energy:
Po Valley Energy (ASX: PVE) is an oil and gas production and exploration
company listed on the Australian Stock Exchange. It has an expanding
portfolio of hydrocarbon assets in northern Italy. Po Valley holds 11
license areas, encompassing 2,000 km2 and owns and operates
two gas treatment plants. The Po Valley region is the main gas
production zone in Italy. The Company’s web site is http://www.povalley.com
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