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Relinquishment Report

Central North Sea, UKCS

Licence: P.2003 Block: 22/9b (All)

Date: February 2015

E.ON Exploration & Production UK Ltd (Operator)

Norwegian Energy Company UK Ltd

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Contents 1 Licence Information ............................................................................................................. 3 2 Licence Synopsis ................................................................................................................... 3 3 Work Programme Summary ................................................................................................ 3 4 Database ................................................................................................................................. 5 5 Prospectivity Update ............................................................................................................ 6 6 Further Technical Work Undertaken ................................................................................. 6 7 Resource & Risking Summary ............................................................................................. 7 8 Conclusions ............................................................................................................................ 7 9 Clearance ................................................................................................................................ 7 10 Maps & Figures ..................................................................................................................... 9

Maps & Figures Figure 1: Relinquished Licence Area with Alfred Prospect outline. ....................................... 9 Figure 2: Areal extent of licensed TOMO ML PSDM from CCG .....................................10 Figure 3: Extent of IKON rock physics, relative and absolute seismic inversion study ...11 Figure 4: EEI -65 Lithology (left) and EEI 21 Fluid Volume (right) extractions ..............12 Figure 5: EEI 21 Fluid Volume extraction in 15ms Window Below Top Forties (left). Traverse through Alfred Prospect (right).. ...............................................................................13 Figure 6: Fluid projection defined by rotating the AI and GI data to the brine trend ......14 Figure 7: Comparison of IKON net pay thickness map (oil case) and geological model output .............................................................................................................................................15

Tables Table 1: Resource & Risking Summary ...................................................................................... 7

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1 Licence Information Licence Number: P.2003 Licence Round: 27th Licence Round Licence Type: Traditional/2 Year Drill or Drop, subsequently Initial Term

extended to January 2017 Block Number: 22/9b E.ON Exploration & Production UK Ltd confirms that DECC is free to publish this report and that all third party ownership rights on any contained data and/or interpretations herein have been cleared for publication purposes.

2 Licence Synopsis The relinquished Licence Area is shown in Figure 1 Licence Status: Relinquished before end of Initial Term (January 2017). Timing: The Licence was awarded to the partnership on 1st January 2013 as part of the 27th Seaward Licensing Round, with the agreed commitment being a Drill or Drop decision within an Initial Term of 2 years. Licence Participants: E.ON Exploration & Production UK Ltd (50%, Operator) and Norwegian Energy Company UK Ltd (50%). Work Obligations: Firm commitment to reprocess 168km2 of 3D seismic data and carry out a Rock Physics study, Pressure analysis and undertake reservoir modelling and simulation. Drill-or-drop commitment to either drill a well into the Forties Sandstone Member, Sele Formation (maximum depth of 2900m), or withdraw from the licence according to the timings above. Licence Extension: An Initial Term extension was sought by the Operator in December 2013 and an Initial Term extension was subsequently granted by DECC to January 2017.

3 Work Programme Summary The agreed work programme comprised firm commitments to reprocess 168km2 of 3D seismic data, review available pressure data and carry out rock physics modelling and an input to the construction and simulation a geological model of the main Prospect (Alfred prospect, Forties Sst Mbr – Figure 1). The commitment was to reach a drill-or-drop decision with an Initial Term of two years (subsequently extended to four years). Any drill decision would result in an exploration

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well drilled to either to drill a well to 2900m or 170m into the Forties Sandstone Member (Sele Fm). The Licence commitments have been fully completed by the P.2003 partnership within the Initial Term of the licence. The partnership purchased 104.9 km2 of TOMO ML PSDM from CCG Services (UK) Ltd. The new PSDM licensing areal extent is shown in Figure 2. As part of the data package, the following deliverables were received by the partnership: TTI Kirchoff PreSDM Full Offset Stack (Time & Depth domain) TTI Kirchoff PreSDM Final Full Offset Stack with TMA3D (Time & Depth domain) TTI Final Velocity Models – Vp, Delta, Epsilon, Theta, Phi Final Depth/Time Conversion Model RNMO Velocity Model (ESSO v2) Bin Centre File Processing Report 48 km2 Post Migration stacks across Alfred Prospect In addition, a comprehensive rock physics, relative and absolute seismic inversion study was completed. The AOI for this study is shown in Figure 3. This focused study used a comprehensive database of vertical wells along with a newly purchased 3D dataset (CGG Cornerstone – 440 km2). The study included a review of the pre-existing rock physics model and subsequent update to include new well data, a review of seismic data and application of seismic conditioning steps where appropriate, to perform a relative inversion scheme to generate relative Extended Elastic Impedance fluid and lithology indicating attributes and finally to perform a model-based inversion for absolute impedance values. Relative Extended Elastic Impedance attributes that are sensitive to fluid and lithology were generated and calibrated at the well locations to allow a qualitative assessment of the lithology and fluid fill across the P.2003, and specifically the Alfred prospect (Figure 4). The absolute seismic inversion allowed the generation of absolute impedance values that could be directly compared with the well log response in a quantitative manner. As an extension of this study, the tuning thickness of the CGG Cornerstone dataset was determined by 2D wedge modelling of the seismic and Extended Elastic Impedance data, in order to validate the relative impedance attributes and subsequently generate net pay thickness maps as a direct input into the (Petrel) geological model for the Alfred prospect. Further fluid substitution forward modelling was conducted to investigate high porosity brine and low gas saturation scenarios to further de-risk the prospect. A deterministic reference case geological model was constructed and simulated for the Alfred prospect, along with a suite of static stochastic realisations in order to fully evaluate the range of recoverable resources for the Alfred prospect. In the deterministic reference case geological model, the net pay thickness map for the Alfred prospect was used to determine the base pay depth. The Extended Elastic Impedance hydrocarbon attribute significantly failed to conform to the structural contours at Top Forties Sst Mbr, resulting Alfred being deemed to be a stratigraphic

