UK P1559 Block 15/23e Cornet Licence Relinquishment

1 25 January 2013

North Sea Business Unit

Cornet Licence Relinquishment

P1559, Block 15/23e (Premier 100% operator)

Section Contents

1 Header 2 Synopsis 3 Exploration Activities 4 Prospect Analysis 5 Reserves Summary 6 Maps and Figures 7 Clearance

UK P1559 Block 15/23e Cornet Licence Relinquishment

2 25 January 2013

1. Header Licence Number: P1559 Licence Round: 26th Block Number: 15/23e Operator: Premier Oil Work Programme: Part I. Firm Commitment

• Obtain 50km2 of 3D seismic data

Part II. Contingent Commitment

• Drill one well to 4000m or to the Top Galley Member, whichever is the shallower, provided that licensee shall not be required to do so and the Licence shall expire at the end of the Initial Term if the Minister confirms in writing that he agrees that it would not be an appropriate use of resources, having regard to the information available to him, to the objective of maximising successful and expeditious exploration and exploitation of the UK's hydrocarbon resources, and in particular any positive indications on seismic, from rock physics modelling, of reservoir presence and quality will be a factor in the Secretary of State's decision. Nothing here fetters the Minister's discretion when considering whether to consent to any specific activity.

2. Synopsis The P1559 licence was awarded in the 26th round as a traditional production licence with 12th February, 2009 as start date (Figure 1). The application was written and submitted to DECC by Oilexco in partnership with Nexen prior to Premier's acquisition of the company in 2009. However, awards were made after the acquisition and Premier accepted the award but Nexen withdrew from the application due to changes to the contingent well terms. The work programme included the purchase of 50km2 of 3D seismic data and a contingent commitment to drill a well to 4000m or Top Galley whichever is shallower before the end of the four year first term ending 11th of February 2013. The first commitment was fulfilled, with over 640km2 of 3D seismic data obtained and up to 379km2 CGG Veritas 3D seismic data volume inverted with a view to investigate Dirk and Galley sand distribution. Several data subsets covering the entire 15/23e and also adjacent blocks to the North (15/23b, 15/23g) and West (15/22) where Premier has equity were integrated for this evaluation (Figure 2). Re-interpretation of structural closures at both Dirk and Galley levels using a newly acquired (2011) 3D seismic dataset reduced the closures by about 30% compared to the assessment for the application (Figures 3 and 4). This reduction in GRV has consequently led to reduction in the predicted Dirk and Galley STOIIPs and recoverable resources (Table 1)

UK P1559 Block 15/23e Cornet Licence Relinquishment

3 25 January 2013

After evaluating the inverted data subsets, it has not been possible to discriminate between sandstones of Dirk and Galley Formation and clays of the Kimmeridge Clay Formation, which was the objective of the inversion. Although the inversion model was robust, showing good ties with Blackhorse discovery wells, 15/22-16 and 15/22-18, the objective of reducing risk of reservoir presence was not met. Given the volumes and risks identified for the Upper Jurassic prospectivity on the P1559 licence – specifically the Cornet prospect – Premier sought approval to relinquish the licence. 3. Exploration Activity: Two separate 3D seismic data sets covering over 640km2 were obtained and interpretation was carried out in order to evaluate Cornet Prospect identified in the block. Seismic inversion was also carried out on Q15 3D Veritas seismic data known as Cornerstone. The inverted data covers an area of 379km2 (Figure 2). The 2011 3D Q15 PSTM-PSDM seismic data was purchased to firm-up structural interpretation with a view to confirm the location and continuity of the main bounding fault on which the Cornet Prospect depends. The inversion data sub-sets created comprised of 5 different sub-volumes which included a Lithology Factor volume; this was used to attempt to discriminate between sandstones of Dirk and Galley formations and clays of the Kimmeridge Clay Formation which would in turn allow delineation of Dirk and also Galley reservoirs and help understand the extent of their distribution. This was considered the critical risk for this prospect but inverted seismic failed to show any identifiable geological features that could be used to constrain either Dirk or Galley sand distribution. Two attempts were made to farm-out at least 50% but none was successful. The first was after the initial interpretation while the second was after re-interpretation on the newly acquired 2011 3D seismic data set. 4. Prospectivity Analysis Cornet Prospect lies mainly in Block 15/23e but part of it also lies in two other licences - P.185 and P.489 located in Blocks 15/22 and 15/23b respectively where Premier has 50% equity in both licences, Nexen holding the other 50%. (Figure 1). The prospect is primarily Dirk and Galley sand plays. The Piper play is considered not prospective at Cornet due to poor reservoir quality (Figures 3 and 4). Water depth is approximately 488ft. At Galley level the trap has two-way dip closure with two-way fault closure. Substantial upside potential could be provided by sealing E-W faulting; the down-dip 15/23-3 well is outside of closure, and encountered good shows in the Galley sand section, with 45m net reservoir (Figure 4). Prospectivity at Dirk level is centered on the 15/23-3 well, which encountered an apparent ODT in a 17.5m Dirk sand section. The Dirk trap is entirely stratigraphic, in line with similar proven traps encountered in the Dirk at Bugle and Blackhorse Discoveries. A north-south fairway has been identified based on Dirk sands presence in offset wells but it was not possible to constrain it with seismic data, including inverted data (Figure 3). It is recognized however that there is a possibility that the Galley Sandstone may be thin or absent towards the crest of the prospect as suggested by seismic data.

UK P1559 Block 15/23e Cornet Licence Relinquishment

4 25 January 2013

5. Reserves Summary Dirk Galley

STOIIP (mmstb)

Oil Resource (mmstb)

STOIIP (mmstb)

Oil Resource (mmstb)

P90 17 2.5 6.5 0.9

P50 25 3.8 12 1.8

P10 36 5.3 23 3.4

Table 1. Shows a summary of STOIIP and Resources for Cornet Prospect at Dirk and Galley levels. Values represent total closures including areas outside Block 15/23e, Cornet Licence.

6. Maps and Figures

Figure 1. Map of Block 15/23e outlined in red highlighting Cornet Prospect structural closures at Dirk, Galley and Piper levels and surrounding areas

Figure 2. Shows two 3D seismic datasets obtained over Block 15/23e to fulfill firm commitment (Q15 2011 3D seismic data and Q15 3D Cornerstone Veritas data which was also inverted).

Cornet - Dirk

Bugle

Scott

Telford

Cornet - Piper

Cornet - Piper

3D Scott

Nexen

379 km2264 km2

2011_3D_Q15_PSTM-PSDM

Q15_3D_Veritas_Data

Block 15/23e

UK P1559 Block 15/23e Cornet Licence Relinquishment

5 25 January 2013

Figure 3. Top Dirk Depth Structure and Isopach maps showing Cornet Prospect and an area where no Dirk sand have been deposited.

Figure 4. Galley Depth Structure map showing Dirk and Galley post application closures and also pre-application Dirk closure. Combine Dirk and Galley GRV( Gross Rock Volume) was reduced significantly and this was due to change in angle of inclination of the main bounding faults after re-interpretation on new 2011 seismic dataset

7. Clearance It is hereby confirmed that DECC is free to publish the results contained in this relinquishment report.

1km

Dirk Depth Structure Map (m) CI - 20m

15/23-3

1km

Dirk Isopach Map (m)

15/23-3

No Dirk

Deposition

Dirk Struct

Closure

Galley Depth Structure Map (m) CI - 25m

1km

15/23-3

No Dirk

DepositionApplication Dirk

Closure

Post-application Dirk closure

Reduced GRV

due to change in

fault inclination

Post-application

Galley closure