Project Introduction UK Southern North...

Project Introduction

Opportunity Overview: Envoi has been engaged by UK AIM-listed company, Cluff Natural Resources Plc, to assist in securing one or more partners willing to earn into its two 100% operated Licences comprising P2248 (involving Block 43/11) and P2252 (involving Block 41/5 together with part Blocks 41/10 and 42/1). The combined acreage, covering some 589 km2, was awarded to Cluff in the 28th UK Offshore Round and is focused on underexplored plays in lower Mesozoic and upper Palaeozoic strata. Prospectivity is supported by existing regional datasets and the licences are located on-trend with proven producing fields in the North West part of the UKs Southern North Sea where the water depth is only around 60 metres.

The proximity of these Licences to nearby infrastructure, attractive local gas pricing and shallow water depths results in low commercial thresholds and minimum economic volumes in the range of 100 Bcf. Above this threshold, fields rapidly become very commercially attractive, especially to existing producers looking to extend production plateaus and ensure infrastructure longevity. Since award, Cluffs work has focused on understanding the full multi-horizon resource potential of the Permian, Triassic and Carboniferous plays in an emerging fairway which has seen new discoveries and a number of significant

UK Southern North Sea Southern Gas Basin - Licences P2248 & P2252

Licence package with underexplored, multi-play (Carboniferous, Permian & Triassic) potential within proven gas province

Independent CPR support for combined 2.4 Tcf (P50) Resource Potential in multiple prospects with 4+ Tcf upside

Proximity to existing fields ensures low commercial thresholds & ready access to markets

P247 Cluff Natural Resources (UK North Sea) Envoi Limited

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developments coming on-stream in recent years. Modern, regional scale 3D seismic datasets have only recently been made available and have been instrumental in the identification of a number of drillable prospects based on new play concepts that could not have been mapped using the legacy 2D datasets. Cluffs detailed structural mapping based on 3D seismic, rock physics and AVO analysis, combined with good regional well control have also shown, for the first time, new details including large scale stratigraphic traps and new gas migration routes into areas previously thought to have been bypassed. The prospects identified across the two licences are estimated to contain a combined P50 resource of 2.4 Tcf with an upside potential of over 5.9+ Tcf. The potential of each individual Licence can be summarised as follows: Licence P2248 contains both a large high relief early Carboniferous structural prospect which exhibits stacked play potential and three discrete amplitude-supported prospects in the Triassic Bunter Sandstone which is a prolific producer locally. All prospects lie on trend with historic or existing production and close to recent discoveries. The combined P50 prospective resource potential of these two plays in the Licence area is estimated to be over 1.73 Tcf with an upside of over 4+ Tcf. Licence P2252 is located close to the shelf edge which defines the northern extent of the Southern Permian Basin where a large Zechstein (Z2) age patch reef prospect has been identified and which, in Cluffs Licence, has an estimated P50 prospective resource of 424 Bcf. Similar reefal structures, located in analogous depositional environments around the margins of the NW European Permian Basin, are proven hydrocarbon producers. The

Licence also contains an existing gas discovery in Zechstein carbonates, made in 2004, with an estimated P50 prospective resource potential of 168 Bcf and a possible resource upside of 350 Bcf which requires further appraisal. Historical drilling on the block encountered gas in fractured Hauptdolomite reservoirs and although attempts were made to test the pay encountered, the fracturing resulted in near total losses whilst drilling which prevented any returns to surface during the well tests. Regional Setting: The Southern North Sea gas province comprises a series of smaller Devonian to Carboniferous basins unconformably overlain by the larger Southern Permian Basin. The Licences are located in the offshore part of the deeper Cleveland Basin, an early Carboniferous palaeo-basin that straddles the northeast coast of England. Bounded to the west onshore by the Palaeozoic age Askrigg Block, under the present day Pennine Hills, its margins are defined to the north by the Mid-North Sea High and to the south by the Flamborough Head Fault Zone. The basin underwent a series of marine transgressions during the Carboniferous laying down a sequence of interbedded marine shales, carbonates and fluvial clastics which form the key early Carboniferous reservoirs and intra-Carboniferous seals. Dinantian to Namurian aged basinal marine shales and the coals of the Scremerston Formation are mature for gas generation beneath the Licence areas and form the key source rock interval with potential for some contribution, via longer range migration paths, from younger Westphalian Coal Measures which are the primary source rocks for fields located further to the South.