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closure with a base seal coincident with base pay. The analysis of the regional formation pressures in the Forties Sst Mbr, in particular across the Everest field, indicate that any Alfred accumulation must either be an oil rim of the Everest Field or a stratigraphically separated gas accumulation. In the geological model, the base seal depth was defined as net pay thickness multiplied by the reciprocal of mean NTG for the AOI. The lithology attribute derived from the Ikon seismic inversion study then was used to control the areal distribution of reservoir quality sands by normalising the attribute between 0 and 1 and applying a 50% cut-off to generate a binary sand/shale lithology model. The same normalised lithology attribute was then used as a trend map to distribute net total porosity in the model. Fluid properties and saturation height function from the nearby E.ON operated Huntington Field were used. The net pay thickness maps output from Ikon provided a useful QC of the resulting geological model (Figure 7).

4 Database The main dataset used for interpretation and inversion was the CGG CNS Cornerstone data, with four angle stacks available: Near (9 degrees), Mid (20 degrees), Far (31 degrees) and Ultra Far (39 degrees). Time horizons derived from this data include: Top Sele Fm, Top Forties Sst Mbr and Top Ekofisk Fm. All of which were picked on the full-stack data (CGG CNS Cornerstone Survey).

Vertical and near-vertical well data were included in the input to the rock physics model. These wells penetrate the Sele Fm and Forties Sst Mbr. The well database included:

22/8a-2 – brine bearing Forties sands

22/9-2 – condensate bearing Forties sands

22/9-3 – condensate bearing Forties

22/9-4 – gas bearing Forties sands

22/14-1 – brine bearing Forties sands

22/14b-3 – brine bearing Forties sands

22/14b-4 – brine bearing Forties sands

22/14b-5 – oil bearing Forties sands

22/14a-7 – brine bearing Forties sands

22/9-5 – brine bearing Forties sands

22/19-2 – brine bearing Forties sands

The wells all have petrophysical logs (SWE, PhiE, Vshale), elastic logs (Vp, Vs and rhoB), QC logs (calliper, DRHO, resistivity), deviation, formation tops and time-depth information.

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5 Prospectivity Update The work programme has focussed on the Palaeocene prospectivity, in particular the Alfred prospect at Sele Fm level, immediately to the west of the producing Everest Field. No prospectivity is identified at any other stratigraphic level. The work has focussed on de-risking this prospect which was identified during the 27th Licensing Round as an amplitude anomaly which does not conform to structural contours at Top Forties Sst Mbr. The seismic inversion study was used to de-risk reservoir presence, with the resulting relative impedance attribute being in good agreement with the regional depositional model for the Forties Sst Mbr and confirming the presence of Palaeocene sands across the Alfred prospect (Figure 4). The inversion and de-tuning has also shown the Alfred prospect to be a robust hydrocarbon response, albeit based on data acquired in 2005, which results in a residual risk of production through the Everest Field since that time (Figure 5). The EEI analysis showed that oil could not be distinguished from gas across the AOI (Figure 6). For the purpose of volumetrics, a more optimistic oil case has been assumed to analyse the Alfred prospect. The reference case (deterministic) STOIIP (oil case) for Alfred is calculated 56mmboe. This compares favourably with the P50 probabilistic volumes (GeoX oil case) of 56mmboe in place and 15 mmboe Recoverable Resources. All volumetrics calculations assume no production of the initial volume or pressure depletion through the Everest Field. The reference case geological model was simulated using Petrel RE and assuming the same fluid properties as the E.ON operated Huntington Field (Block 22/14b). Whilst the reference case volumes, petrophysical and fluid properties were not modelled as an uncertainty, a number of different development scenario sensitivities were run. Two horizontal production wells with depletion drive recovered 20% of the initial volume (11mmboe recoverable resource). The most favourable scenario was two horizontal production wells with gas lift and two peripheral water injectors giving a 40% recovery (21.7mmboe). No consideration was given to offtake routes, tie-back distances or feasibility of running injection lines. Following the static volume sensitivity and estimated Recoverable Resource, the decision was made to relinquish the Licence, based on the estimated value of the Alfred prospect and significant risk of partial depletion through the Everest Field.

