Talora info from Sintana It is lenghty, but full of good info (that's how you know it is not from PDQ). Why the F are they not drilling this up???
Upper-Middle Magdalena Basin, Transition Area, Colombia
There are four field areas surrounding Sintana’s acreage in what can be referred to as the Upper-Middle Magdalena Transition Area. Management estimates, based on prior work experience and frequent communications with other industry participants, that recoverable reserves in the Guando Field are approximately 120 MMBO, that peak production was greater than 30,000 BOPD and is currently producing in a range around 20,000 BOPD. These field areas stake out a rough rectangle around Sintana’s two (2) main blocks, Talora and COR-39. COR-11 is located further to the SE, within in its own transition area between the Upper Magdalena Basin and the Eastern Cordillera in a frontier wildcat area, fairly high up in the mountains. These four fields are:
• Guando Field discovered in 2000
• Toqui-Toqui Field discovered in 1986
• Puli Field discovered in 1991
• Abanico Field ("Main") discovered in 1999
The Guando Field is 25 km to the southeast of Talora and is one of the most important Upper Magdalena basin fields. This field, which was discovered by Petrobras and Nexen Inc. in 2000 (from the Lasmo prospect inventory acquired in 1998), is one of the most notable fields in Colombia due to its shallow position, the excellent thick Cretaceous Guadalupe reservoir with over 1,000 feet net sandstone and a world-class hydrocarbon column of over 2,100 feet. The good quality medium-gravity oil is surprising for such a shallow field, especially since the field has low reservoir pressure. The shallow position of such a large field and its proximity to infrastructure in the Magdalena Valley and the nearby Bogotá metro area, about 60 km to the east, gives the field considerable commercial advantage. The key to success in low-pressure fields such as Guando is to maintain reasonable reservoir pressures and efficient water flooding programs as long as possible.
When one zooms into the individual areas, it becomes clear that there may be additional clues as to how even more oil and gas potential may have been overlooked. Nine wells have been drilled in the immediate Talora area since 1921. Closer inspection, however, reveals that these wells are located on the edges of the main structures and mainly along the faults rather than on the anticlines between the faults. It is also important to note that none of these wells has yet reached the Cretaceous Caballos reservoir. Sintana has often urged the operator to be prepared for both conventional fractured sandstone and unconventional shales and carbonates. The commercial outlook is excellent due to the proximity of infrastructure in the well-developed Bogotá/Sabana region where both natural gas and oil are commercially viable.
It is important to point out that the best-known reservoirs in this "Upper-Middle Magdalena Transition Area," are stratigraphically situated in the upper Cretaceous section. Unfortunately, large areas have been eroded and stripped of this upper Cretaceous section due to uplift, incision and erosion. In the Talora area, as is true in much of the transitional area between the Upper and Middle Magdalena basins, the lower Cretaceous is often considered to be "
shaley" even though it is largely unknown or very poorly understood. In some areas – in particular to the NE – the lower Cretaceous is thought to be dominated by shales, marls and poorly developed limestones (<20 kms away are the shaley Chawina wells). In other areas – for example toward the SW – the lower Cretaceous is dominated by hundreds of feet of Sintana Energy Inc. Management’s Discussion & Analysis Three Months Ended March 31, 2013 Discussion dated: May 29, 2013 P a g e | 17
hard sandstones and conglomerates as observed in the Raspe-1 and Lucha-1 wells (~20 kms SW of Talora). Across the entire area, closer inspection reveals a widespread lack of trap in the features that have been drilled over the years.
It is in part due to these widespread perceptions in the industry that Sintana chose this "Upper-Middle Magdalena Transition Area," as a strategic focus area because some of these risks are quite real, there are also several overlapping favorable conditions that one might suggest lead to the opposite conclusion often held by the industry. There are 4 main strategic reasons:
(1) Reserve Scale:
Avoids the "Reserve Treadmill"
In the opinion of management, this area has world-class oil charge volume as well as very thick net reservoir. These world-class characteristics provide the large reserve scale observed in the nearby Guando Field. The upper Cretaceous reservoir in Guando (Guadalupe) has over 2,000 feet gross and around 1,000 feet net. The disadvantage in Talora is that this upper Cretaceous section has been eroded and has mainly the upper and middle Cretaceous section exposed at the surface. Thus the reservoir section in Talora must depend on the middle and lower Cretaceous. As stated above, Sintana’s view is that this Upper-Middle Magdalena transition area has more conventional sandstone reservoirs hidden in the undrilled Cretaceous sequences, likely representing progressively greater water depths in the northward direction. Though the age of the reservoir unit may vary from field to field and prospect to prospect, it is extremely important to note that these Cretaceous transitional sequences might provide 100s of feet of net reservoir. This reserve scale in Sintana’s Upper-Middle Magdalena transition area provides a very important exploration element in Sintana’s strategy and that is to avoid the reserve treadmill. This is a common vicious circle that is difficult to break in which companies find themselves in a state of constant reserve depletion due to the small size of their discoveries.
