Wahoo

[Kaliboo]

Some weekend reading material while we wait on results from Wahoo.

Here is another couple of excerpts from the Black Bass-1 Drilling Reports:

“- Although well off the structural high, the Black Bass -1 well penetrated the Wedge Hill Limestone and logs indicated it has significant reservoir potential with log derived porosity of 15% to 18% and a gross thickness of approximately 587 feet (179 meters). The limestone formation covers a large portion of the coastal exploration licence resulting in a number of future drilling opportunities.
- Analysis of the Talama Volcanic Formation has revealed a lower porosity section with several large fracture/fault intervals with unconsolidated sands. Detailed review of the wireline logs strongly suggested that the permeability in this interval is related to fracturing and the unconsolidated zones.
- DST's were conducted over two zones: 3,100 - 5,150 feet (945 - 1,570 meters) and 5,226 - 5,383 feet (1,593 - 1,641 meters).
- Within the upper zone minimal flow of mud returns was observed during the DST, following the introduction of high mud weights to the formation.
- The DST in the deeper zone flowed formation water with gas (90% C1) cut, confirming elevated gas saturation levels in the Talama Formation. The test was terminated due to collapse of formation solids (sand, silt and gravel) into the test string. The flow was closely correlated to a fracture identified on the wireline logs.
Several features at the structural high near the Black Bass-1 well will be delineated with a seismic program to define locations for offset wells at Black Bass and should be completed while drilling is in progress in PPL237 and PPL238. The rig on Black Bass will be moved to the Triceratops well site for drilling.”

And the last report:

“Second Quarter 2005 Drilling Activities
• We spudded the first exploration well, the Black Bass – 1, of our 8-well drilling program on
April 26, 2005.
• As its primary objective, this well was programmed to test a seismic anomaly, the reservoir
potential of the Wedge Hill Limestone and the Talama Formation.
• Drilling the well has confirmed that the anomaly encountered at 3,287 feet is from a sandstone and shale sequence consistent with a fluvial system.
• Confirmation of reservoir quality sandstones and limestones was achieved, with liquid-rich natural gas in the sandstone sections, which was flared at surface during drilling.
• The Black Bass – 1 well has been plugged and abandoned. Further seismic and geological work will be necessary to determine a path forward.
• Subject to seismic and geological work, additional wells will need to be drilled to confirm the structural highs and regional extent of the reservoirs discovered.
• The results of the Black Bass – 1 have confirmed a regional play and a larger exploration opportunity along the coast for the limestone and sandstone systems, and that the oil system is positively charged with hydrocarbons.”

What can we conclude from the above reports that might help us understand what we might expect at Wahoo?

1. They thought the Wedge Hill Limestone was higher than they found it.
2. The seismic anomaly they thought was the Wedge Hill Limestone was actually a sandstone and shale sequence consistent with a fluvial system.
3.The sandstone and shale sequence was above the Wedge Hill Limestone.
4. The Wedge Hill Limestone was 587 feet thick.
5. The Wedge Hill Limestone had a log derived porosity of 15 - 18%.
6. The Talama volcanics zone was below the Wedge Hill Limestone and consisted of both a low porosity fractured zone and an unconsolidated sand.
7. The DST of the lower (Talama) zone was across the interval 5,226 - 5,383 feet, so we might conclude that the Talama was 157 feet thick.

So we could have three zones that could qualify as reservoir rock. The sands above the Wedge Hill Limestone, the Wedge Hill Limestone itself and low porosity fractured Talama zone which was on top of an unconsolidated zone of sand and gravel. The comment from the drilling report: “The test was terminated due to collapse of formation solids (sand, silt and gravel) into the test string.” is not surprising in hindsight. You can not test an unconsolidated zone in open hole without expecting it to collapse into the hole during the test. I would expect an unconsolidated zone of sand and gravel to have a porosity in excess of 30%. In order to properly test such a zone they will need to set casing through it and perforate the zone of interest and test it inside of casing. If the zone is found to be productive of either oil or gas it will probably have to be “gravel packed”  to keep the sand and gravel from entering the well bore with the produced fluid (oil or gas).

