Hydrocarbon Potential

Analysis performed to date indicates a strong potential for significant oil reservoirs on the licenses. This analysis has benefited from our own studies, past exploration efforts and significant fieldwork by geologists from both the NL Government and Memorial University. Field reports have not only noted karstification and other indicators of reservoir quality but extensive oil seeps along the coastline adjacent to and on the islands within the licenses.

While all risk economics have been calculated using net pay thicknesses between 24 and 30m for the Lark Harbour Prospect, the potential for greater thicknesses exists. Onshore mapping of uplifted northeastern sections of the carbonate platform near the community of Port Au Choix to the north of the licenses is described by Cooper et al (2001) as an exhumed oil field. He notes that, prior to the major thrust movement in the Carboniferous; this section would likely have held 100 metres of pay.

An evaluation of undiscovered prospective resources for License 1120 was carried out by Martin and Brusset Associates (M&B), Calgary, Alberta effective August 31, 2012 and in accordance with National Instrument (NI) 51-101 standards. Oil prices were based on their spot forecast for Brent assuming $100.10 as of a January 1, 2017 (earliest starting production date) and escalating to $120.66 by 2027.

This evaluation estimated the statistical risk parameters for potential oil recoverable within the Exploration License 1120’s best prospect only (the Lark Harbour prospect). As this is a frontier area, the parameters for reservoir porosity, recovery, thickness, seal, charge and closure were kept on the conservative side and are modeled after a nearby well (Port au Port #1) and outcrop studies (Baker & Knight, 1992). The overall prospect risk for the initial well is being assessed at 20-25 %, however if the initial well is successful, the overall risk associated with subsequent prospects would be reduced.

Reservoir Assumptions for Lark Harbour Prospect
Porosity Recovery Net Pay (metres)
Probability of Success
15% 20% 24-30 20-25%

In all of the below noted cases, the same general reservoir parameters were used with the size of the reservoir being the most significant variable. As per the table below, the total potential recoverable oil, for the Lark Harbour prospect only, ranges between 61 and 278 million barrels with the most likely case being 154 million barrels.

Assessed Prospect Potential Fully Risked
(G. Maureau, Maur Oil International)
Case Scenario
Drainage Area Size – ha
Net Pay Zone (metres) Prospective Recoverable
Oil MMbbl
P90 2,025 24 61
P50 4,050 30.5 154
P10 7,284 30.5 278

The Hydrocarbon resource potential estimates summarized below are conservative considering that only a single oil bearing reservoir zone, the Aguathuna Limestone, would be encountered. M&B further assume an oil recovery rate of 20 % with no provision made for gas.

Figure 2.20 - Hydrocarbon Resource Potential – Bar Graph

The below Net Present Value (NPV) estimates are presented in Canadian dollars after royalties and taxes and with provisions for well abandonment. Only considering the Aguathuna Limestone with a net pay zone of 30.5 metres, the most likely case scenario discounted at 10 percent provides a NPV of $1.26 billion.

Figure 2.21 - Hydrocarbon Resource Potential – NPV for P10, P50 and P90 Cases