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Although the Cleveland Basins Carboniferous play is relatively underexplored offshore, it is overlain by the regionally far more extensive Permian Basin, a prolific hydrocarbon province which stretches across from the UK in the west to the Netherlands and Germany to Poland in the east and now contains over 500 gas fields discovered during 40 years of exploration. Most of these fields are sourced by gas and oil generated by source rock intervals in Carboniferous sediments with reservoirs dominated by the continental clastics of the Rotliegends Formation or the later Zechstein carbonates. The whole province is regionally sealed by thick evaporite sequences deposited during the Permian due to regression and restricted circulation. The basin is fringed by carbonate platforms and reefs proven elsewhere in Europe by existing fields but underexplored to date in the UK Southern Gas Basin, including a potential string of undrilled prospects in and around the Cluff acreage. The early Mesozoic saw the transition from restricted marine conditions to a continental clastics regime. The Bunter Sandstone Formation is a fluvial-alluvial system which saw large channel systems transporting sediment from emergent highs in the West and depositing the material in a series of overlapping and prograding alluvial fans in the basin depocentre to the East of the Cluff licences. These clastics were re-worked locally and aeolian sand deposits are also recognised locally. The Bunter Sandstone is sealed by the overlaying Rot Halite and Rot Shale which are proven effective seals locally. The Triassic Bunter Sandstone formation was a key exploration target, with a number of large fields discovered in close proximity to the Cluff licences during the 1970s and 1980s, although almost no exploration specifically targeting the Bunter has been carried out in the last 20 years. The targets in Cluffs acreage include stacked sand reservoir targets in the Carboniferous sequence, which are proven across the UK Southern North Sea, and particularly in the more recently discovered nearby fields of Breagh, Crosgan and Pegasus that flank Cluffs P2248 Licence. The Triassic-age fluvial-aeolian sands, proven in nearby fields and sealed by Triassic evaporites, provide alternative prospectivity in the Licence. On Cluffs P2252 Licence, the reefal carbonates of Zechstein age are the primary exploration target.

Value: A recent independent report by Xodus estimates that the unrisked NPV of the estimated combined 1.7+ Tcf (P50) resource potential mapped in Cluffs P2248 Licence alone exceeds 690 million and would be substantially bigger if some proportion of the upside potential were discovered

Planned Work Programme: Cluffs G&G studies and 3D reprocessing has fulfilled all the outstanding commitments of the current Promote Term, where a drill or drop decision is required by 30th September 2018 to progress to an additional 4-year exploration and appraisal term. Cluff is offering a material interest in each of its Licences in return for a commitment, preferably by an experienced offshore operator, to fund the forward work programmes on these licences which both require wells to be drilled to allow progression. Minimum required expenditure, based on well cost estimates, range from 6 million (~US$ 8.4 million equivalent) for the shallower Bunter targets in P2248 and between 810 million (~US$ 1114 million equivalent) in P2252, where the acquisition of some infill seismic is also being considered which may enhance drilling location selection ahead of drilling. Given the variety of prospectivity on offer there are a number of structures which may be suitable and each licence can be treated either individually or as a package depending on the incoming partys appetite. Further Information: Access to the key data on these opportunities can be made available after execution of a Confidentiality Agreement, after which seriously interested parties will be invited to Cluffs London office (UK) for a detailed presentation and review of the comprehensive data. This includes seismic workstation projects on each asset. All expressions of interest and requests for information should be made through Envoi:

Contact: Mike Lakin E: [email protected]

T: +44 (0)20 8566 1310 I: www.envoi.co.uk

Summaries on each Licence follow:

