Stage 2 – Explore & Appraise Additional Play Types
The Stage 2 exploration and appraisal drilling program will evaluate the potential of the liquids rich gas fairways in both the Kyalla and Velkerri shales to determine the most commercially prospective play to be targeted during Stage 3. Field activities planned for 2019 will include the drilling of one vertical well and the drilling and hydraulic fracture stimulation of two horizontal wells.
An early commitment to Stage 3 capital expenditure during 2019 was also agreed, enabling an efficient transition from Stage 2 to Stage 3, in the case that Origin and Falcon agree to proceed to Stage 3.
Stage 3 – Work Program Overview
Stage 3 objective is to achieve commercial production flow rates.
Drilling operations include the drilling and hydraulic fracture stimulation of two horizontal wells targeting one of more of the three plays:
- Velkerri B shale gas play
- Kyalla shale and hybrid liquids rich gas plays
- Velkerri shale liquids rich gas play
2019 Updates
21 January 2019 – Rig Contract Signed
On 21 January 2019 Falcon announced that Origin had signed a rig contract with Ensign Australia Pty Ltd. for Rig 963 for the 2019 Stage 2 Beetaloo drilling programme, with an option to extend the contract into 2020.
Subject to relevant approvals, and implementation of the exploration recommendations of the Inquiry into Hydraulic Fracture Stimulation in the Northern Territory, the JV will evaluate the potential of the liquids-rich gas fairways in both the Kyalla and Velkerri plays. Exploration and appraisal activities include the drilling and hydraulic fracture stimulation of two horizontal wells. Together with the Velkerri B dry gas play discovered in 2016, this allows for the assessment of three plays, enabling the most commercially prospective play to be targeted for Stage 3 drilling during 2020.
As of 21 January 2019 work had already commenced at some well sites, including water bore drilling and water monitoring, with drilling targeted to commence in June 2019.
3 May 2019 – Kyalla 117 N2 Exploration Well EMP Accepted for Assessment
On 3 May 2019, Falcon announced that the Environmental Management Plan (“EMP”) for the Kyalla 117 N2 Exploration well, for the planned 2019 drilling, stimulation, and well testing prepared by Origin on behalf of the JV, has been accepted for assessment by the Northern Territory Department of Environment and Natural Resources (“DENR”).
The EMP provides detail on how Origin will ensure the environmental impacts and risks associated with its activities are reduced to a level that is as low as reasonably practicable and acceptable. The EMP has been prepared with reference to regulatory obligations and relevant Inquiry recommendations that have underpinned the Code of Practice for Petroleum Activities in the Northern Territory.
22 August 2019 – Kyalla 117 N2 Horizontal Appraisal Well EMP Approved
On 22 August 2019, Falcon announced that the EMP for the Kyalla 117 N2 horizontal appraisal well, had been approved by DENR.
Kyalla 117 N2 Horizontal Appraisal Well
- The well is targeting the Kyalla shale liquids rich gas fairway
- Construction of the well pad and related civil works is nearing completion
- Drilling operations will commence in September
9 October 2019 – Spudding of the Kyalla 117 N2-1 Appraisal Well
On 9 October 2019, Falcon announced the spudding of the Kyalla 117 N2-1 appraisal well in the Beetaloo Sub-Basin.
Highlights:
- Kyalla 117 N2-1 is the first well in the Stage 2 drilling programme to target the Kyalla shale liquids rich gas play.
- Located within Exploration Permit 117 approx. 32 kilometres north of the Beetaloo W-1 well.
- A vertical pilot hole will target a total vertical depth of approximately 1,750 metres into the Kyalla Formation.
- A subsequent horizontal section is planned for approximately 1,000 metres that will be drilled, completed, stimulated and production tested in the prospective Kyalla shale reservoir interval.
- Origin Energy B2 Pty Ltd (“Origin”), as Operator, will drill the Kyalla 117 N2-1 well.
- Origin hold a participating interest of 70% and Falcon Oil & Gas Australia Limited hold the other 30% participating interest over the Beetaloo Exploration Permits, 76, 98 and 117.
The principal objectives for the drilling of the Kyalla 117 N2-1 well are to:
- Penetrate the Kyalla Formation to assess hydrocarbon maturity, saturation and reservoir quality.
- Provide further information on the areal distribution of the Kyalla Formation.
- Collect data for subsequent horizontal drilling, completion, stimulation and production testing; including ability to flow liquids rich gas.
Formation evaluation, including reservoir characterisation, will be carried out through petrophysical interpretation, geo-mechanical studies and core analysis.