(2) Underexplored Conventional Sandstone Reservoirs:
Additional Conventional Upside
Sintana’s view is that this transitional area is underexplored and that there are large sections of conventional sandstone reservoirs hidden in the undrilled Cretaceous sequences of this Upper-Middle Magdalena transition area. Due to the thickness of some of these conventional reservoirs and the large hydrocarbon volumes native to this area, the conventional play has considerable long-term upside and reserve scale, much more than is generally recognized.
(3) New Unconventional Play:
Significant New Unconventional Reserves
There is increasing evidence being collected and compiled for the unconventional plays in the Upper-Middle Magdalena transition area. The La Luna and the Simiti-Tablazo formations are the main source rocks in the basin. Therefore, they are the main unconventional targets. The basin is highly charged with geochemical characteristics of the Cretaceous section which are being analyzed with very encouraging source rock characteristics, including the fact that some are within the present-day oil window, even at relatively shallow depths (e.g. 3,000-6,000 feet). If these source-prone sections are proven to be viable unconventional reservoirs, they may provide significant reserve scale. (Petrotech Engineering Report for Sintana Energy Inc. – July 31, 2012)
(4) Less Competitive Area, but Excellent Infrastructure & Proximity to Market:
Under the Radar
Finally, despite its close proximity to the full range of infrastructure, the country’s main oil and gas pipelines and Bogotá as one of the major growing industrial centers, this Upper-Middle Magdalena transition area is not nearly as competitive or over-sold as some of Colombia’s other basins. For example,
Sintana Energy Inc. Management’s Discussion & Analysis Three Months Ended March 31, 2013 Discussion dated: May 29, 2013 P a g e | 18
many of the active portions of the Llanos basin are extremely competitive within the industry and yet they are known to have small reserve size, they are often isolated by great distances without infrastructure and overall, the Llanos’ new discoveries lack access to pipelines and even face serious trucking challenges. In great contrast, the Upper-Middle Magdalena area faces none of these problematic issues. The Upper-Middle Magdalena transition area is in one of the most ideal locations with respect to natural gas commercialization. Due to the proximity of the pipelines and the nearby facilities, oil development in this mature Magdalena area results in low development costs.
Talora Block, Colombia (Sintana – 30% participation interest)
On August 17, 2011, the Company announced that Sintana Energy Inc. Sucursal Colombia had entered into an agreement with Petrodorado Energy Ltd. ("Petrodorado") to farm-in to an undivided 30% private participation interest in the 108,336-acre Talora Block located in Colombia’s oil prolific Magdalena Basin. The block was subsequently reduced to 58,812 acres through the normal contract relinquishment schedule (September 2011). The Talora Block, which is operated by Petrodorado, is immediately adjacent to the region’s main oil and natural gas pipelines and only 60 kilometres west of the capital city of Bogotá. Sintana’s first well on Talora, Dorados-1X commenced drilling on July 31, 2012.
The original planned total depth for the well was 9,500 feet (MD, Measured Depth) with the Cretaceous Caballos and Tetuan (Albian/Aptian) formations being the primary objectives. While drilling in the Cretaceous Cenomanian section above these objectives, the well encountered a younger and exceptionally thick sand-prone sequence which had never previously been reported in the basin. This sand-prone section, currently named the Dorados Sands, was encountered from about 5,160 feet (MD) to below 7,000 feet, or around 1,850 feet thick (gross). While drilling, this section (5,160 to 6,035 feet) yielded excellent wet gas and oil shows as measured by both Gas Chromatography and Mass Spectroscopy. The economic basement was reached, much higher than the prognosis, at 7,282 feet (MD), without seeing the Tetuan or Caballos formations and as such, the partnership decided to terminate drilling operations at this depth on September 29, 2012 with the forward plan to log and then production test the extensive Dorados Sands.