http://www.envoi.co.uk/


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Introduction: Cluff has identified several new prospects in Licence P2248, based on the interpretation of recently acquired 3D data which has only recently been made available. The Licence is located on an emerging fairway close to existing production and on trend with recent discoveries. The prospectivity includes the large Carboniferous stacked reservoir Cadence prospect, together with three Triassic Bunter sandstone prospects named Bassett, Beckett and Bathurst. Exploration History: Licence P2248, comprising Block 43/11, is situated about 100 km east of Scarborough. Block 43/11 was previously part of a larger Promote Licence awarded in 2005 to Wham Energy, later bought by Venture, itself taken over by Centrica. There was no 3D seismic over the area until 2009, when Venture shot a 1,300 km2 3D survey over what is now P2248 and adjacent acreage. Centrica relinquished the block in 2011 to concentrate on their other acreage to the east, upon which it had already successfully drilled the Carboniferous Pegasus discovery. Only one well (43/11-1, drilled by Zapata in 1973) targeting the Triassic Bunter Sandstone exists in what is today the Cluff Block. This well was plugged and abandoned as a dry hole. Critically, Cluffs new interpretation of the modern 3D seismic now shows both the extent of crestal faulting which may have invalidated the trap and additionally that the

structure does not appear to have communication with the fluvial channels which are now recognised to act as both reservoir and as a gas migration pathway within the Bunter Sandstone. Gas found in the Triassic is sourced from the underlying mature Carboniferous source rocks and migrates through the Zechstein regional seal via tertiary volcanic dykes or areas of thinner Zechstein salts, both mechanisms can be demonstrated to exist within Cluffs area of interest. Licence P2248 was awarded to Cluff 100% as a Promote Licence as part of the 28th UK North Sea Round, since when they have completed the initial licence work obligations which required the reprocessing of 2D seismic. Cluff have acquired significant regional dataset including >1,300 km2 of 3D and 3,500 km of 2D seismic in addition to the OGA released data, 29 offset wells, 21 CXRM datasets and geochemical analysis. Cluff has now re-interpreted the modern 3D seismic, have depth converted their interpretation based on a new velocity conversion model and subsequently completed prospect volumetrics. Additional geotechnical work including regional studies, a 10 well petrophysical study, fault seal analysis, Triassic rock physics and AVO work along with preliminary well costings have also been completed by Cluff. AVO analysis focusing on the Bunter Sandstone

Licence P2248 Summary (Block 43/11)


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prospects is ongoing and should be completed in the coming months. Both Cluff Licences were granted 12 month extensions in November 2017 to 30 November 2018, requiring a drill or drop decision by 30 September 2018. Prospectivity: P2248 lies on a proven trend of Carboniferous fields, including the Murdoch, Cavendish and Pegasus fields which are located to the south east and Crosgan and Breagh fields to the west, with Licence P2248 perfectly located in an unexplored part of the play between the two proven areas.

The primary Carboniferous prospect in the Licence is the potentially very large Cadence Prospect which contains stacked early Carboniferous reservoirs within the Yoredale, Scremerston and Fell Sandstone Formations in a three-way dip closed structure. The feature, with robust definition in both time and depth, is estimated capable of containing P50 prospective resource potential of 929 Bcf. Sourced from mature inter-bedded Carboniferous coals and organic shales down-dip, together with possible input from the Silverpit Basin to the south east, the intra-Carboniferous and

Zechstein evaporites form very effective regional seals proven in the many existing fields. The Cadence prospect has already been significantly derisked by the discoveries immediately to the east including the Cavendish field, which produced 60 MMscfd, and the Pegasus field, understood to have tested gas at rates up to 91 MMscf per day from late Namurian Sandstones. Together with the Breagh & Crosgan fields which have produced gas from the Scremerston Formation to the west, these proximal fields have proved that Carboniferous reservoir quality can be preserved at significant depths below the Base Permian Unconformity and have also confirmed the effectiveness of the intra-Carboniferous seals. Cadence is also on trend with the Andromeda prospect, due to be drilled by Spirit Energy (the Centrica and Bayerngas joint venture) in 2018. Although some minor CO2 content has been observed in some of the regional Carboniferous wells, including the Breagh Field, this is not seen as a significant production or economic issue due to the quantities of gas being targeted.


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In the P2248 Licence, the Bunter Sandstone provides an alternative opportunity which includes three amplitude-supported Triassic Bunter Sandstone prospects in largely stratigraphic traps, created by the interaction of halokinetic movement and large scale fluvial systems, which form both reservoir and critical migration pathways. Although previously unresolvable on the legacy 2D seismic, the sands can now be mapped in detail on the modern, high resolution 3D seismic data. The amplitude and AVO character associated with each of the newly identified prospects is analogous to that seen at offset fields and discoveries. These include the Esmond, Forbes and Gordon fields, all of which produced from anticlinal structures and recovered approximately 475 Bcf of natural gas before production was halted. The Bassett Prospect, which has an estimated 128 Bcf (P50) prospective resource potential, is considered relatively low risk. This is also drillable for as little as 6 million which, if successful, would significantly de-risk the two much larger follow-on Triassic Bunter prospects mapped by Cluff in its acreage. The total unrisked NPV of the combined (P50) 1.7 Tcf resource potential of the Carboniferous and Triassic prospects mapped in P2248 has been independently estimated by Xodus in their CPR to exceed 690 million.

