Well said Haasko. I am still worried about formulating a...

Well said Haasko.

I am still worried about formulating a reasonable approximation of the cost of drilling Surprise East. I formulated a guestimate of the cost of Surprise R-1ST (drilled in Dec - Jan 2011-12) totalling $13,229,000. I took the figures from the exploration expenditure recorded in the 2 QARs for the relvant 6 months.

To make a comparison I have extracted some figures from the web site of PetroFrontier (PFC). The PFC/Statoil exploration campaign is on tenements that have a similar degree of remoteness to the Surprise locality. Perhaps PFC's tenements have a slightly superior access road. The landscape is similar. Drilling conditions would be roughly the same.

Summary of Statoil Farmin
Phase 1/2A - 2012 - 2014 Statoil spends (million USD) $65.0
Phase 2B - 2015 Statoil spends (million USD) $30
Phase 3 - 2016 Statoil spends (million USD) $80

I wanted to see how much drilling PFC got for the $65m contemplated by Phase 1/2A so I looked closely at the JV's precise exploration drilling program for that phase.

Three horizontal wells were drilled during 2011 - 2012 and so far in 2014 there have been 2 drilled (with a further 3 to go). So that is five (5) wells drilled from 2011 to June 2014 with a sixth underway as we speak. There are 2 more wells to go to complete the current 2014 drilling program (phase 2A).

That indicates a budget of $65m to cover a total of 8 wells and the necessary preliminary seismic. If well allow 12.5% of total budget for the seismic, it seems that the PFC/Statoil JV were budgeting around (very, very approximately) $7 m per well.

How does this compare with $13 m approximately as the indicated cost of Surprise R-1ST?

The PFC web site gives some help where it says that three of the 2014 wells will be based on a lower cost design and abandoned after obtaining the exploration data from them.

Also, it seems that the PFC/Statoil wells are not as "big" as was Surprise R-1ST. It was 2854 m measured depth plus 335 m horizontal. That is a much bigger project that was/were the PFC holes. We can see that from this PFC phase 1/2A data:

PFC Well #1: Oz-Alpha 1 (EP 104) drilled and cased in April of 2014. It was drilled to a depth of 1233m. Surprise R-1 ST was 2.5 times this magnitude of drilling.

PFC Well #2: Oz-Beta 1 (EP 127) drilled and cased in May of 2014. Depth was 1442m. Surprise R-1 ST was 2.2 times this magnitude of drilling.

PFC Well #3: Oz-Gamma 1 (EP 103) recently spud and planned to be drilled to a depth of approximately 1200m. Surprise R-1 ST was 2.66 times this magnitude of drilling.

PFC Well # 4: Oz-Delta 1 (EP 128) planned to be drilled to a depth of approximatly 1000m. Surprise R-1 ST was 3.2 times this magnitude of drilling.

PFC Well #5: Oz-Epsilon 1 (EP 128) expected to be drilled to approximately 900m. Surprise R-1 ST was 3.5 times this magnitude of drilling.

So I am beginning to think that the 2011-12 Surprise R-1 ST mobilisation and drilling costs of $13 m were within the ball park.

Yes, Surprise East drilling costs would have been covered if we had drilled in February - March of 2014 but I fear that now we will not have enough of that fund left in the Sep quarter of 2014 to cover the likely cost.