Byron’s SM71 project on track to reach payout within year of initial production

SM 71 F platform; Source: Byron

Byron Energy has said that its operated South Marsh Island Block 71 (SM71) F Platform located in the U.S. Gulf of Mexico is matching its previous production and cashflow forecasts and will reach payout within one year of initial production.

According to Byron’s statement from Friday, December 21, 2018, during late November and early December, the company undertook bottom hole pressure surveys in all three producing wells at SM71.

The purpose of this work was to ascertain the current reservoir pressures in the D5 and B55 Sand Reservoirs, evaluate the reservoir drive mechanisms and to determine if two key wells, the SM71 F1 and F3 wells, are connected in the primary D5 Sand reservoir.

 

D5 Sand Reservoir

 

Since production began in March 2018, two wells completed in the D5 Sand (F1 and F3) have produced a total of approximately 885,000 barrels of oil and 1.0 billion cubic feet of natural gas (as of 20 Dec 2018). Bottom hole pressure surveys had been also conducted in May 2018 and were compared to the work done in December 2018.

In December, both the SM71 F1 and F3 wells exhibited reservoir pressure decreases, but the observed decreases are well within the company’s expectations based on comparisons to nearby D5 Sand oil wells on adjacent blocks on the SM71 salt dome.

Byron said: “The D5 reservoir is characterized by a combination drive mechanism with initial pressure depletion followed by primary water drive support through the end of life of the reservoir; it appears we are seeing signs of this transition which is consistent with our original expectations.”

Two key observations can now be made by comparing data from May and December.

First, the overall rate of daily pressure decline has decreased over the past six months. Second, the number of barrels of oil produced per psi of pressure drop in the D5 Sand reservoir has significantly increased. These observations are strong indications of water support from the downdip aquifer in the SM 71 D5 Sand reservoir. Neither the F1 nor the F3 well is producing any water at the present time.

Another test was performed to determine if the SM71 F1 and F3 wells are in communication in the D5 Sand reservoir. Both wells were shut in for several hours during which pressure build up rates were measured in each well. When the downdip F3 well was opened to production while the updip F1 well was still shut in, the corresponding rate of pressure build-up in the F1 decreased, indicating the two wells are in communication within the D5 Sand reservoir as expected.

 

B55 Sand Reservoir

 

Bottom hole pressure measurements were also taken in the SM71 F2 well which was re-completed in the B55 Sand in October. Based on these downhole pressure measurements the well’s gas lift system was modified and since then, the SM71 F2 well has become more predictable and now is producing at a stable rate of 180 barrels per day on gas lift. This rate is in line with other B55 Sand producers on the dome and the company’s pre-completion estimate. The F2 well will continue to be managed at appropriate production rates.

 

Payout within year 

 

Byron’s SM71 project is fast approaching one million barrels of total oil production since March 2018. This cumulative production combined with minor amounts of facility related downtime and strong commodity prices means that the SM71 project will reach payout within one year of initial production.

Current rates form the SM71 platform are 2,900 barrels of oil per day and 7.25 million cubic feet of gas per day and no water from all three wells. The average realized price for oil has been Louisiana Sweet minus $7.50 per barrel which accounts for all associated transportation, marketing and handling costs and for gas the company realizes Henry Hub less $0.40 per thousand cubic feet.

Total gross production at SM71 to date is 928,000 barrels of oil and 1.1 billion cubic feet of gas. The company’s Collarini June 30, 2018, reserve report estimated total production to the end of November 2018 would be 904,000 barrels, which compares very closely to the company’s actual production of 878,000 barrels to the end of November. The company’s forecast revenue was 24.5 million dollars which matches almost exactly its actual realized cashflow. The original production estimates for the D5 included minimal gas but in actuality we are producing a gas volume equivalent, on a revenue basis, to approximately 500 barrels of oil per day based on current pricing.

Additional downhole pressure surveys will be acquired in May of 2019.

Byron, through its wholly owned subsidiary Byron Energy Inc. is the operator of SM71 and has a 50% working interest and a 40.625% net revenue interest in SM71. Otto Energy holds the remaining interest in SM71.

Maynard V. Smith, Byron CEO, commented: “We continue to be very pleased with the performance of our SM71 project. This project is closely matching our previous production and cashflow forecasts and will allow us to execute with confidence our very exciting exploration program in 2019. This is an outstanding result for our company and is a testament to the continued hard work of our offshore personnel and our technical staff.”

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