Borders & Sth. Regulatory News (BOR)

21 Jan 2009 07:00



21 January 2009

Borders & Southern Petroleum plc

("Borders & Southern" or "the Company")

Operational Update - Initial Review of 3D Seismic Interpretation

Borders & Southern is pleased to announce an initial review of its 3D seismic interpretation. The 3D survey, acquired in 2008, covers an area of 1,492 sq km, representing approximately 7.6% of Borders & Southern's total licensed area. The survey was designed to target some of the largest high-graded leads that had been identified on the Company's 2D seismic data. 

Whilst the technical interpretation will continue, the initial phase is now complete. The Directors believe that all of the Company's pre-3D objectives have been achieved. These were: to reduce the technical risk; to deliver a high quality prospect inventory; to validate the direct hydrocarbon indicators identified on the 2D seismic lines; and to identify well locations on prioritised prospects. Below we describe the key play fairways mapped along with two prioritised prospects.

The technical work has highlighted three principal play fairways: 

• A seismic amplitude supported Lower Cretaceous play fairway, 

• An Upper Cretaceous / Lower Tertiary structural play fairway

• A Tertiary seismic amplitude supported play fairway.

Within these play fairways, multiple prospects have been generated that, in common with analogous geological settings, could deliver in the success case multi-billion barrels of total recoverable reserves.

The 3D has revealed plenty of evidence for hydrocarbon generation and migration in the area. This includes a chain of five anticlines with gas hydrates located above the crests or slightly displaced on the asymmetric limb of the folds. Additionally, there are many seismic amplitude anomalies throughout the survey area.

Lower Cretaceous play fairway

The Lower Cretaceous play fairway comprises sandstone reservoirs within tilted fault blocks and submarine fans. The prospects are enhanced by seismic amplitude anomalies that display a strong AVO response which could be indicative of hydrocarbons. Our prioritised prospect within this play fairway is the Darwin prospect. In detail, it comprises two separate tilted fault blocks but which may be joined as one large accumulation. This prospect is located up dip of a regional migration pathway to a large source kitchen. Down dip of the prospect location, the source rock is modelled to be currently sitting in the oil generation window and therefore oil is the most likely hydrocarbon phase to be encountered.

The prospect is structurally robust, partly fault and dip closed. There is a strong AVO anomaly associated with the target reservoir which clearly switches off at the bounding faults and at a closing contour on the dipping surface. The total measured area for the AVO anomalies is 26 square kilometres. Potential P50 recoverable reserves estimated for the area defined by these AVO anomalies alone are 300 million barrels. However, if the accumulation extends down to the mapped closing contour then the accumulation would be significantly larger. This prospect has the added attraction of potentially deeper reservoir targets that fall within structural closure leading to the possibility of stacked reservoirs.

Upper Cretaceous / Lower Tertiary structural play fairway

The Upper Cretaceous / Lower Tertiary structural play fairway comprises sandstone reservoirs within major structural closures measuring up to 150 square kilometres. Our prioritised prospect within this play fairway is the Stebbing prospect. It has a structural closure measuring 85 square kilometres. The structure is a simple fold with four way dip closure and a thrust located in its core. 

There is a well developed gas hydrate above the crest of the fold a few hundred metres below the sea bed. Potential P50 recoverable reserves for the Upper Cretaceous / Lower Tertiary reservoir are 570 million barrels of oil. Additional reserves from the possibility of stacked reservoirs occur deeper within the structure. If this play fairway is successful, there are numerous robust structural closures within the portfolio that could deliver very large volumes of hydrocarbons.

Tertiary seismic amplitude supported play fairway

The Tertiary seismic amplitude supported play fairway comprises Tertiary deep water distributary sandstone reservoirs partly stratigraphically trapped within structural closures. The play is marked by strong seismic AVO anomalies which could be indicative of hydrocarbons. The play extends over several structural culminations including the Stebbing prospect. Potential P50 recoverable reserves estimated for the Tertiary reservoirs in the Stebbing structure are 710 million barrels of oil.

Prioritised prospects

The Darwin prospect has been prioritised due to its robust structure, its location at a migration focus within the basin, and the strong AVO support. There are good analogues for this prospect within the Magallanes Basin located a few hundred kilometres to the west of this area where reported recoverable basin reserves have yielded approximately 6 billion barrels of oil equivalent.

The Stebbing prospect has been prioritised due to the ability to test two separate play fairways, strong AVO anomalies at one reservoir level and the presence of a gas hydrate above the structure.

The Darwin and Stebbing prospects are currently assessed as having the best chance of success and will be progressed to drill-ready status. Other than sharing the same source rock they are completely independent, allowing different aged rocks and different trapping configurations to be tested. Whilst these two prospects are currently the preferred first tests, the prospect inventory now has significant depth and with additional work alternative prospects may be high-graded. 

If success is achieved during the initial drilling programme there is plenty of scope for developing the prospect inventory outside the current 3D area. The mapped play fairways extend outside of the survey area and leads have already been identified. 

With the initial interpretation phase completed it is the Directors' intention to seek partners in order to help finance the drilling programme. This will be initiated in the first quarter of 2009. With relatively low oil prices and mid to large exploration companies reducing their discretionary expenditure this is clearly not the optimum time for seeking partners but the Board believes that is has some high quality prospects of significant scale which hopefully should attract interest.

Commenting on the 3D results Harry Dobson, Borders & Southern's Chairman said: 

"We're delighted with the outcome of the 3D interpretation. The prospects are large, offering attractive and exciting drilling targets. The two independent prospects, Darwin and Stebbing, are excellent examples of the quality and depth of the Company's exploration portfolio. Due to the seismic amplitude support for these prospects, the Directors believe that they offer relatively low exploration risk for an untested frontier basin. As a consequence, the Directors have increased confidence in the ability of the portfolio to deliver commercial success for our shareholders".

Notes

Care should be taken when reviewing prospect reserves in undrilled frontier basins. In the absence of hard geological data from well penetrations judgements have to be made about input parameters into the reserves calculation. However, confidence can be placed on the prospect aerial closures as these are based on maps generated from 3D seismic interpretation.

The prospect names are based on crew members and passengers of HMS Beagle which stopped in the Falkland Islands during its famous voyage to the Galapagos Islands and surveying work of South America. In 2008 it was the 175 year anniversary of the Beagle's visit to the Falkland Islands. 

REVIEW BY QUALIFIED PERSON, QUALITY CONTROL AND REPORTS

The results of the Company's technical evaluation have been reviewed, verified and compiled by the Company's geological staff (including Dr Howard Obee, a petroleum geologist with over 20 years relevant experience, Fellow of the Geological Society and member of the American Association of Petroleum Geologists and the Petroleum Exploration Society of Great Britain) for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects.

For further information, please visit www.bordersandsouthern.com or contact: