AC/P32 (Timor Sea Permit)

Permit Overview

Exploration licence AC/P32 ( Permit ) is located in the Ashmore-Cartier area which lies within the western Timor Sea (click here to view map). The Permit lies in an area which has access to the proven petroleum migration pathways and reservoir systems along the southern and eastern margins of the Vulcan sub-basin as demonstrated by the presence of the depleted Skua oil field some 35 kms to the west of the Permit and the Challis/Cassini oil fields some 20 kms to the northeast. The undeveloped Talbot gas field and Montara oil and gas field are also located less than 10 kms from the Permit.

The joint venture has undertaken a comprehensive review and mapping of the Permit's extensive 3D seismic database over the last 18 months. This work has resulted in the identification of a number of prospects and leads (Click here to view map), with the key drillable prospect being Wisteria.

The prospect has multiple dual objectives, and will target a large but relatively high risk Cretaceous stratigraphic trap combined with a lower risk but smaller Jurassic tilted fault block. The Cretaceous objective has the potential for up to 174mmbbls of oil whereas the Jurassic objective has potential in the range 20 – 30mmbbls.

At the Jurassic level, the structure is a simple tilted fault block - well-defined on 3D seismic, making it relatively low risk in that it is less prone to late trap breach and leakage of hydrocarbons. Furthermore, it has two excellent sandstone reservoir targets – the Plover and the Montara.

At the Cretaceous level, the play involves the pinch-out of Cretaceous aged Puffin sands. The edge of the pinchout trap is formed by a large embayment and can be clearly seen on the new 3D seismic data. In addition, it has subtle hydrocarbon leakage features, shallow gas and HRDZ's, marking the zero edge (Click here to view diagram of the Wisteria Prospect).

If successful, a discovery could be tied back to the Montara production facilities which are currently under development by Coogee Resources who is also the operator of AC/P32. Threshold economics based on a tie-back development indicate that even a very modest oil discovery of 5 – 10 mmbbls at Wisteria would be economic.

Other prospects in the permit are in the process of being matured. They include the Hibiscus channel play (similar in geometry and trap style to the Hurricane discovery in the Carnarvon Basin ) with 65 mmbbls P50 potential, and a variety of Jurassic structural plays.

In early 2008 Adelphi and some of its joint venture partners successfully concluded a farm-out deal to the Cosmo Oil Group on terms which reflect the world-class quality and reserves potential of this prospect. This has resulted in Adelphi's reduced 10% interest being essentially free-carried for the expected dry-hole cost of the Wisteria-1 Well.

The well is now expected to be drilled during the third quarter of 2008 as part of the Operator's multi-well drilling campaign in the Timor Sea this year.

Additional Geological Background Information

Regional geology

The Permit covers part of the Skua Trough/Montara Terrace within the Vulcan Sub-basin . The Vulcan Sub-basin is a northeast-trending, Mesozoic aged, extensional depocentre located in the western Bonaparte Basin . The sub-basin comprises a complex series of horsts, grabens and basin margin terraces that abut the Londonderry High to the east-southeast and the Ashmore Platform to the west-northwest. Most exploration wells drilled within the Vulcan sub-basin are sited on narrow intra-basin horst blocks or on basin margin terraces.

The Vulcan Sub-basin contains a thick Jurassic succession in major, graben-related sedimentary troughs such as the Swan and Paqualin Grabens which provide a petroleum charge for good quality, Jurassic age reservoirs in structural traps associated with intra-basin horst blocks and basin margin terraces.

Twenty three petroleum accumulations have been identified within the Vulcan Sub-basin . Commercial production has occurred from four of these discoveries (Challis, Cassini, Jabiru, Skua) to date.

Petroleum potential

The Vulcan Sub-basin is a proven oil and gas province. Both commercial and sub commercial discoveries have been identified within Late Triassic (Challis), Early-Middle Jurassic and Late Jurassic (Jabiru), and Late Cretaceous (Puffin) reservoirs.

The primary play type in the sub-basin has traditionally been Triassic and Jurassic sands within tilted fault blocks, located either on narrow, intra-basin horsts or basin margin terraces.

Reservoirs

Clastic units within pre-extensional and rift sequences host the majority of the petroleum accumulations identified to date in the Vulcan Sub-basin . Reservoirs from which commercial petroleum production has taken place include the Triassic Challis Formation (at Challis and Cassini) and the Middle Jurassic Plover Formation (at Skua and Jabiru). Both these reservoirs are expected to be widely distributed over the Permit area.

Seal

Regional flooding of the northwest continental margin in the Valanginian led to the deposition of the shales of the Echuca Shoals Formation which form a regional seal across the sub-basin and is the operating seal in the majority of hydrocarbon accumulations in the Timor Sea . Many Jurassic/Triassic reservoirs within tilted fault blocks in the Vulcan Sub-basin , including the prospects identified on the Permit, rely on competent, intra-formational and cross-fault seals for trap integrity.

Higher in the stratigraphic succession, Puffin Formation reservoirs are sealed by Palaeocene carbonates of the Johnson Formation. The Puffin Formation is a channelled, fan sand deposit and many traps within this unit probably have a significant stratigraphic component.

Source

Thermally mature oil-prone marine source rocks within the Vulcan Formation have sourced many of the petroleum accumulations identified in the sub-basin and these are expected to be well developed in the depocentres adjacent to the Permit.

The Lower Cretaceous, Echuca Shoals Formation, which provides a regional seal to the underlying Upper Vulcan Formation reservoirs, also has significant source rock potential but is probably thermally immature to marginally mature for petroleum generation over much of the Vulcan Sub-basin . Hydrocarbon generation in the Vulcan Sub-basin appears to have involved multiple charge events and flushing of oil accumulations by late gas generation is a significant exploration risk in the area including the Permit.

Traps

Tilted fault blocks and horsts sealed by the Lower Cretaceous, Echuca Shoals Formation regional seal are the principal play types targeted by explorers in the sub-basin and many discoveries of petroleum have resulted, most of which are reservoired either in the Plover Formation or in the Late Triassic, Nome and Challis Formations.

Higher in the stratigraphic succession, the Late Cretaceous Puffin Formation hosts the Puffin, Swan, East Swan and Birch petroleum accumulations. Puffin Formation traps are usually subtle, four-way dip closures with a significant stratigraphic component. Other largely untested Mesozoic plays in the Vulcan Sub-basin include rollovers into the downthrown side of faults, fans, mounds, scours and stratigraphic pinchouts.

Post-drill interpretations of wells drilled in the Vulcan Sub-basin indicate many failed to test valid structural closures. Modern seismic techniques such as 3D seismic acquisition are an aid to resolving the difficulties associated with fault definition in this area.