1

LICENCE RELINQUISHMENT

REPORT

UKCS P2020

BLOCKS 213/29 & 213/30

E.ON E&P UK LTD

March 2015

2

Contents

1. Licence Information

2. Licence Synopsis

3. Work Programme Summary

4. Database

5a. 27th Round Prospectivity, January 2013

5b. Prospectivity Update, January 2015

6. Further Technical Work Undertaken

7. Resource and Risk Summary

8. Conclusions

9. Clearance

3

List of Figures

Fig 1 Location & Coordinates of Determined Area (Full Relinquishment)

Fig 2 Comparison PGS Megamerge vs Reprocessed CGG

Fig 3 Seismic and Well Database

Fig 4 N-S Geoseismic Section through Doina & Ada Prospects

Fig 5 Top Doina Fan Lobe TWT Structure Map

Fig 6 Arbitrary Line through Doina Feeder Channel

Fig 7 In Line through Doina 4WD

Fig 8 Interpreted Arbitrary Line Along Caledonia Fan Lobe through 213/23-1,

Ada, Doina

Fig 9 Uninterpreted Arbitrary Line Along Caledonia Fan Lobe through

213/23-1, Ada, Doina

Fig 10 Ada Fan Lobe TWT Structure Map

Fig 11 Seismic In Line across Ada

4

1. Licence Information

Licence Number: P2020

Licence Round: 27th Round

Licence Type: Traditional

Block Numbers: 213/29 & 213/30

Licensees: E.ON Exploration & Production (Operator) 100%

Clearance Statement:

E.ON Exploration and Production confirms that the Department of Energy and

Climate Change is free to publish the contents of this report. All 3rd party ownership

rights on contained data and interpretations have been considered and appropriately

cleared for publication purposes.

5

2. Licence Synopsis

Licence Status:

Drill-or-Drop Decision Deadline 1st January 2015

Licence Summary:

E.ON Exploration & Production (Op) 100%

27th Round Award, Traditional, 4-year term

Licence Start: 01/01/2013

2-year DOD decision due: 01/01/2015

Licence End: 01/01/2017

Work Programme: Part I Firm Commitments:

Reprocess 400km² 3D seismic to PSTM, and

Inversion, rock physics, and AVO studies

Part II Drill-or-Drop:

Drill 1 well to 2600m or 100m beneath Top Eocene, whichever is the shallower

Outline of Prospectivity at time of Application:

Doina prospect: Mid Eocene stratigraphic trap in basal part of Caledonia fan defined by seismic amplitudes.

Ada Lead: Mid Eocene 4-way structural dip closure in upper part of Caledonia Fan

6

3. Work Programme Summary

Work Programme: Part I Firm Commitments (a) Reprocess 400 km² 3D seismic to PSTM, and (b) Inversion, rock physics, and AVO studies. Part II Drill-or-Drop (a) Drill 1 well to 2600m or 100m beneath Top Eocene, whichever is the shallower, or (b) Elect to allow the licence to automatically cease The drill-or-drop programme carries a 2 year decision deadline and by the

anniversary of the start date (01/01/2015): (a) Part I of the Work Programme must be completed, and

(b) A firm commitment to complete Part II of the Work Programme must be made, failing either of which the licence will expire at that time.

Work Completed:

(a) Reprocess 657 km² 3D seismic to PrSTM (CGG(Fugro) MC3D)

(b) Inversion, rock physics, and AVO studies, also detuning analysis, spectral decomposition

7

4. Database

Key data used in evaluation of the block: see Figure 3

● PGS Megamerge 3D, PoSTM, Full Stack only (base survey for reprocessing)

● TGS NSR Long-Offset 2D, PrSTM

● 657 km² CGG (Fugro) E.ON, PrSTM, deliverables include Full Stack, Reprocessed MC3D, 4 Angle Stacks, gathers, velocities

● All UKCS released well data

8

5a. 27th

Round Prospectivity, Jan 2013 At the time of the 27th Round Application, Doina had been identified as an Eocene stratigraphic trap lying at approximately 2500mSS, pinching-out towards the southeast and defined by seismic amplitude anomaly, the effect of compactional drape and possibly enhanced by structural inversion. The location of the feature in the basal part of the sequence was consistent with it representing an early part of the primary feeder channel within the slope canyon connected to the Caledonia fan. Seismic amplitudes provided encouragement that an interbedded sand/shale sequence was present. Intra-formational shales provide effective base and lateral seals. The top seal is also shale, proven effective by the Tobermory discovery. The same well demonstrated a working hydrocarbon system, the inversion structure providing links to mature source horizons at depth, in addition to migration pathways although carrier beds at the level of the fan itself. Recoverable reserves were estimated at 19-142-457 bcf (P90-P50-P10) with a GCF 27%, and trap and charge being identified as the most significant risks. The Ada lead was identified as a four way structural dip closure recognised towards the top of the Eocene fan sequence at approximately 2400m depth. Seismic response and mounded character were considered to be indicative of sand presence. Effective top seal was seen to be provided by overlying shale intervals. The Tobermory discovery demonstrates a working hydrocarbon system, although migration into the structure whether by lateral migration through Eocene carrier beds or vertical migration via local deep seated faults was a risk factor for this lead. Recoverable reserves were estimated at 19-62-132 bcf (P90-P50-P10) with a GCF 18%, and trap and charge again being identified as the most significant risks.

