The long anticipated results from Humpback, the only well to be drilled in the South Falkland Basin in the current Falklands drilling campaign, have been disappointing, with the well encountering non-commercial quantities of oil and gas.
Falkland Oil and Gas (FOGL), together with operator Noble Energy was targeting oil in the Diomedea fan complex in the Fitzroy sub-basin to the south and east of the Falkland Islands. Humpback was assessed pre-drill to be sitting in the likely oil window in the basin based on geothermal modelling. In addition it was hoped that good quality Cretaceous sands similar to those found in the 2010 FOGL well Toroa on the edge of the basin would be present in Humpback, as it was believed that these Toroa sands had been eroded and redeposited in Diomedea. The presence of oil and gas gives credence to the geothermal modelling approach, however the sand quality was poorer than expected, with moderate porosities being reported.The oil and gas shows were found in 40m of net sand across in a number of sandstones, including the main target ,the Lower Cretaceous APX-200, with a further 25m of sandstone below.
Drilling of the well has proven to be complex and difficult, such that the well had to be sidetracked, and it proved impossible to retrieve fluid samples from any of the hydrocarbon bearing intervals. As a result, the well will have incurred significant cost overruns. Humpback was originally scheduled to take 65 days to drill at a cost of $110m. The well has now taken over 130 days, so we expect that gross well cost could be in the region of $200m. Although an element of this should be recovered based on the unforeseen equipment failures that contributed to the long drill time, we expect that FOGL will exit this well with very little cash. The company held a 52.5% WI in the well, but was only paying 27.5% of the costs as a result of an exploration carry paid by Noble under the terms of its farm-in. In addition, FOGL farmed down 32.5% of the deeper targets only to Noble to fund the drilling of the deeper section of the well.
The rig will next move to the North Falkland Basin, where it will drill the Elaine/Isobel appraisal well. FOGL is fully carried for its share of Elaine /Isobel (including recovering $10m from its partners as compensation for switching this well from Jayne East). However, the company will still need further funding to carry out additional activity in either basin.
FOGL and Noble will now integrate the Humpback well findings into the geological model to provide an updated view of the exploration potential of both the Diomedea area and the overall oil and gas potential of their Southern Area licences. The licences also include the Hersilia Fan Complex to the north of Diomedea and the Cretaceous Fault Blocks adjacent to Borders & Southern’s (B & S) gas condensate discovery, Darwin. Inevitably, B & S will be impacted by this result being Southern Basin focused; however the merits of the Darwin potential development itself probably remain unchanged.