Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 1

RELINQUISHMENT REPORT FOR LICENCE P.1832, BLOCK 204/14c and 204/19c

Licence: P.1832

Blocks: 204/14c and 204/19c

26th Round Traditional Licence

Operator: Ithaca Energy Inc. 25%

RWE Dea UK SNS Limited 20%

Sussex Energy Limited 15%

Edison International SpA 25%

Oyster Petroleum Limited 15%

LICENCE SYNOPSIS

Valiant Petroleum was initially awarded 100 % interest in licence P.1832, Blocks 204/14c and

204/19c in the 26th Licensing Round with a start date of 10th January 2011 (Figure 1). Valiant

transferred a 10% carried interest to Sussex Petroleum in P1832 Blocks 204/14c and 204/19c in Q4

2011. Subsequently Valiant farmed out 20% of licence P.1832 (and P.1631 which included the

Handcross South prospect) to RWE Dea on 28th March 2013 reducing its interest to 70%. In April

2013 Valiant Petroleum was acquired by Ithaca Energy Inc. through a corporate transaction. On

17th June, Ithaca Energy executed a farm-out agreement with a subsidiary of Edison International

SpA for a 25% interest in the licences containing the Handcross prospects. On 23rd September 2013

Ithaca Energy announced the farm-out to Oyster Petroleum Limited of a 9% working interest and a

further 5% working interest to Sussex Energy Limited. Finally on 20th December 2013 Ithaca

Energy announced the divestment of a further 6% working interest to Oyster Petroleum in the

Handcross licences, prior to the conclusion of the Handcross exploration well.

Blocks 204/14c and 204/19c lie in the West of Shetlands in the Judd Basin. Commercial

accumulations are found in this area in sandstone reservoirs of Palaeocene age. These sands were

deposited as submarine fans and form high quality reservoirs although are often dependant on

stratigraphic closure for success. Foinaven, Schiehallion and the Loyal Fields are successful

examples to the south while the Suilven Field is located in the adjacent block 204/14a and the

Tornado discovery lies only 5km to the northwest (Figure 1).

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 2

The Handcross North Prospect has been defined as part of a larger seismic anomaly which also

delineates the Handcross (South) Prospect and extends across Blocks 204/18b and 204/14c. The

overall structure is closed by the lateral pinchout/shale out into a submarine fan neck at the T36

level of the Palaeocene. Detailed mapping shows that the anomaly is divided by the Suilven fault

with the Handcross North Prospect lying in Block 204/14c and mapped as a small footwall crest

structural closure on this fault. The contingent well commitment of licence P.1832 rested on the

results of the Firm commitment to drill a well on the Handcross (South) Prospect in License P.1631,

Block 204/18b.

The firm commitment well 204/18b-2A was drilled on the Handcross (South) Prospect and reached

its final depth in January 2014 but no hydrocarbons were found in the target T36 and T35 sands.

The negative result of this well significantly downgraded the Handcross North prospect in that the

geophysical attribute anomaly was proved not to be a hydrocarbon indicator. The licensees were

subsequently granted a waiver on the Contingent commitment well for P.1832 and have since

surrendered the licence.

Fig 1. Location of Block 204/14c and 204/19c

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 3

WORK PROGRAMME SUMMARY

The licencees made a firm commitment to reprocess 170km2 of 3D seismic data and undertook a

contingent commitment to 'drill one well on the Handcross North lead to a depth of 300m or 50m

into the T35 shale whichever is the deeper'. The contingent commitment was to be based on the

technical evaluation of the reprocessed and inverted 3D seismic data and calibration using results of

the firm well on Handcross (South) (204/18b-2A). The DECC agreed to waive the contingent well

commitment further to the failure to find hydrocarbons at the Handcross (South) well location.

DATABASE

Recent broadband 3D seismic data was obtained from PGS (PGS Geostreamer FSB11 survey,

PSTM and Simultaneous Inversion data) and this was used to validate the Handcross prospect

(Figure 2). Initial definition of the Handcross prospect area had been undertaken using

conventional 3D seismic data utilising 1400km2 of the CGGV UTMOST survey (consisting of

PSTM, PSDM with Pre-stack AVO inversion, Figure 2). A full suite of offset wells was available

for the evaluation.