9

5b. Prospectivity Update, Jan 2015

Following award of 27th Round Licence P2020, work commenced on reprocessing 657 km² of existing PGS PoSTM Megamerge 3D full stack seismic data to PrSTM. This work was carried out by CGG and the resultant dataset, (which included full stack, 4 angle stacks, gathers and velocities) showed increased seismic continuity and definition of the fan sequence, which enabled detailed interpretation and differentiation of 4 individual fan lobes, and also allowed spectral decomposition analysis to be carried out to further assist in understanding the evolution of the fan system.

A key risk for the Doina stratigraphic trap was associated with the existence of lateral and topseal in the area of sand pinchout to the southeast, and increased seismic resolution on the newly reprocessed seismic data allowed the identification of a possible zone of sand bypass and backfill with abandonment mudstones, thereby indicating a potential seal.

Detailed mapping of individual fan lobes also led to the identification of an additional 4WD closure lying in the down dip part of the Doina prospect which had not been recognised previously, which was caused by vertical stacking of minor sand lobes to give a mounded sand body, a small-scale analogue of a similar feature drilled by 214/26-1.

The newly reprocessed PrSTM seismic data was used as input for rock physics, AVO and inversion studies work which were carried out by PGS. Significant difficulties were experienced in obtaining zero-phase data and in achieving a well tie to well 213/23-1 which was included in the reprocessed area, and this necessitated the use of other wells in order to provide input in terms of sand/shale properties and hydrocarbon phase data.

Nearby well 214/26-1 was drilled in an analogous position on the adjoining Strachan fan and contained a conglomeratic sequence representing deposition from high-density debris flows and the possibility that a similar sequence could occur in the Doina prospect and give rise to the amplitude anomalies defining the top of the feature was also investigated by the rock physics studies.

The rock physics work gave inconclusive results, although the weight of evidence suggests that the amplitude anomalies seen in the Doina prospect are most likely due to lithological effects rather than to hydrocarbon fill. It is also possible that these amplitudes could be related to a tuning effect, and these could still be masking a hydrocarbon response, but detuning analyses carried out has not provided a definitive conclusion. It can be said with certainty that any possible hydrocarbon fill contained within the prospect is unlikely to be gas or light oil, as these would be distinguishable by a softening in AI response and a flat spot, as in the Tobermory gas discovery 214/4-1. The only hydrocarbon phase possible would be heavy oil and this would however be indistinguishable from brine.

10

At the time of the application gas was considered to be the most likely resource, taking the Tobermory 214/4-1 discovery as an analogue and considering the maturity levels of the Kimmeridge Clay source rock. The newly reprocessed seismic data has however allowed slightly better resolution of the deeper part of the section and mapping of the deeper structures underlying the fan system shows the existence of a number of downthrown fault terraces which form the southeastern flank of the Corona High. The pre-rift Kimmeridge Clay sequence thought to be preserved in these terraces is less mature than in the deeper parts of the Faroe-Shetland Basin, and is the likely source of immature and optimum mature oils on the Corona High, eg Rosebank and an oil case is now therefore the favoured hydrocarbon phase for Doina /Ada. The deepest part of the basin adjacent to the terraces however has been fully within the gas generation window since the Upper Cretaceous and is the likely source of gas for the Laggan-Tormore fields to the east.

As recognised at the time of application, there still remains significant risk relating to charge and migration for the Doina/Ada prospects: analysis of nearby wells 214/26-1 and 214/17-1 confirms that they were drilled on valid closures and penetrated excellent high-quality reservoir sequences in the analogous Strachan fan and yet were dry, leading to the conclusion that there are significant problems in charging the Eocene section, due primarily to the massive thickness of Cretaceous and Tertiary mudstones which separate the Kimmeridge source rocks and Eocene reservoir sands, with little faulting between.

11

6. Further Technical Work Undertaken

Regional Sequence Stratigraphic study of the Eocene West of Shetlands (EON)

Spectral decomposition of Mid Eocene Fan System (EON)

Detuning analysis of Doina prospect (Earthworks)

12

7. Resource And Risk Summary

13

8. Conclusions

● Work commitment completed:

(a) Reprocess 400km² 3D seismic to PrSTM (657km² reprocessed) (b) Inversion, rock physics and AVO studies

Seismic reprocessing has allowed more detailed mapping of the Caledonia

fan architecture, including further definition of the Doina lobe and potential seal, identification of local 4 way dip (4WD) within the Doina fan lobe and more detailed mapping of the Ada 4WD. Major risk still remains however regarding seal for the Doina stratigraphic trapping mechanism.

Seismic reprocessing has also allowed further delineation of the deep structure, leading to a revised charge model for the prospects and an oil case now preferred over the original gas case, although charge is still a major risk.

Rock physics, inversion and AVO studies, together with additional detuning analyses and spectral decomposition studies, have given inconclusive results, although the weight of evidence suggests that the amplitude anomalies seen in the Doina prospect are most likely due to lithological effects rather than to hydrocarbon fill.

Economic analysis indicates that recoverables resources for Doina do not reach the minimum economic threshold for development and those for Ada are too small to warrant drilling. In addition GCF has decreased.

The reasons given, E.ON Exploration & Production proposed full

relinquishment of Licence P2020, Blocks 213/29 & 213/30.

14

9. Clearance

E.ON Exploration & Production confirms that the Department of Energy and Climate Change is free to publish the contents of this report. All 3rd party ownership rights on contained data and interpretations have been considered and appropriately cleared for publication purposes.

15

16

17

18

19

20

21

22

23

24

25