Buru Energy gears up for extensive exploration program across the Canning Basin

Buru Energy Limited (ASX:BRU) (OTCMKTS:BRNGF) (FRA:BUD) Executive Chairman Eric Streitberg said the last quarter of 2020 was a “seminal period” for the company with the execution of two farm-out transactions with Origin Energy Ltd (ASX:ORG) (OTCMKTS:OGFGF) (FRA:ORL) for a Canning Basin exploration program. Streitberg said: “The transactions underpin a major exploration program on the company’s Canning Basin exploration permits during 2021. “The exploration program will include the drilling of two potentially company changing conventional oil exploration wells and a major regional seismic acquisition program. “The participation by Origin in a basin-wide exploration program is a strong vote of confidence in the Basin’s prospectivity and of Buru’s ability and experience as operator in the Kimberley’s Canning Basin.” Canning Basin Farm-out Buru welcomed the transaction, which provides the funding and certainty for a basin-wide exploration program which is set to commence after the end of the current northern Australian wet season. Origin will earn a 50% interest in exploration permits EP 129, EP 391, EP 428, EP 431 and EP 436 previously held 100% by Buru (the Buru permits), with Buru retaining a 50% interest in these permits. Origin will also earn a 40% interest in the EP 457 and EP 458 permits held by subsidiaries of Buru and Rey Resources Limited (ASX:REY) (the Buru-Rey permits), with Buru and Rey retaining respective 40% and 20% interests. Notably, Origin also has the option to fund further activity in two of the Buru Permits which, if fully exercised, require Origin to fund (on a carried basis) up to an additional $10 million of exploration expenditure to maintain its 50% interests in these two permits.  Alternatively, Origin can withdraw from the exploration permits. Similarly, to maintain its 40% interests in the Buru-Rey Permits, Origin must provide a carry of $6 million towards further exploration expenditure at its option. Carried exploration work program The exploration program for 2021 includes two conventional oil exploration wells at Kurrajong 1 and Rafael 1. Origin will provide individual carry amounts totalling $16 million for these well costs and will provide an additional $1 million payment to Buru in recognition of past costs. In addition, the work program includes the acquisition of extensive regional and prospect level seismic programs, with Origin carrying the first $3 million of seismic acquisition expenditure on the Buru Permits and the first $3 million of seismic acquisition expenditure on the Buru-Rey Permits. Origin will also carry the first $4 million of expenditure if the joint venture decides to acquire a 3D seismic program over the Rafael prospect area within the Buru Permits after the drilling of the Rafael 1 well. The working interests across Buru’s extensive Canning Basin portfolio as a result of recent transactions Ungani production and sales Oil production for the quarter was some 78,000 barrels (gross) at an average rate of around 850 barrels of oil per day. The production was considerably impacted by wet weather during December with the Ungani access road being closed intermittently due to heavy rainfall. Production from the existing wells is declining largely in line with field reservoir modelling, with continuous improvements being implemented to optimise oil recovery both for the surface production facilities and the downhole well configurations including a further workover of the Ungani 7H well, the installation of an ESP in the Ungani 5 well and acquisition of larger ESPs for future installation in the Ungani 1ST1 and Ungani 2 wells. Given the potential availability of a slot on the rig being mobilised to the basin for the exploration program, the Ungani Joint Venture is currently undertaking technical and commercial analysis of the feasibility of drilling a further development well on the Ungani Oilfield during the 2021 drilling season. Oil sales for the quarter totalled around 68,000 barrels gross (Buru’s share 50%) from one lifting completed on 30 November 2020 with the company’s 50% share equalling around A$1.9 million. On a cash basis, a further A$1.6 million was received during the quarter from the previous lifting in September, for total cash receipts during the December quarter of around A$3.5 million. Looking forward Streitberg said the company has moved quickly to kick start the exploration program, building on the work done in the last quarter to prepare for a wide-ranging program during the year ahead. He said: “A preferred seismic contractor has been identified with a contract award expected shortly. “Several drilling rigs suitable for the program have also been identified, and a drilling contract is expected to be awarded once contract negotiations are completed. “Buru has production from our Ungani Oilfield, a strong balance sheet, no debt, and a committed new partner, and we are very much looking forward to a revitalised and high potential exploration program during 2021.”