If the Wedge Hill Limestone comes in lower than expected again at Wahoo-1 it is probable that the seismic has again been misinterpreted and the anomaly they thought was the top of the limestone was actually the sand/shale sequence above the limestone. I believe over pressured shale and thick gas filled porous zones can give them some problems in interpreting the travel time through the formations. The Talama zone has been reported to have a distinct seismic signature and if it is a high porosity zone filled with gas it would probably be even more distinct.

If we do have a reef build up on the limestone platform, I would expect to see a thicker zone with better porosity than was seen at Black Bass.

I believe they will have set a string of casing (9 5/8”?) above the first productive zone. If the upper zone is over pressured they will have to use high mud weight to continue drilling. If they encounter a very high porosity or fractured zone in either the Wedge Hill Limestone or the Talama formation they will likely lose circulation with the high mud weight which will probably force them to convert over from conventional drilling to managed pressure drilling. If all of this transpires the next problem will be to keep the hole open for logging and coring and  then getting the liner (7”?) to the bottom of the hole for cementing and testing the lower zone. After testing the lower (Talama) zone we will move up the hole and test the Wedge Hill Limestone and any prospective sandstones above the limestone. I assume each of the three or more reservoir zones will be tested individually if the logs and cores show them to be prospective for oil or gas.

Thanks for the nicely done summary.  Given the well estimates of 60 and 90 days for these wells, it sounds like all the DST work was intended to be conducted in open hole.  And the reports you provided above clearly indicate uncemented sands were flowing into the test string in the Black Bass well.  But it seems likely based on the above reports they should have planned on running casing, perforating and installing a gravel pack in order to do a production test for the Wahoo well at least.  Of course that takes a whole lot longer and cost a lot more.  If we have to do that then we ought to just plan on making it a keeper, i.e., not an expendable well.  A poor boy approach such as running screens on the test string is likely to just plug up and/or cut out and fill up the string with sand based on Black Bass experience.  So if they didn't plan for this correctlly, that could be yet another reason for   the delay in reporting.

Wahoo's delay has now caught up with Bobcat's 90 day end point.  I guess from here on we could hear from either one first or both at the same time, but hopefully well before Rapto's 90 day end point which I believe is June 27.  By July 4 I'm hoping IOC will be skyrocketing with some shock and awe.

[Palm]

Thanks Pet! Great explanation.

[Getitrt2]

Extremely interesting and helpful, Pet, even for a non-industry guy like me. Thanks!

Why would they not have considered Black Bass a "discovery", just couldn't confirm enough gas at that point and needed to drill another well at structural highs first?

Do you think based on your analysis of Black Bass that issues such as these explain and justify the delay we are seeing? Given the experience with Black Bass, shouldn't they have foreseen its taking longer? You still see a very high probability of a material discovery, right?

[Getitrt2]

Thanks for your interesting comments, Kaliboo. I sure hope your hopes are fulfilled, and at least part of them by June 24!

[sageo]

Thanks for your interesting comments, Kaliboo. I sure hope your hopes are fulfilled, and at least part of them by June 24!

Getit- Good day to you ! May I add a big"ME TOO" to that !  And again 'thanks' to Pet and Kaliboo for all your fine work you do for our benifit.

[trans]

I'll give an interesting guess on this. Going back to Peteng's 4300 ft on 4/24, I come up with the following timeline:
I estimate (layman's est) 55 ft per day "slow" drill time from the 4/24 point. (Without problems, in the past it generally figured out 107-8 ft. per day). If I accept Peteng's 6500 ft TD est, that gives me 40 days from 4/24 to total depth. Plus 1 week (7 days for other work). -6 days finishes April, -31 days takes care of May. Plus the 7 days other work. That figures out to June 10th as an estimate when this well would be theoretically completed. That's tomorrow. Now let's see how close this comes to the actual timing......trans

[johnwgrant]