Figure 2. Seismic & Well Database

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 4

PROSPECTIVITY UPDATE AND FURTHER TECHNICAL WORK

Handcross North Prospect

The Handcross feature is defined by an extensive amplitude anomaly which is mapped at the top

T36 seismic event and calibrated to dry wells 204/14-2 and 204/18-1 that have well developed

reservoirs at the target T36 level (Figure 3). The Handcross North Prospect was identified as the

northern part of this feature. The northern part is separated from the south by the Suilven Fault and

was mapped as a small footwall crest structural closure on this fault (Figures 4 and 5).

Figure 3. T36 Upper sand Vp/Vs Response (Depth contours 10m)

Figure 4. Handcross North Depth Map at T36 Sand level

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 5

The anomaly south of the Suilven Fault, in the adjacent Block 204/18b was recognised as a separate

but larger prospect known as Handcross (South) (Figure 3). In order to de-risk both prospects

further work was undertaken to better understand the nature of the amplitude anomaly.

Figure 5. Seismic lines over the Handcross North Prospect, (Data courtesy of PGS).

AVO attribute processing was undertaken in an attempt to characterise the amplitude anomaly prior

to drilling. Fluid substitution modelling demonstrated that a characteristic change of amplitude

should be observed with offset for oil or gas filled formations. Applying the AVO methodology to

3D seismic data shows an anomaly in the Vs/Vp domain. This was considered most probably the

result of a hydrocarbon fluid effect.

One dimensional modelling for the target formation was undertaken using the 204/14-2 well. Fluid

effects are shown to result in a drop in acoustic impedance and Vp/Vs, separating the response from

that of water (Figure 6). The anomaly conforms to a Class III AVO anomaly which means that in

the case where oil or gas is present, a slight increase in amplitude occurs with offset. Some

encouragement was also provided by the anomaly being conformable to structure over the

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 6

Handcross North Prospect (Figure 4). Subsequently, the absence of any hydrocarbon (oil or gas)

found in the Handcross well, 204/18b-2A, has demonstrated that the geophysical anomaly does not

represent a hydrocarbon fill indicator at the T36 sand interval.

Figure 6. Fluid Substitution Modelling

A detailed rock physics study was carried out by Ikon Geoscience post drilling the Handcross

(South) well in order to properly understand the link between the log responses and the mapped

seismic anomaly. The conclusions of this study are summarised in the relinquishment report for

Licence P1631.

Whilst the geophysical anomaly forms the basis of the Handcross North prospect it is evident that

the results of the Handcross South well significantly increase the risk that the seismic response at

Handcross North is not associated with hydrocarbons and any well drilled on the Handcross North

prospect is likely to be dry.

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 7

Other Leads in Blocks 204/14c and 204/19c

Two additional small and high risk leads were identified in Block 204/19c, namely the Ard and the

Ech leads, (Figure 1). Both leads are mapped at the T45 level and are thought to have been

developed on a deeply incised Top Balder landscape creating structural and partly stratigraphic

features that lie to the north and south of the well 204/19-5 (Figure 8). A thin oil leg at the T38

level was encountered in 204/19-5, but alone this does not significantly reduce the seal risk

attributed to these leads.

Neither lead is considered large enough to warrant further investigation, given the failure to find

hydrocarbons in the Handcross prospect (Table 1).

Figure 8. Depth Map and Geoseismic Section over the Ard and Ech Leads

Relinquishment Report P.1832, Block 204/14c & 204/19c April 2015 Page 8

Table 1. Summary Table of Volumes and Risks for Remaining Prospects and Leads in Blocks

204/14c and 204/19c

Resource and Risk Summary

Prospect Stratigraphic

Lead level Unrisked recoverable resources

Discovery Oil MMbbls Gas BCF

Name Low Central High Low Central High

Geological Chance of Success

%

Handcross North Paleocene T36 7.5 11.6 17.5 10.1 13.6 18 10

Ard Paleocene T45 45 10

Ech Paleocene T45 35 10

CLEARANCE

Ithaca confirms that the OGA (DECC) is free to publish this report and that all third party

ownership rights have been considered and appropriately cleared for publication purposes.