20 November 2019 Drilling data from Kyalla 117 N2-1 Vertical Well Very Encouraging
On 20 November 2019 Falcon announced that drilling of the vertical section of the Kyalla 117 N2-1 appraisal well in the Beetaloo Sub-Basin, Australia had been completed to a vertical total depth of 1,895 metres.
Preliminary drilling data from the vertical section of the Kyalla 117 N2-1 appraisal well confirms:
- The continuation of the regionally pervasive Kyalla Fm between the Beetaloo W-1 and Amungee NW-1H wells.
- Elevated gas show with relatively high C3, C4 and C5 components were observed across the carbonaceous shales.
Other work carried out as part of this drilling operation included:
- 45 metres of conventional coring was acquired in each of the Upper and Lower Kyalla reservoir sections.
- Sidewall cores and extensive wireline logging have been acquired.
Horizontal drilling, stimulation and testing:
- The JV is now preparing to drill the horizontal section within the Kyalla formation.
- Horizontal drilling will commence following the final evaluation of the vertical well results.
- Once completed, the horizontal section will be fracture stimulated, and production tested.
- The JV has prepared for continued operations during the wet season.
10 December 2019 – Kyalla 117 N2-1 – Horizonal Drilling Commenced, Evaluation of Vertical Well Advances
On 10 December 2019 Falcon announced that drilling of the horizontal section of the Kyalla 117 N2-1H appraisal well in the Beetaloo Sub-Basin, Australia has commenced, along with the advancement of the vertical well evaluation.
Drilling of the Kyalla 117 N2-1H horizontal well has commenced
- The JV has elected to land the horizontal well within the Lower Kyalla shale, at a depth of ~1800mTVD.
- The horizontal section will be drilled for approximately 1,000-2,000 metres.
- On completion of drilling, the horizontal section will be fracture stimulated and production tested.
Evaluation of the Kyalla 117 N2-1 vertical well advances
- Three source rock reservoir (“SRR”) sections are identified within the Kyalla Shale Formation, characterised as the Lower, Middle and Upper Kyalla.
- The thickness of the entire Kyalla Shale Formation measured almost 900 metres.
- Gross thickness of each SRR interval is between 75 and 125 metres.
- Each SRR exhibited elevated gas shows with relatively high C3, C4 and C5
- Diagnostic fracture injection tests (“DFITs”) were performed on each SRR.
Ongoing analysis of conventional cores acquired in each of the Upper and Lower Kyalla reservoir sections, along with sidewall cores, DFITs and extensive wireline logging, will enable a full-scale evaluation of prospectivity of the Kyalla Formation in the central part of the Beetaloo Sub-Basin.
2020 Updates
13 January 2020 – Kyalla 117 N2-1H Horizontal Well Operational Update
On 13 January 2020, Falcon provided the following operational update on the drilling of the Kyalla 117 N2-1H well in the Beetaloo Sub-Basin, Australia.
The vertical section of the Kyalla 117 well was successfully and safely completed in late November 2019. Drilling of the horizontal production hole section with a target length of 1,000 to 2,000 metres, commenced in early December.
However, after reaching a horizontal length of 700 metres, operational challenges were experienced in maintaining adequate clean hole conditions and stability over portions of the horizontal production hole section appropriate to complete operations.
The initial horizontal production hole section will now be plugged in line with regulatory requirements. This will then be followed by sidetracking and drilling a new horizontal production hole section.
Plugging back and drilling a new horizontal section from an existing vertical well is not uncommon in an exploration drilling program such as this.
With the drilling rig and equipment on-site and in position, drilling operations will recommence on the new horizontal well section within the next month.
Fracture stimulation activity will only occur after the successful completion of drilling and the integrity of the well is tested and verified.
Results obtained from operations to date in the target shale formation demonstrate good reservoir continuity, conductive natural fractures, and continuous gas shows. The JV remains positive about the potential of the Lower Kyalla Formation, resulting in the decision to continue with drilling operations.
30 January 2020 – Kyalla 117 N2-1H ST2 Horizontal Well Operational Update
On 30 January 2020 Falcon announced the commencement of the sidetrack to drill the new horizontal production hole section of the Kyalla 117 N2-1H ST2 well in the Beetaloo Sub-Basin, Australia. This new horizontal section will again target a lateral length of 1,000 to 2,000 metres within the Lower Kyalla shale, at a depth of ~1,800mTVD.
20 February 2020 – Successful Drilling of Kyalla 117 N2-1H ST2 Horizontal Well
On 20 February 2020 Falcon announced that drilling operations, including casing and cementing, on the Kyalla 117 N2-1H ST2 well have been successfully completed.