Due to deteriorating hole conditions, tool sticking and high levels of mud invasion (seven (7) lost circulation events) it was operationally impossible to run an adequate logging program. With limited data, however, it was noted that the targeted reservoir section coincides with the highest log resistivities (through casing logs), including zones with fair to good porosities (e.g. 15%). All these indicators, log resistivities, oil shows, hydrocarbon components (C1 through C9), hydrocarbon ratios, helium and other trace element relationships are consistent with a thick hydrocarbon column. In addition, and very importantly, all these indicators terminate abruptly, still within the sand-prone section, at around 6,030 to 6,050 feet (as stated above), forming compelling evidence of a basal water contact with a hydrocarbon column above.
In mid-November, 2012 a program to flow test up to six (6) sandstone intervals was initiated with a completion and testing rig. Due to significant formation damage which occurred during drilling operations, only a limited amount of additional reservoir data was obtained. The test results confirmed that the sand section is a low-pressure reservoir system and that oil has been emulsified. Geochemical lab analysis from production tests proved that this emulsion contains viable medium gravity crude oil with 20° API. This provides incontrovertible evidence regarding the severity of the mud invasion and a valid reason as to why certain sandstone intervals with good porosities did not flow during testing. It is important to note that these low-pressure reservoirs are common in this part of the Basin, including in the Guando Field.Sintana Energy Inc. Management’s Discussion & Analysis Three Months Ended March 31, 2013 Discussion dated: May 29, 2013
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Despite the formation damage incurred in the wellbore, the underlying conclusion is very encouraging. The Farm-in partners have concluded that a new undamaged wellbore is needed (sidetrack or twin well) to further evaluate the Dorados structure, a large thrust anticline in which the Dorados-1X well data now reveals this new thick sandstone reservoir with significant recoverable hydrocarbons potential. Seismic mapping yields structural closure, 4-way and 3-way closure against the main thrust fault, in the range of 2,900 to possibly over 8,000 acres with estimated net reservoir thickness based on limited data in the range of 200 feet and possibly much greater.
The Talora Block straddles the boundary between the Upper and Middle Magdalena Basins and is flanked by Middle Magdalena oil fields to the north and Upper Magdalena oil fields to the south. In the Cretaceous, this area represents the transition between the Upper Magdalena’s long-known prolific conventional sandstone reservoirs to the south and the very recent excitement over an increasingly compelling unconventional section in the Middle Magdalena Basin to the north. Sintana Energy’s technical strategy is to have, in addition to acreage within the northern unconventional acreage (e.g. VMM-37), to establish a focus area in this transition area between the Upper and Middle Magdalena basins with the concept that there are attractive prospects in both the conventional and unconventional sections. Sintana’s view is that there are more conventional sandstone reservoirs in this transition area within the undrilled Cretaceous sequences than the industry has recognized to date, sequences which likely contain the range of depositional clastic environments in a northward direction as Cretaceous water depths generally increase, from fluvial to paralic to marine. Conversely, although the unconventional play-types are now being investigated in Colombia’s northern and central Middle Magdalena and Eastern Cordillera basins, the industry has largely ignored the transition area between the Upper and Middle Magdalena. This transition area has long been recognized for its oil seeps and rich source rocks, often at shallow depths. Only recently have companies begun to view these hydrocarbon-rich sections as potential unconventional reservoirs. In fact it is possible that both conventional and unconventional reservoirs will be found in the same wellbores.
Verdal-1 (2010)
The prior well, Verdal-1, was drilled by the current operator Petrodorado in 2010. It was the first well to target one of the two main thrust anticlines located near the center of the Talora Block. The Verdal-1 was forced to cease drilling and was abandoned while drilling the shale, limestone and marl of the Tetuan Formation due to well control problems, including significant quantities of natural gas coming from the Tetuan Formation. The well depth was estimated to be only a few hundred feet above the main Caballos reservoir target. Drill stem test attempts in the Tetuan failed due to insufficient stimulation or possibly that the tests indicated a limited gas volume in the Tetuan. Ultimately, the Verdal-1 test results were considered inconclusive. However, the well was declared a technical gas discovery by the ANH in the gas-charged Cretaceous Tetuan formation. The Verdal-1 well revealed important new information about stratigraphy and the hydrocarbon content of the Cretaceous units in these thrust anticlines, including that the main Cretaceous Caballos reservoir may be deeper than originally thought in the Verdal structure.