Opportunity: Cluff is offering a material interest in the Licence in return for funding the forward drilling programme required to retain the licence. Given the variety of prospects identified on the Licence a number of potential structures, including a stratigraphic split, are potentially possible with entry costs from as low as 6 million (USD$8.5 million) for the drilling of a Bunter Prospect. Gross estimated well costs for drilling the Carboniferous Cadence prospect is in the order of 10-12 million (USD$14 to 17 million) depending on the extent of geological data collection and well testing process.


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Introduction: Licence P2252 lies on the NW margin of the Southern Permian Basin where a large Z2 (Hauptdolomite) Zechstein patch reef prospect has been defined (analogous to existing reef fields already proven elsewhere on the margins of the NW European Permian Basin) which, in Cluffs Licence, has an estimated P50 prospective resource potential of 424 Bcf. The Licence also contains the potential for appraisal of an existing gas discovery made in 2004 by the 41/10a-Z well, which encountered pay in fractured Hauptdolomite reservoirs. Cluffs reinterpretation now estimates this to have a P50 prospective resource potential of 168 Bcf and a possible upside of 350 Bcf. Although attempts to test the discovery were made during drilling, the fracturing encountered, and near total losses whilst drilling, prevented any returns to surface. Exploration History: The present-day Licence area, situated about 50km NE off the coast from Whitby, was first licenced by Conoco and Marathon in the 1990s. The Fairhaven and Lytham closures redefined by Cluffs new mapping were orginally identified by Marathon after it acquired 220 km2 3D seismic, shot by Geco Prakla in 1993 over the northern part of their acreage. Marathon then drilled the 41/10-1 well in 1994 to test Namurian and Dinantian sandstone reservoirs. This was water wet but encountered gas shows in the shallower Permian aged Plattendolomite and Hauptdolomite formations outwith any mappable structural closure. Walter (UK) E&P (which was later awarded the Block as part of a larger 21st Offshore UK Round licence in 2003) drilled the Fairhaven closure with 41/5-1 in 2004. Shows were recorded while drilling through the Plattendolomite, even though over the overbalanced mud system, which was standard drilling practice at that time, resulted in the loss of

2,000 bbls of mud into the formation. This made any subsequent testing problematic due to gas being driven away from the wellbore where 2 DSTs were attempted including DST#1 over a 73 ft interval of Hauptdolomite below 5,975 ft MD with no recovery from 3 Nitrogen lifts. DST#2 was carried out over a 321ft interval of Plattendolomite below 4,342 ft and achieved some initial flow of gas which lit the flare for a short period. Water influx from the Bunter due to poor cement isolation is also thought to have influenced the test results. Ownership and partners changed within the Licence, which led to Lundin drilling the Lytham prospect with 41/10a-2 and 2z wells in 2007. This penetrated a 30 metre (107 ft) gas column in the Hauptdolomite with 100 metres (>300 ft) of shows in the underlying Carboniferous. The last 21st Round operator, Wintershall, relinquished the blocks in 2009. TrapOil was awarded the Licence in 2011, in the 26th Round, but relinquished it due to financial issues in January 2013 after reprocessing by Geotrace of the 1993 Marathon seismic. Production from the Zechstein in the Hewett field area (48/29, 48/30) has occurred from the 1980s and more locally a number of Zechstein reservoirs containing gas have been confirmed in a number of wells around P2252. These include Totals Maxwell discovery 41/24a-1, which tested at 22 MMcf gas per day. Conoco well 41/24a-2z was drilled horizontally to appraise the Maxwell discovery and is believed to have produced 34MMscfd + 1,280 bpd of condensate which demonstrates the commercial production potential of the Zechstein. Gas shows have also been reported in wells 41/14-a, 41/15-1, 42/16-1, 41/20-1, 41/20-2 and 41/18-1 to the West and South of P2252 offshore and onshore production from the Zechstein includes the Kirkleatham, Eskdale and Lockton fields. The current Licence area was awarded to Cluff as a 28th Round Promote Licence. Cluff has acquired the recently