The well has been drilled to a total measured depth of 3,809 metres, including a 1,579 metre lateral section (from 90 degrees) in the Lower Kyalla Formation. Preparatory work, including the drilling of water impact monitoring bores – a new requirement of the Code of Practice for onshore petroleum activities in the NT – will commence in the coming month ahead of the next stage of operations.
The JV will continue its in-depth shale evaluation program of all the technical data gathered from the conventional cores, sidewall cores, DFITs and extensive wireline logging, to build an understanding of the prospectivity of the Kyalla Formation.
26 March 2020 – Kyalla 117 N2-1H Horizontal Well Operational Update
On 26 March 2020 Falcon provided the following operational update on the Beetaloo project in the Northern Territory, Australia in light of COVID-19.
Following the successful completion of drilling operations, including cementing and casing, of the horizontal well section of the Kyalla 117 N2-1H ST2 well (the “Kyalla Well”), the JV had completed the installation of water monitoring bores and preparatory work was continuing towards the next phase of operations, which includes the fracture stimulation of the Kyalla Well.
Given the unprecedented circumstances brought about by COVID-19 in recent weeks, the JV made changes to its operations to protect the health and well-being of Origin Energy Limited employees, contractors and communities across the Northern Territory. Adhering to the latest guidelines and advice from the Northern Territory and Federal Government on health and safety and social distancing are of the utmost importance to the JV and all present on site are observing health authority requirements.
Following the implementation of the necessary control procedures, the JV elected to temporarily pause activities at the Kyalla Well site, reducing those on site to essential personnel only, whilst ensuring the required regulatory and environmental management conditions to monitor and maintain the site can be met. The JV plans to resume activities in the latter half of 2020 and during this interim period the JV will use Northern Territory based employees and contractors to undertake civil and other works in preparation for the resumption of activities.
The JV remains committed to the Beetaloo project which, if successful, has the potential to deliver long-term economic and social benefits for the Northern Territory, Australia and is encouraged by the positive results to date. However, the circumstances presented by COVID-19 have led the JV to conclude that the focus must be to protect the people and communities of the Northern Territory.
7 April 2020 – Beetaloo Farm-out
On 7 April 2020 Falcon announced that its c. 98% subsidiary, Falcon Oil & Gas Australia Limited (“Falcon Australia”), has executed an agreement which includes a restated Farm-Out Agreement and Joint Operating Agreement (collectively “the Agreements”) with Origin to farm down 7.5% of Falcon Australia’s 30% participating interest (“PI”) in the Exploration Permits in the Beetaloo Sub-basin, Northern Territory, Australia (“the Permits”). Falcon and Origin are obligated to seek the Northern Territory government and TSXV stock exchange approvals, in respect of the Agreements.
Transaction details
- With the necessary approvals, the PI of the respective JV partners will be:
- Falcon Australia 22.5%
- Origin 77.5%
- In consideration of Falcon Australia transferring 7.5% of its PI, Origin will increase the gross cost cap of the work program by A$150.5 million.
- The previous farm-in arrangement included a Stage 2 gross cost cap of A$65.3 million and a Stage 3 gross cost cap of A$48 million, or A$113.3 million in total. Under the Agreements, the Stage 2 and Stage 3 gross cost caps will be combined and increased by A$150.5 million to A$263.8 million (the “Overall Cost Cap”),
- This Overall Cost Cap will be applied to the completion of the Stage 2 and Stage 3 work programmes.
- Amounts of the Overall Cost Cap not utilised during Stage 2 and Stage 3 will be applied to future work programmes.
- Expenditure above the Overall Cost Cap will be borne by the JV partners in proportion to their PI.
- Origin will assume 25% of the cost of Falcon Australia’s remaining call option to reduce the overriding royalties with the TOG Group. The cost to Falcon Australia, should it wish to exercise the call option, will reduce from US$7.5 million to US$5.625 million, in line with its reduced PI.
Operational Update
Drilling operations on the Kyalla 117 N2-1H ST2 well (“Kyalla Well”) were successfully completed in February 2020, reaching a total measured depth of 3,809 metres, including a 1,579-metre lateral section (from 90 degrees) in the Lower Kyalla Formation. Water impact monitoring bore drilling was completed in March and final preparatory work continues ahead of the next stage of operations. On 26 March, in response to the COVID-19 pandemic, Origin confirmed forward operations in the Beetaloo had been temporarily paused. As a result, Origin expects a delay to the Kyalla Well stimulation and extended production test of at least 3 months to now occur in H2 2020, and the drilling of the Velkerri Flank well in H1 2021.
