Valiant Petroleum
Valiant Petroleum plc plans fourteen North Sea wells in fifteen months
Since valiant Petroleum was founded in 2004, it has managed to raise an impressive £113m, including £50 million raised when the company listed on AIM earlier this year. Valiant is focused on appraising and developing a number of oil discoveries in the Northern North Sea and also a number of exploration prospects on its North Sea licenses. The Company has a strong balance sheet, with debt funding of $245 million from the Bank of Scotland, to bring into production 23.13 million barrels (MMbbls) of Proven and Probable (P2) reserves in the North Sea.
Valiant’s management anticipates first production from the company’s West Don 17.275% wi (working interest) and Don South West 40% wi, to come on stream during 2009. Future growth, in terms of reserves and production into 2010, is planned from development of the Crawford and Causeway discoveries, and from the company’s exploration prospects in the Northern North Sea. Development plans could see peak production levels of 10,000bopd (barrels of oil per day) in 2009, and 15,000 - 20,000bopd in 2010, from its portfolio of development assets
West Don and Don South West
These development prospects contain a total of 17.59MMbbls of P2 reserves net to Valiant Petroleum. A field development plan has been submitted to the UK authorities and approval was granted in May this year. The floating production facility, “Northern Producer”, will be used for the recovery and storage of the oil produced, which will then be offloaded to a tanker throughout 2009, and then possibly a pipeline to the Thistle field facilities in 2010 - depending on capacity available. The Northern Producer is capable of handling 55,000bopd and 59,000 barrels of water injection capacity per day - water will be injected into the reservoir to maintain pressure during production. The dual development of West Don and Don South West will require up to seven development/appraisal wells. Initial production for the entire project is anticipated to be in the region of 30,000bopd (10,000bopd net to Valiant).
As well as the proven reserves of the Don South West field, there are up to seven untested fault compartments surrounding the field. Resource estimates here indicate a potential yield of c.30MMbbls net to the company – subject to the compartments being found to contain commercial quantities of hydrocarbons. These compartments represent relatively low cost appraisal opportunities for the company, as existing wells could be extended or side-tracked into these yet to be tested compartments. Any subsequent production could then be tied into the future facilities at the Don production hub. The management rates about 50% of the compartments as having a one in two chance of success, and that’s good odds for North Sea exploration wells.
Crawford Development
An appraisal well drilled on the field in 2007, discovered a 60ft vertical oil column in the Tertiary aged reservoirs and a 400ft oil column in the Triassic reservoir. Valiant has a 29% interest in the Crawford discovery, which gives the company 5.6MMbbls of P2 reserves and a possible upside of 2.5MMbbls, if fracture stimulation is used to increase permeability and increase total oil recovery. It is envisaged that development of the field will be via a sub-sea tie-back to Harding or East Brae, with the possibility of a Floating Production Storage Off-Take vessel if production levels are high enough to warrant the expenditure. The field development plan will be submitted later this year, with first oil anticipated in 2010. Peak production is anticipated to be in the region of 5,800bopd ne to Valiant for this development.
Causeway Development
The Causeway is similar to the Don South West field in that it’s made up of a number of reservoir compartments. Antrim Energy successfully appraised the Causeway field in 2006, with the 211/23d-17z well achieving an impressive flow rate of 14,500bopd. So far, all wells drilled in the appraisal of the Causeway field have encountered oil, and those that have been flow tested have all recovered oil. Not only is the Causeway field made up of three main compartments on a tilted fault block, but the oil is contained in three zones within the Jurassic sands. Some of the zones have yet to be tested and further appraisal success would convert more of the P3 of 34.4MMbbls into P2 reserves. Valiant has a 14% wi in this development, and drilling is about to kick-off with both an appraisal well and a developmental well. One of these wells is likely to be used as a production well and the other is likely to be used as a pressure support well. These wells will test the Ness and (as yet untested) Etive formations of the Jurassic sands, on the East Causeway block. After this phase of developmental drilling, a field development plan will be submitted later in the summer. Following approval of this plan, the partners in this development are hoping to have the infrastructure in place for initial production by December 2009.
Exploration
Valiant has a number of prospects identified on its North Sea licence areas, and kicked off with a three well exploration campaign this year. The company drilled the first of three wells in May. Unfortunately, the Globe prospect was unsuccessful in discovering commercial quantities of hydrocarbons - however, it wasn’t all bad news as the well was completed at approximately 20% below budget. The Byford Dolphin rig is contracted to drill the Prospero prospect in August, followed by the Bourbon prospect in November. Valiant also has a 50% wi in the Prospero prospect that could net the company some 6.25 Million Barrels of Oil Equivalent (Mmboe) of reserves, while at Bourbon the company has a 30% wi in the field which could net Valiant 11.88MMboe of reserves. Under the terms of the farm-out agreement, Valiant only has to pay 11% of the cost of the exploration well on the Bourbon prospect.
Conclusion
A very active drilling programme lies ahead with two wells to be drilled in the Causeway field in the coming months, followed by an exploration well on the Prospero prospect and three wells on the West Don and Don South West area. Later in the year, the company will be drilling the Bourbon prospect and only footing 11% of the costs of the well with a 19% free carry.
Valiant has 2P and 2C reserves of 38.9MMbbls and it is possible that the developmental drilling will move a significant amount of these reserves up into the P2 category. A very active fifteen months lies ahead with up to fourteen wells to be drilled with four “rig slots” booked for drilling in 2009. It is agreed that these slots can be used to drill the company’s current portfolio or any areas gained in the 25th North Sea licencing round (as some of the new licences may have work commitment clauses). Having these rig slots available at this stage shows a very active company with good future planning. As Valiant pushes production from towards 20,000bopd within the next two years, it will be able to drive forward both its UK North Sea exploration, and its developments, from internal cash flow.
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