To complement Armour Energy’s prospective areas in Northern Australia, the Company made a strategic investment in Lakes Oil, an oil and gas explorer focused on the Otway and Gippsland Basins, Victoria and entered agreements on three key projects:
Armour and Lakes are targeting gas and oil discoveries in the onshore sections of the Gippsland Basin, predominantly in the Strzelecki Group and the Rintoul Creek Sandstone. Armour and Lakes believe the bulk of the Gippsland Basin’s oil and gas reserves which form the basis for BHP and Esso’s massive offshore production activities are at least partially derived from the Rintoul Creek Sandstone and that the Rintouls Creek Sandstone offers significant onshore oil potential to Lakes and Armour.
The sands and shales of the Strzelecki Group are highly prospective in Lakes’ tenements. Initial flows in the Wombat field have flowed up to 4.5 million cubic feet per day from the Strzelecki Group. Live oil flowed from a natural fracture in Wombat 3 believed to be sourced from Rintoul Creek Sandstone from a deep source beneath the total depth of the well.
Lakes has outlined some 1.68 trillion cubic feet of contingent resources in the Strzelecki Group in PRL21 and is targeting further resources on resumption of exploration work in the area. Work programmes in this area are presently delayed due to a Victorian fraccing moratorium and finalisation of Beach Petroleum’s farm-in activity, if any.
Gas resources of PRL2 and other targets are well placed for sale within Victoria, for power generation or industrial uses. The projects are surrounded by existing infrastructure including gas pipelines and power stations.
The main target structure in PEP166 is the Baragwanath Anticline which extends for 70 kilometres east-west from west of the Yallourn Power Station in the west to Boundary Creek, east of the Longford gas plant in PRL2 in the east. The structure is believed to host potentially large and extensive gas resources in the Strzelecki Group and potential oil accumulations in the Rintoul Creek Sandstone.
Armour believes that access to advanced fraccing and well stimulation and drilling techniques and the experience of its technical team will contribute to early achievement of commercial gas and oil flows from the onshore section of the Strzelecki Group.
Armour is participating at the current 51% level in the drilling of Otway 1 well in PEP169 north of Port Campbell in western Victoria. Drilling of the well is currently scheduled for early March 2013. The well, located beside Origin’s Iona Gas plant, is targeting commercial gas flows from the Waarre Sandstone and Eumeralla Formation.