April 16, 2012 Market Release (via electronic lodgement) Project Updates Bowtie West—Eagle Ford Permian Golden Gate Petroleum Ltd (ASX: GGP) is pleased to provide an update of operational activities in our active Texas projects. VALLEY No 1 WELL DRILLING DATE Bowtie West Sugar Valley #1 Well, Matagorda County, Texas, Non Operator 10% WI The Sugar Valley #1 well spudded on 23 March 2012 and the well is presently drilling ahead at a TVD of 11,364 feet and will be drilled to a depth of 13,000 feet. Electric logs will be run once reaching total depth. The Sugar Valley # 1 well will be testing a Vicksburg sandstone reservoir known as the Tex 2 formation and shallower Frio sandstone reservoirs. The Bowtie prospect is a moderately risked exploration prospect with prospective resources recently estimated by the operator at 30 billion cubic feet of gas on a high side resource calculation basis and approximately 540,000 barrels of oil assuming a gas oil ratio reported in a down dip well which produced from the same structure back in the early 1970s. It would most likely require three wells to produce the in place high side resource potential of the Bowtie West Prospect. Eagle Ford Project, Dimmit and LaSalle Counties, Texas, Non Operator 10% WI The initial well to be drilled on the Eagle Ford Prospect is expected to commence in early May. The road and drill site (West 1A pad) have been completed. The Pioneer rig 28 is contracted and is expected to finish current operations within the next 10 days and commence mobilization shortly thereafter. The new project covers approximately 3,400 acres in the oil window of the Eagle Ford Trend and involves drilling 40+ horizontal development wells. The operator and prospect promoter estimate resource potential of 15 million barrels of oil equivalent (BOE) gross (net to GGP approximately 1.5 million barrels) for the leasehold position. The depth of the Eagle Ford Shale in this area is around 8,200 feet with a shale thickness of approximately 175 feet. Well costs are estimated at US$7.5 million with a drilling time of three weeks. The lateral length of the horizontal wells is planned for 4,500 feet and is expected to contain 12 to 16 frac stages. Initial production rates range from 600 BOE per day to 1,300 BOE per day. Estimated ultimate recovery per well is in a 362M BOE to 500M BOE range. Permian Project, Reagan and Irion Counties, Texas, Operator 100% WI SRH 1 Well, our first well drilled in the Permian project continues to serve as our “test hole” as we investigate various completion techniques, review results from initial fracture stimulation programs, monitor production from the Wolfcamp intervals which have been isolated from the other intervals above and below. One result of our testing program thus far has been the discovery of a new productive lower Wolfcamp interval which is often referred to as the Cline shale. None of the surrounding wells on adjacent acreage had drilled deep enough or tested the Cline shale. The initial test results from the Cline shale completion are very encouraging and make this interval a potential candidate for its own horizontal drilling program. At the end of Wolfcamp testing program in the SRH 1 well, we will be completing the well in the Spraberry Dean intervals with an added 5 stage fracture stimulation program. Both the Wolfcamp and Spraberry Dean intervals will then be put on commercial production. SRH 2 Well has been prepared for a 5 stage fracture stimulation program in the Spraberry Dean formation after having individually tested the Wolfcamp and Cline intervals over the last couple of months while gaining necessary information of each interval’s performance for our horizontal drilling program. The SRH 1 and SRH 2 wells will undergo their fracture stimulation programs at the same time primarily to reduce completion costs. Both wells will then be put on commercial production. SRH 3 Well is on production with a new pumping configuration and is working effectively. Current production is running approximately 90 bbls per day of high gravity oil and gas/gas liquids. SRH 4 Well has successfully undergone an 8 stage fracture stimulation program in the Spraberry Dean and Wolfcamp intervals. The Strawn and Cline intervals have been isolated after gathering data primarily from the Strawn interval. These intervals will be evaluated for future development. Initial frac fluid has been produced and a pumping unit is expected to be installed this week with the well being put on commercial production similar to the SRH 3. All the fracture stimulation programs have been planned and implemented with the guidance and assistance of Halliburton while using their latest completion programs. We have been very pleased with the Halliburton performance, the technical advice provided and efficiency of their operations. SRH 5H Well and 3 D Seismic. Planning for our first horizontal well continues to progress along with negotiations on participating in a new 3 D seismic program. Recent studies are confirming that our leasehold position is an excellent area to achieve successful stimulations, applications of latest technologies and high cost effective production rates. We believe that the current leasehold position could contain three intervals that can be horizontally drilled and fracture stimulated. The assessment increases the potential of the current acreage “multi fold” over our original estimates. Project Partnering. The Company has been in discussions with other oil and industry related companies interested in partnering with us in the development of our acreage position which now appears to represent a project several times larger than originally estimated. A partner in this project would provide the added capital to take advantage of the multiple intervals that have the potential for horizontal drilling. It would also accelerate the development program to GGP’s financial benefit. These discussions have advanced considerably over the last few weeks. Technical assessments by others interested in participating in our proposed Wolfcamp development confirm the high quality of the rock properties for successful fracture stimulation. We are anticipating that these discussions could lead to an announcement by the end of May on a multi well horizontal drilling program commencing this year. New Permian Basin and Close By Acreage. The Company is examining other acreage positions in the Permian Basin where we can diversify and leverage our position based on the knowledge acquired both from a geologic and engineering standpoint. There have been several acquisition proposals presented. Production Table. Following is a net production chart showing the trend in GGP’s net oil and gas production from producing properties measured in barrels of oil equivalent per month. For further information contact: Chris Ritchie Chief Financial Officer Phone +61 3 9349 1488
GGP Price at posting:
1.9¢ Sentiment: LT Buy Disclosure: Held