Licence P2252 Summary (Blocks 41/5, 41/10 and 42/1)


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reprocessed 3D seismic survey along with an extensive regional 2D and well based dataset. The initial firm work programme was fulfilled through the reprocessing of a limited quantity of 2D seismic. Additional geotechnical studies, including a post-stack inversion at Hauptdolomite, geochemical studies and petrophysical reviews, have also been completed by Cluff. Both Cluff Licences were granted 12 month extensions in November 2017 to 30 November 2018, requiring a drill or drop decision by 30 September 2018. Prospectivity: Licence P2252 contains the Pensacola Prospect which is a distinctive Zechstein age patch reef prospect similar to a number of recently mapped structures locally, including the Hauptdolomite reef which overlies the Crosgan prospect just 35km to the South East and the recently drilled West Newton prospect located onshore UK. The Hauptdolomite reef at Crosgan appears to be the only example of this prospect type being drilled offshore, although in a less attractive topset location on the way to a deeper Carboniferous target, and resulted in a discovery in the Hautpdolomite which flowed at 7.6mmscf/day (well 42/15a-2). These reefal deposits are also highly analogous to other producing hydrocarbon fields around the fringes of the basin, including the BMB field situated in Western Poland. Cluffs latest interpretation estimates the Pensacola Prospect has a (P50) 424 Bcf prospective resource potential with an upside of of nearly 1 Tcf. Cluff maps the Pensacola prospect as just one of several analogous reef structures which could provide significant regional running room for this multi-Tcf reef play. The redefined Lytham-Fairhaven Prospect is mapped as a large, low-relief faulted anticline with fractured Hauptdolomite reservoir. This is a prolific producer elsewhere in the Southern North Sea, where it is sealed by the regionally extensive Stassfurt Halite up to 300 metres

thick. Historical wells in the Licence, drilled between 2004 and 2007, encountered 30 metres of gas pay but experienced near total fluid losses during drilling. Although this, along with recent inversion work, confirms the high-density fracturing, the drilling issues prevented testing. Modern drilling fluids and well designs would enable testing to confirm reservoir deliverability and unlock the 168 Bcf (P50) prospective resource potential now defined by Cluff. The historic wells drilled on the Licence have proven both the presence of gas in the Zechstein carbonates and demonstrated the maturity of the Carboniferous source rocks and presence of gas in the underlying Carboniferous sequence which, due to faulting, is in direct contact with the Zechstein Carbonates above. The production from the nearby Breagh Field is a wet gas, which indicates that there may be some potential liquid contribution in P2252 and geochemical work carried out by Cluff indicates that a thick sequence of dolomitic carbonates, sands and shales which make up what is called the Cementstone, locally deposited in the Dinantian in syn-rift lows, probably under hypersaline conditions may be the source of these liquids. Planned Work Programme: The Promote Term work obligations, involving purchase of 3D seismic data along with associated geotechnical studies, has been completed. Currently the Pensacola Prospect is partially imaged on 3D with the remainder imaged on legacy 2D data. The forward work programme could potentially comprise acquisition of new 3D data across the entire prospect, however, given the robustness of the prospect it is believed that the acquisition of this 3D could be delayed until after the exploration drilling and before field development planning. Opportunity: Cluff is offering a material interest in the Licence in return for funding the planned work programme, at a gross estimated well cost of between 810 million (~US$ 1114 mm equiv.), with the acquisition of some infill seismic being considered ahead of drilling.

Disclaimer: The information in this document is for guidance only. Neither Envoi Limited (Envoi), or its client(s) (Client) nor any director, officer or employee of Envoi or its Client(s) accepts responsibility for, or makes any representation or warranty, express

or implied, with respect to the accuracy or completeness of the information, estimates and opinions contained in this document. This document does not constitute an offer, and neither this document nor the information, estimates and opinions contained

in it shall form the basis of any contract. Companies wishing to acquire an interest in any project and/or seeking Envois Services will be expected to make their own review of all documents and form their own judgments entirely. 2018 Envoi Limited.

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