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North Sea Energy Highlights Bagpuss Well in Q2; Updates Ops

Share Print Bookmark    |    Tuesday,August 30,2016

North Sea Energy Inc. reported its financial results for the period ended June 30, 2016.

Statoil Bottom Hole Agreement

NSE announced on June 6, 2016 that it is a party to a 'Bottom Hole Contribution Agreement' between Statoil (U.K.) Limited and Premier Oil UK Limited, in its capacity as the P.1943 Operator as agent for the P.1943 Group in respect of the 13/25-1 Bagpuss well.

Under the agreement, Statoil will pay up to US$260,000 ($338,234) for data recovered from drilling and up to an additional US$175,000 ($227,658) for data from testing of the Bagpuss well under certain conditions. The initial amount is to be paid for the well data while drilling the Well and the subsequent amount for testing data, if applicable. North Sea Energy (UK NO2) Limited ("NSE2") is to receive payment for this data in proportion to its 15% working interest in the Bagpuss Licence P.1943.

The Drilling and Results of the Bagpuss Well

The spudding of the Well occurred on July 18th, 2016 although the Bagpuss operations commenced on July 14th, 2016 when Ocean Valiant offshore drilling rig left the Solan development and arrived on site at the Bagpuss prospect July 16th, 2016.

On August 5, 2016, NSE announced the Well results from Premier, the Operator, that the Well which was targeting the Bagpuss prospect on the Halibut Horst in the Outer Moray Firth reached a total depth of 1,532 feet (TVDSS) in granite basement. The Well was drilled approximately 2 km from the 1981 Amoco well in the same structure.

The Well encountered 41 feet of hydrocarbon-bearing sands within a 68 feet hydrocarbon column. This is in line with pre-drill estimates. The sands have between 25%-33% porosity and initial indications were that the oil is heavy which was expected. The Well was plugged and abandoned in accordance to the drilling plan.

Premier's Director of Exploration commented: "The Bagpuss well has successfully proven a significant volume of oil in place. We will now work with our partners to carry out a full analysis of the hydrocarbons and reservoir encountered with a view to ascertaining whether commerciality can be established."

NSE's costs relating to the Well have been carried by Maersk Oil UK. The Company is also funded for 50% of its costs on a Bagpuss subsequent well, should one be drilled, subject to a cap, through its farm-in agreement with Maersk Oil UK.

Premier's senior management espoused the following concerning the Bagpuss prospect:

• Bagpuss is a heavy oil discovery as anticipated and the well results came in on prognosis in terms of the reservoir;

• The analysis of the geochemistry of the samples collected is still going on, the results of which will tell us more about the flow properties of the oil in due course;

• The Bagpuss well was drilled on the Halibut Horst which is very large granite structure, so the reservoir is hotter when the granite is that close to the surface;

• The Bagpuss well confirmed a significant volume of oil in place;

• The temperature of the well was about the same temperature as the original 1981 Amoco well [44°C, 111°F] due to the raised geothermal gradient over the granite horst.

The Bagpuss Well, a vertical well, was always planned to be an informational well only and in accordance with the original Well Plan it was plugged and abandoned upon completion. Should development of the Bagpuss field take place, it would most likely be done with horizontal wells.

Corporate Update

NSE's forward plan is to review the analysis of the results of the Bagpuss well with the joint-venture partnership to ascertain the viability of the Bagpuss and Blofeld prospects. If the prospects are determined to be viable, NSE will vote to renew the P.1943 licence for an additional four (4) years commencing on December 31, 2016 as the conditions of the current licence appear to have been met. As the Operator releases additional data concerning the results of the Bagpuss well over the coming weeks and any decisions regarding licence renewal, NSE will announce the finding in accordance to TSX-V policy and in accordance to our Joint Venture Agreement (JOA) with the Bagpuss and Blofeld co-venturers.