I'll give an interesting guess on this. Going back to Peteng's 4300 ft on 4/24, I come up with the following timeline: I estimate (layman's est) 55 ft per day "slow" drill time from the 4/24 point. (Without problems, in the past it generally figured out 107-8 ft. per day). If I accept Peteng's 6500 ft TD est, that gives me 40 days from 4/24 to total depth. Plus 1 week (7 days for other work). -6 days finishes April, -31 days takes care of May. Plus the 7 days other work. That figures out to June 10th as an estimate when this well would be theoretically completed. That's tomorrow. Now let's see how close this comes to the actual timing......trans

But - will we hear when they reach TD, or, only after all "testing" is completed?    For some of their other wells the testing has gone on for almost as long as it took to drill the well to TD!!!   (maybe not a fair statement given that they were doing horizontal drilling...)  

*** WE ARE PAST DUE -- InterOil should give us a status report !!!  ***

[petrengr1]

Some weekend reading material while we wait on results from Wahoo.

Here is another couple of excerpts from the Black Bass-1 Drilling Reports:

“- Although well off the structural high, the Black Bass -1 well penetrated the Wedge Hill Limestone and logs indicated it has significant reservoir potential with log derived porosity of 15% to 18% and a gross thickness of approximately 587 feet (179 meters). The limestone formation covers a large portion of the coastal exploration licence resulting in a number of future drilling opportunities.
- Analysis of the Talama Volcanic Formation has revealed a lower porosity section with several large fracture/fault intervals with unconsolidated sands. Detailed review of the wireline logs strongly suggested that the permeability in this interval is related to fracturing and the unconsolidated zones.
- DST's were conducted over two zones: 3,100 - 5,150 feet (945 - 1,570 meters) and 5,226 - 5,383 feet (1,593 - 1,641 meters).
- Within the upper zone minimal flow of mud returns was observed during the DST, following the introduction of high mud weights to the formation.
- The DST in the deeper zone flowed formation water with gas (90% C1) cut, confirming elevated gas saturation levels in the Talama Formation. The test was terminated due to collapse of formation solids (sand, silt and gravel) into the test string. The flow was closely correlated to a fracture identified on the wireline logs.
Several features at the structural high near the Black Bass-1 well will be delineated with a seismic program to define locations for offset wells at Black Bass and should be completed while drilling is in progress in PPL237 and PPL238. The rig on Black Bass will be moved to the Triceratops well site for drilling.”

And the last report:

“Second Quarter 2005 Drilling Activities
• We spudded the first exploration well, the Black Bass – 1, of our 8-well drilling program on
April 26, 2005.
• As its primary objective, this well was programmed to test a seismic anomaly, the reservoir
potential of the Wedge Hill Limestone and the Talama Formation.
• Drilling the well has confirmed that the anomaly encountered at 3,287 feet is from a sandstone and shale sequence consistent with a fluvial system.
• Confirmation of reservoir quality sandstones and limestones was achieved, with liquid-rich natural gas in the sandstone sections, which was flared at surface during drilling.
• The Black Bass – 1 well has been plugged and abandoned. Further seismic and geological work will be necessary to determine a path forward.
• Subject to seismic and geological work, additional wells will need to be drilled to confirm the structural highs and regional extent of the reservoirs discovered.
• The results of the Black Bass – 1 have confirmed a regional play and a larger exploration opportunity along the coast for the limestone and sandstone systems, and that the oil system is positively charged with hydrocarbons.”

What can we conclude from the above reports that might help us understand what we might expect at Wahoo?

1. They thought the Wedge Hill Limestone was higher than they found it.
2. The seismic anomaly they thought was the Wedge Hill Limestone was actually a sandstone and shale sequence consistent with a fluvial system.
3.The sandstone and shale sequence was above the Wedge Hill Limestone.
4. The Wedge Hill Limestone was 587 feet thick.
5. The Wedge Hill Limestone had a log derived porosity of 15 - 18%.
6. The Talama volcanics zone was below the Wedge Hill Limestone and consisted of both a low porosity fractured zone and an unconsolidated sand.
7. The DST of the lower (Talama) zone was across the interval 5,226 - 5,383 feet, so we might conclude that the Talama was 157 feet thick.