20 August 2020 – Beetaloo Operational Update
On 20 August 2020 Falcon provided the following operational update on the Beetaloo project in the Northern Territory, Australia.
Kyalla liquids-rich gas play
In February 2020, the Kyalla 117 N2-1H ST2 well (“Kyalla 117”) was drilled to a total measured depth of 3,809 metres, which included a 1,579 metre lateral section in the Lower Kyalla Formation. Results obtained demonstrated good reservoir continuity, conductive natural fractures and continuous gas shows.
In March 2020, operations in the Beetaloo Basin were paused in response to the COVID-19 pandemic. The Ensign rig was secured and maintained locally, and by mid-May all personnel had left the Kyalla 117 well site.
Subject to COVID-19 related conditions, fracture stimulation of Kyalla 117 is expected to commence in Q3/Q4 2020 with extended production testing of the well to follow. Initial results from the production test are expected during Q4 2020 with final results expected by the end of Q1 2021. These results will inform the decision to either further evaluate this liquids-rich gas play or commence activities in the Velkerri liquids-rich gas play.
Construction of the Velkerri 76 well lease pad was completed in early December 2019 and environmental approval to drill and fracture stimulate the Velkerri Flank well was granted in late December 2019.
21 September 2020 – Beetaloo Operational Update
On 21 September 2020 Falcon provided the following operational update on the Beetaloo project in the Northern Territory, Australia.
Kyalla liquids-rich gas play
Operations have recommenced at Kyalla 117 N2-1H ST2 with the fracture stimulation of the well, extended production testing to follow. Initial production test results are expected during Q4 2020 with final results expected by the end of Q1 2021. These results will inform the decision to either further evaluate this liquids-rich gas play or commence activities in the Velkerri liquids-rich gas play.
02 October 2020 – Beetaloo Technical Update
On 02 October 2020 Falcon provided the following technical update on the Beetaloo project in the Beetaloo Sub-basin, Northern Territory, Australia regarding the hydraulic stimulation of the horizontal Kyalla 117 N2-1H ST2 well.
Highlights of the preliminary results from the Kyalla 117 well:
- Completion of 11 hydraulic stimulation stages along the 1,579-metre horizontal section in the Lower Kyalla Formation
- Stimulation treatments were successfully executed
- Activities have commenced in preparation for the flowback and extended production test
- Early stage gas flow rates are expected in the coming weeks
04 November 2020 – Operational Update
On 4 November 2020 Falcon noted that operations continue following the hydraulic stimulation at Kyalla 117 N2-1H ST2 well in the Beetaloo Sub-basin, Northern Territory, Australia. Following a short initial flow back of hydraulic fracture stimulation fluid to surface the well was subsequently shut in and production tubing was successfully installed and tested. Flow back operations recommenced in late October, with the well flowing back at a rate of approximately 500 bbl/d with minor gas breakthroughs observed to date.
25 November 2020 – Operational Update
25 November 2020 Falcon provided an update on exploration activity in the Beetaloo Sub-basin, Northern Territory, Australia following the successful hydraulic stimulation of the Kyalla 117.
As announced on 4 November 2020, flowback operations of the fracture stimulation fluid commenced in early October before Kyalla 117 was shut in and production tubing was successfully installed, with flowback operations recommencing in late October.
Kyalla 117 continues to flow back fracture stimulation fluid, with some gas shows; however, a measurable gas breakthrough that would allow the commencement of extended production testing to assess the extent of the resource that may be present has yet to occur.
Data collected and analysed to guide ongoing operations is showing greater pressures in the horizontal section of Kyalla 117 than in the surrounding reservoir, due to the saline content and density of the flowback fluid and the hydrostatic column weight of this fluid in the vertical section. This pressure difference can prevent the flow of gas from the reservoir into the fractures and then to surface and it is not unusual in shale plays to observe the salinity and density of the flowback fluid to increase as salt easily migrates from the formation.
Operations are now being planned to re-enter Kyalla 117 with coiled tubing and apply nitrogen lift techniques to lower pressures in the Well and assist with achieving and sustaining gas breakthrough that, if successful, will allow extended production testing to commence. This technique is not uncommon and was applied to the successful Amungee NW1-1H well in 2016.
The timing of coiled tubing activities and the nitrogen lift are being considered as the wet season approaches, with health, safety, environment and cost considerations in mind. If a decision is made to temporarily shut-in the Kyalla 117, operations will resume in early 2021.
As is the nature of exploration and appraisal, Falcon and Origin, are continually responding to the data gathered through operations to inform ongoing activities.