Talora Work Program – 2-Year Appraisal & Exploratory Extensions
The Talora E&P contract began in 2004, in the year following the start of the ANH and its new function as the administrator of Colombia’s oil and gas contracts. The Talora contract had the typical 6-year exploration term and thus 2010, the year in which the Verdal-1 was drilled, was the final exploration year. Given fulfillment of the contractual work program and an adequate indication of a new hydrocarbon resource, these E&P contracts allow for 2-year contract extensions beyond the normal 6-year exploration term in which the partnership has additional time to prove up a commercial project. This additional time consists of 2-year extensions, typically in exchange for drilling a well, performing other work program
Sintana Energy Inc. Management’s Discussion & Analysis Three Months Ended March 31, 2013 Discussion dated: May 29, 2013 P a g e | 20
activities and/or making partial acreage relinquishments, all subject to approval by the ANH. By approval of the ANH, the Verdal-1 well was formally declared a technical gas discovery on January 17, 2011, thereby providing the Talora partnership with the option of an extension in exchange for a defined ANH-approved work program. The current extension expires in September 2013. In addition, with the encouraging technical information gathered from the Verdal-1 well, the partnership was also interested in committing to additional exploratory work program activities to test a separate structure adjacent to Verdal, referred to as the Dorados structure. The current extension for the Dorados acreage expires in July 2013. Due to the likely need for an appraisal well following an exploratory well, an exploratory program has the option of a second 2-year extension. Thus by agreement between the ANH and the Talora partnership, the current Talora work program is based upon two 2-year drilling and evaluation programs running in parallel with the option to add another 2-year period. The first is based upon drilling a follow-up appraisal well to the 2010 Verdal-1 exploratory well and proving up a commercial Verdal project within a 2-year period. In tandem the partnership may also work at proving up the Dorados exploratory project within the adjacent undrilled Dorados structure. A more limited exploration activities program will result in a partial acreage relinquishment in the Talora block outside of the discovery areas for the Verdal and Dorados, as defined by the ANH. Satisfaction of the requirements of these limited programs will result in additional two year extensions for each of the Verdal and Dorados areas.
The Verdal-1 (2010) technical gas discovery provided the initial contractual basis for the current 2-year extensions for the Talora partnership. It is in these extension phases that Sintana began to participate in the Talora contract. The advantage of participating in these extension periods is that it consists of near term drilling activities, which Sintana’s analysis suggests have reasonable probabilities to be high impact in terms of reserves, time to market and the equally commercial outlook of both oil and natural gas.
The phase of the hydrocarbons may change with depth and by geologic formation. Thus there could be a fairly complex interaction of multiple source rocks, episodes of expulsion and migration in order to explain dry gas in the Tetuan formation (Verdal-1), possible natural gas and light oil zones in the Dorados Sandstones younger than the Tetuan, gas-condensate in the younger shale unit above the Dorados Sandstones (possible 500-foot unconventional section) and the presence of the well-known Guataqui Oil Seeps which flow to surface, apparently along the prospect’s main thrust fault (current API gravity may be in the teens while the original oil at depth may be 30° and lighter).
The Verdal-1 and the Dorados-1X wells demonstrate evidence for effective anticlinal traps, the presence of both oil and natural gas and the presence of potential reservoirs which may be conventional, unconventional or both.
Talora Contract Extensions:
•
Talora E&P Contract: 2004 to 2010, normal 6-year exploration period.
• Final well drilled in 2010: Verdal-1 which resulted in gas-charged Tetuan Fm.
• Declaration of
Verdal-1 as a technical gas Discovery with the ANH – January 17, 2011: o 2-year extension granted by the ANH and recently extended to September 2013.
o
Requires drilling Appraisal Well on the Verdal structure.
• Partnership also filed for an
exploration extension of the Dorados structure, adjacent to Verdal: o 2-year extension granted by the ANH (see below).
o
Requires drilling exploration well on the Dorados structure.
o
Option for a second 2-year extension (see below).
Sintana Energy Inc. Management’s Discussion & Analysis Three Months Ended March 31, 2013 Discussion dated: May 29, 2013
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• Mandatory 50% Relinquishment
o Sep. 15, 2011: 108,336 acres reduced to 58,812 acres
o
Additional 50% relinquishment in 2013, the acreage area to be determined based on limited exploration activities and the resulting acreage held for an additional two years.
•
Exploration Extensions – decision on April 19, 2011: o Phase I: 2 years, ending January 19, 2013: Drill 1 A3* well. Recently extended through July 2013.
o
Phase II: 2 years, ending January 19, 2015: Drill 1 A3* well + 50% Relinquishment.
o
Dorados-1X drilled, tested and temporarily abandoned.
o
Additions 50% relinquishment of acreage as held by prior exploration activities
o
2nd Dorados well may be drilled as soon as possible, before Jan. 19, 2015.
[*A3 Well = rank exploration well; A2 = appraisal; A1 = development well.]