So we could have three zones that could qualify as reservoir rock. The sands above the Wedge Hill Limestone, the Wedge Hill Limestone itself and low porosity fractured Talama zone which was on top of an unconsolidated zone of sand and gravel. The comment from the drilling report: “The test was terminated due to collapse of formation solids (sand, silt and gravel) into the test string.” is not surprising in hindsight. You can not test an unconsolidated zone in open hole without expecting it to collapse into the hole during the test. I would expect an unconsolidated zone of sand and gravel to have a porosity in excess of 30%. In order to properly test such a zone they will need to set casing through it and perforate the zone of interest and test it inside of casing. If the zone is found to be productive of either oil or gas it will probably have to be “gravel packed”  to keep the sand and gravel from entering the well bore with the produced fluid (oil or gas).

If the Wedge Hill Limestone comes in lower than expected again at Wahoo-1 it is probable that the seismic has again been misinterpreted and the anomaly they thought was the top of the limestone was actually the sand/shale sequence above the limestone. I believe over pressured shale and thick gas filled porous zones can give them some problems in interpreting the travel time through the formations. The Talama zone has been reported to have a distinct seismic signature and if it is a high porosity zone filled with gas it would probably be even more distinct.

If we do have a reef build up on the limestone platform, I would expect to see a thicker zone with better porosity than was seen at Black Bass.

I believe they will have set a string of casing (9 5/8”?) above the first productive zone. If the upper zone is over pressured they will have to use high mud weight to continue drilling. If they encounter a very high porosity or fractured zone in either the Wedge Hill Limestone or the Talama formation they will likely lose circulation with the high mud weight which will probably force them to convert over from conventional drilling to managed pressure drilling. If all of this transpires the next problem will be to keep the hole open for logging and coring and  then getting the liner (7”?) to the bottom of the hole for cementing and testing the lower zone. After testing the lower (Talama) zone we will move up the hole and test the Wedge Hill Limestone and any prospective sandstones above the limestone. I assume each of the three or more reservoir zones will be tested individually if the logs and cores show them to be prospective for oil or gas.

Thanks for the nicely done summary.  Given the well estimates of 60 and 90 days for these wells, it sounds like all the DST work was intended to be conducted in open hole.  And the reports you provided above clearly indicate uncemented sands were flowing into the test string in the Black Bass well.  But it seems likely based on the above reports they should have planned on running casing, perforating and installing a gravel pack in order to do a production test for the Wahoo well at least.  Of course that takes a whole lot longer and cost a lot more.  If we have to do that then we ought to just plan on making it a keeper, i.e., not an expendable well.  A poor boy approach such as running screens on the test string is likely to just plug up and/or cut out and fill up the string with sand based on Black Bass experience.  So if they didn't plan for this correctlly, that could be yet another reason for   the delay in reporting.

Wahoo's delay has now caught up with Bobcat's 90 day end point.  I guess from here on we could hear from either one first or both at the same time, but hopefully well before Rapto's 90 day end point which I believe is June 27.  By July 4 I'm hoping IOC will be skyrocketing with some shock and awe.

Kaliboo - If they can get the liner to TD and cemented in place I believe they can test the unconsolidated Talama zone (if present). The unconsolidated zone of sand and gravel will be supported by the casing and cement. There will likely be some sand production along with the oil or gas but I think they can get a test of the zone whether or not it is oil or gas. I do not think they will plan to gravel pack the well just for the test but a producing well will require a gavel pack installation to prevent sand production over the long term.

Regarding the drilling time estimates of 60 days at Wahoo and 90 days for Raptor and Bobcat, I think the estimates were probably all a bit optimistic. Yes, they should be able to drill wells to that depth if they were trouble free wells but they will probably not be trouble free. I have not recently checked the drilling time on all of the wells drilled by IOC at Elk, Antelope and Triceratops but, as I recall, all of the wells have required more than 90 days and none of them were near as deep as the planned TD of Raptor or Bobcat.
I think the 60 day estimate for Wahoo was just based on the well being much more shallow than Raptor and Bobcat and they had already put out the 90 day estimate on those wells. So if all of the three wells have not been trouble free we probably should expect all of them to take more time than originally estimated. We might have been given a hint by the length of the Raptor drilling contract which was 150 days.