Other data collected to date remains positive. In particular, core analysis indicates mature hydrocarbons and good permeability (natural pathways for gas to flow) and mud logs indicate liquids rich gas. The fracture stimulation of the well was successful and the integrity of the well remains.
10 December 2020 – Operational Update
10 December 2020 Falcon provided an update on exploration activity at Kyalla 117. As announced on 25 November 2020, operations were being planned to re-enter Kyalla 117 with coiled tubing and apply nitrogen lift to lower the pressure in the wellbore and to assist with achieving and sustaining gas breakthrough. If successful, this would allow extended production testing to commence. The timing of operations was carefully considered as the wet season approaches, with health, safety, environmental and cost considerations in mind.
The JV decided to execute operations without delay with all of the necessary equipment and consumables for the nitrogen lift being prepared to mobilise to the well site.
24 December 2020 – Operational Update
24 December 2020 Falcon provided an update on exploration activity with respect to Kyalla 117. As announced on 10 December 2020, the JV decided to execute operations without delay to re-enter Kyalla 117 with coiled tubing and apply nitrogen lift to lower the pressure in the wellbore and to assist with achieving and sustaining gas breakthrough. If successful, this would allow extended production testing to commence.
The coiled tubing unit and all necessary consumables have arrived at the wellsite and the rigging up of the equipment was in progress. Nitrogen lift operations expected to commence in the next few days.
19 January 2021 – Notification of Discovery – Kyalla 117 N2-1H ST2
19 January 2021 Falcon announced that Origin, our Joint Venture partner, has submitted a notification of discovery and an initial report on discovery (“Notification of Discovery”) to the Department of Industry, Tourism and Trade of the Northern Territory (“DITT”) on the Kyalla 117 in the Beetaloo Sub-basin, Australia. The Notification of Discovery is a requirement under s64(1) of the Petroleum Act 1984 (Northern Territory) and the NT Guidelines for reporting a petroleum discovery.
Details of the Notification of Discovery from Origin to the DITT are as follows:
- The Notification of Discovery is supported by preliminary production test data and petrophysical modelling.
- This follows the introduction of nitrogen to lift the fluids in Kyalla 117, which has enabled Kyalla 117 to flow unassisted for a period of seventeen hours.
- Unassisted gas flow rates ranging between 0.4-0.6 MMscf/d over seventeen hours were recorded.
- Flow back of hydraulic fracture stimulation water to surface over the same period, averaged between 400-600 bbl/d.
- Initial analysis suggests a liquid-rich gas composition with less than 1% CO2.
- Condensate shows were also observed.
Further Information
- These early-stage flow rates are preliminary indications of well performance, and an extended production test (“EPT”) will be required to determine the long-term performance of Kyalla 117.
- Longer-term measures will be put in place to flow back sufficient hydraulic fracture stimulation water to allow Kyalla 117 to flow continually without assistance and enable an EPT to continue in the coming months during the dry season.
- A further update will be provided when production testing has concluded, and detailed evaluation has been undertaken, expected to be in Q2 2021.
Australian Government
The Australian Government announced during the week commencing 11 January 2021 that it would invest A$217m in economic enabling infrastructure and upgrades to remote roads in the Northern Territory. These upgrades will provide quality infrastructure to support gas development and other industries in and around the Beetaloo Sub-basin. This is in addition to the A$50m being provided by the Australian Government to accelerate exploration activity in the Beetaloo announced in December 2020.
22 January 2021 – Gas Composition Data Confirm Kyalla Liquids Rich Gas Play
On 22 January 2021 Falcon announced the following update on the first gas composition data obtained during the 17-hour unassisted flow period of Kyalla 117.
The initial analysis of natural gas by gas chromatography confirms a liquids-rich gas stream low in CO2 as follows:
- C1 = 65.03 mol%
- C2 = 18.72 mol%
- C3 = 8.37 mol%
- iC4 = 1.29 mol%
- nC4 = 2.03 mol%
- C5+ = 2.73 mol%
- CO2 = 0.91 mol%
- N2 = 0.92 mol%
The elevated C3+ gas component of 14.42 mol%, which meets our pre-drill expectations, confirms the Lower Kyalla Shale as a liquids-rich gas play. Gas composition data also support the view that the Kyalla gas stream will have elevated LPG and condensate yields.
As announced on 19 January 2021, longer term measures will be put in place to flow back sufficient hydraulic fracture stimulation water to allow the Kyalla 117 to flow continually without assistance. This work is expected to commence at the start of the dry season in Q2 2021 and if successful will allow an extended production test (“EPT”) of between 60 and 90 days to commence.
