Exploration Strategy

1. Global Basin Analysis Complete Basin Studies Acquire New Exploration Licenses

The Prospect Evaluation

2. Develop Play Concepts 3. Define Exploration Play Areas 4. Evaluate Prospects 5. Identify Drillable Prospects Drillable Prospects/ Well proposals Drill Exploration Wells Compile Full Lead & Prospect Inventory

6. Drill Exploration Wells = New Resources

Evaluation
Basin Scale Assessment Estimation of undiscovered potential within each Play 3. Assessment of Prospect-Specific Risk 4. Volumetric Calculations (Reserve estimates) 5. Economic Analysis Infrastructure Market Price Taxes and royalties Political Risks
1. 2.

To drill or not to drill?

1)

Basin-scale Play assessment:

Identify areas of a basin where there are: source rocks, reservoirs and traps 2) Identify prospects in those areas 3) Rank the prospects by risk 4) Drill the best one, then re-evaluate the others

Probability of Success

Example
100%

US Drilling Success Rates for Oil and Gas Wells 1978-1997

Risk Factor Risk (0-1) Probability hydrocarbon charge 0.80 Probability of reservoir 0.80 Probability of a trap 0.70 Chance of Success 0.44

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996

Exploratory

Development

(EIA, 1997)

Number of Wells
100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 1978
Number of Wells Inflation-adjusted Price

More Detailed Risk Factors

Oil Price

$120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00

1983

1988

1993

Hydrocarbon charge Source Rock Quality (TOC, Kerogen type) Maturity of Source Rock Migration Pathways Reservoir Porosity Permeability Trap Closure (Trap volume) Seal (Trapping efficiency) Timing

Basin-wide Play Map

Probability of Success
A. Everything is cool (100%) B. No structural traps (20%) C. Long migration required (50%) D. Long migration and bad reservoir (30%) E. Poor source (50%)

Fairway Map
Jurassic
Gertrude Play Claudius Play

HAMLET PLAY

Polonius Play

CI = 300m
CI = 500m
CI = 500m

50 m

Hamlet
GEOMETRY: ESTIMATED RESERVES: Risk Elements x Res. Potential

Probability Distribution
?

Every risk element of a prospect is imperfectly known before drilling.

Most Likely
P90
200km2 750m 7% 40 %

P50 = 138 billion scm (gas) RISK ELEMENTS: Source Presence = Source Maturity = Reservoir Quality* = Trap Quality = Migration/Trap Timing = .34 RESERVOIR POTENTIAL: Pay Aerial Extent = Pay Thickness = * (Multizone) Porosity = Saturation =

1 1

P10
340km2 1050m 15 % 60 %

Min

Max

.6 .8 .7

411 Billion scm

Cumulative Probability

Volumetric calculation
Reserves= Area of trap) x Thickness of reservoir unit x Net to gross ratio of reservoir x Porosity x Hydrocarbon saturation x Recovery factor x Formation volume factor

Min

Most likely

Max

Volumetric Example Formation Volume Factor

Change in volume from reservoir to surface conditions Depends on Reservoir Temp, Pressure and gas-oil ratio 1 to 1.7 High shrinkage oil Boi= 1.4 Low Shrinkage oil Boi = 1.2

Thickness: 48 ft Net/Gross: 0.40

GERTRUDE PLAY

Gertrude
GEOMETRY: ESTIMATED RESERVES: Risk Elements x Res. Potential

? P50 = 0.80 billion scm RISK ELEMENTS: Source Presence = Source Maturity = Reservoir Quality = Trap Quality = CI = 50m Migration/Trap Timing = .12 RESERVOIR POTENTIAL: Pay Aerial Extent = Pay Thickness =

.8 .6

P90
25km2 140m 9% 70 %

P10
27km2 150m 11 % 80 %

.7
Porosity =

.7
Saturationc =

.5

6.84 Billion scm