I expect some kind of an update on Wahoo before we see any “results” from Raptor and Bobcat. As we know Bobcat has been delayed by having to drill at least two sidetracks in the shale zone above the Puri Limestone. Bobcat was spud 23 days before Raptor but it is probably running behind Raptor at this point.
I would expect to hear results from Wahoo before the other two wells. We may get something on Wahoo before  the June 24th AGM but we should at least get an update on all of the wells on the presentation made for the AGM.

[Palm]

Once more, from the Q1 results Q&A on when they said they will report results:
"
Okay. Fair enough. And just a small procedural question, if I may, on the three wells currently drilling. Are you planning to disclose results on each one separately or will it be kind of a package announcement when all of them are completed?

Dr. Michael Hession - Chief Executive Officer
That’s an excellent question, Pavel and I have been paint to talk about the importance of the portfolio approach. We’ve got to look at this in terms of the portfolio and as I said, we’ve put our 11 years, numerous prospects and we worked our way through delivering value in that portfolio. However, we will disclose results as soon as we have them on each well.

Pavel Molchanov - Raymond James
Okay, clear. Very clear. Appreciate it.

Dr. Michael Hession - Chief Executive Officer
Thanks, Pavel.

Operator

The next question is from the line of Chris McDougall with Westlake Securities. Go ahead, sir.

Chris McDougall - Westlake Securities
Hello, gentlemen. Thanks for the detailed updates. Michael, on the exploration program, building up of Pavel’s question, what should we expect in the way of data for each well? I mean, are you doing your standard wireline logs, are you going to be doing production tests, what will define your certain degrees of success and such before we get there, it would be nice to have an outline?

Dr. Michael Hession - Chief Executive Officer
It’s a pleasure to answer detailed oil and gas questions given the background. Wireline logs, of course we will do the wireline suite. And it will be the complete conventional suite that one uses to determine whether we have a discovery or not. We will then make certain decisions in terms of -- okay, what we find. We will make a decision on whether we test the thing depending on what we find and depending what we see from the logs. So, I can tell you unequivocally, we will have a full suite of wireline logs and then we will have discussions about side wall core programs, BSPs and indeed potentially testing. So it’s going to be box standard oil and gas field practice. So does that help, Chris?

Chris McDougall - Westlake Securities
Sure. So, I guess I was trying to get an outline for, will it be a successful well or not? I would assume, if you don’t do a production test, that would maybe a little bit less confidence about the success and if you do a production test. But please correct my initial impression before we get there.

Dr. Michael Hession - Chief Executive Officer
Let me jump in there straight away. That’s often not the case. You can get particularly on unequivocal answers from wireline logs. I mean, we’ve got to remember, the conventional decisions will be made around testing and there are scenarios where you get such a good result and such good harpoon for instance, such good properties, such good gas saturations that you don’t need to do a test. So it’s not a black and white answer and we will work through as we do on the day and we will wait for those results.

Chris McDougall - Westlake Securities
Okay. Great. Thanks. And then updating on the particular wells, could you give us kind of the latest depth where you are at Wahoo-1, Raptor-1 and Bobcat, the side track?

Dr. Michael Hession - Chief Executive Officer
Chris, I won’t be doing that simply because we’ve said that we will disclose what’s material and we will be disclosing what we’ve got in terms of discoveries or not, on resource side during -- at the appropriate time."

As Pet and Kaliboo have said, there appear to be several things they may have encounterered and they said they will decide testing etc based on what they encounter. They will report when everything for a well is complete and/or they have something material which requires reporting. They know what this means much better than we do.

[Libtardius Maximus]

Thanks palm. Now if we can just get the IOC stock symbol changed to WAIT. Is it too late to put on the ballot for the AGM that is now just 15 days away?