6 Further Technical Work Undertaken To address the risk of production through Everest, the Alfred top reservoir depth was stochastically modelled using Conditional Sequential Gaussian simulation to produce 5000 equiprobable top Forties Sst Mbr depth surfaces. Seismic pick, depth conversion error and survey error of existing wells in the AOI were included as variables in the

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stochastic workflow. This work, along with new analysis of the released Everest wellstock formation pressures, indicated that in the absence of a stratigraphic closure between Alfred and Everest, the Alfred prospect must be in communication with the Everest closure, due to the lack of a structural closure in 100% of depth realisations. E.ON therefore considers it unlikely that all of the volumes discussed in Section 5 remain unproduced.

7 Resource & Risking Summary Table 1 summarises the Recoverable Resources for the Alfred prospect. No other prospectivity has been identified on the Licence. Note that Low, Central and High equate to P90, P50 and P10 values respectively.

Resource and Risk Summary

Name PLD Stratigraphic

Level

Unrisked Recoverable Resource Geological Chance of Success %

Risked P50

MMboe

Oil (mmbbls) Associated Gas (bcf)

Low Central High Low Central High

Alfred P Palaeocene 9 14 30 7 13 22 41 6.5

Table 1: Resource & Risking Summary

8 Conclusions After completing the work programme which consisted of reprocessing seismic, inversion, interpretation and the construction of a reservoir model for the P.2003 prospectivity, the decision was taken by the JV group to relinquish the licence due to the modest size of the Alfred prospect, coupled with the risk of partial depletion through the Everest Field (Figure 5).

9 Clearance E.ON Exploration & Production UK Ltd confirms that DECC is free to publish this report and that all third party ownership rights on any contained data and/or interpretations herein have been cleared for publication purposes. No liability whatsoever is accepted and no representation, warranty or undertaking, express or implied, is or will be made by E.ON Exploration & Production UK Ltd or any of E.ON SE’s subsidiaries, or any of their respective agents, being their directors, officers, employees, advisers, representatives or other agents, for any information, projections or any of the opinions contained in this report or for any errors, omissions or misstatements in this report. Neither E.ON Exploration & Production UK Ltd or any of E.ON SE’s subsidiaries, nor any of their respective agents makes or has authorised to be made any representations or warranties (express or implied) in relation to any of the matters described herein or as to the truth, accuracy or completeness of this report, or any other written or oral statement provided. This report shall not be deemed to be an offer to sell or invitation to invest in E.ON Exploration & Production UK Ltd or any of its assets and no information set out in this report is intended to form the basis of any contract, investment decision or any decision to purchase or invest in any such assets.

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Neither E.ON Exploration & Production UK Ltd or any of E.ON SE’s subsidiaries nor any of their respective agents undertakes any obligation to provide any recipient with access to any additional information or to update or correct any inaccuracies in or omissions from this report. This report should not be considered as a recommendation by E.ON Exploration & Production UK Ltd or any of E.ON SE’s subsidiaries or any of their respective agents to invest in any securities (including, without limitation, those issued by E.ON Exploration & Production UK Ltd) or any other assets. Recipients should rely solely on their own judgement, review and analysis in evaluating the information set out herein.

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Maps & Figures

Figure 1: Relinquished Licence Area (black dashed line) with Alfred Prospect outline.

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Figure 2: Areal extent of licensed TOMO ML PSDM from CCG

February 2015

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Figure 3: Extent of IKON rock physics, relative and absolute seismic inversion study given by red polygon

February 2015

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Figure 4: EEI -65 Lithology (left) and EEI 21 Fluid Volume (right) extractions in 15ms Window below Top Forties (EEI Attributes derived from conditioned Angle Stacks: I, G, AI, GI, Chi angles +21, -65)

February 2015

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Figure 5: EEI 21 Fluid Volume extraction in 15ms Window Below Top Forties (left). Traverse through Alfred Prospect (right). Note lack of structural closure coupled with continuous response between Alfred and Everest. The risk of partial depletion of Alfred through Everest remains a residual risk.

February 2015

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Figure 6: Fluid projection defined by rotating the AI and GI data to the brine trend, the projection line used here is seen above. The amplitudes of this projection is now effectively the distance from the brine trend. Gas and Oil Clouds are not well separated, therefore EEI will not solve for the fluid type across the Alfred prospect.

February 2015

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Figure 7: Comparison of IKON net pay thickness map (left - oil case) and geological model output (right). Inset: Difference map