South Marsh Island 71 (SM 71)

Ownership: 50.00% with Byron Energy Inc (50% and Operator)
Status: Exploration
Location: Offshore Gulf of Mexico
Area: 12.16 km2

Otto owns a 50% Working Interest (“WI”) and a 40.625% Net Revenue Interest (“NRI”) in the South Marsh Island block 71 (“SM 71”), with Byron Energy Limited (“Byron”) the operator, holding an equivalent WI and NRI. Water depth in the area is approximately 137 feet. Currently, there is no production from the block, although production is expected to commence in March 2018.

SM 71 Platform and Pipelines
During the December 2017 quarter, the installation of the jacket and decks comprising the SM 71 F Platform was completed without any safety or operational issues. The Tetra Hedron derrick barge was de-mobilised off location in late November 2017 after successfully placing the jacket and decks over the SM 71 F1 well drilled in 2016 and securing the structure with pilings.

Operations to lay the 500 foot 4-inch oil and 7,000 foot 6-inch gas pipelines were also completed during October 2017. Each pipeline was initially laid and buried to within tie-in distance of the SM 71 F platform location and their respective sales lines. Final tie-in work at the platform and sales lines was completed in December 2017 by dive crews soon after the jacket and decks were installed at the platform location in SM 71.

SM 71 F2 Appraisal Well
The Ensco 68 jack-up rig spudded the OCS G-34266 #F-2 well (“F2”) on SM 71, in early December 2017.

On 27 December 2017 Otto reported that the SM 71 F2 appraisal well encountered four discrete hydrocarbon bearing sands, including the B65 and D5, and that the drill pipe became stuck approximately 214 feet below the bottom of the D5 sand. Attempts were made to free the stuck drill pipe whilst evaluating various alternatives including the optimization of the F2 wellbore and the drilling of a future F3 well. Consequently, it was decided to case the F2 well to a depth of 7,700 feet measured depth (“MD”), 130 feet MD below the base of the B65 sand. By doing so, the B65 sand logged in the well was preserved as an optimal take point in that reservoir. The F2 well can also be used to produce the J1 sand and B55 sand after cessation of production in the B65 sand sometime in the future.

In early January 2018, 7 5/8 inch casing was run before suspending the F2 well for a short period prior to completion for production. The F2 well will provide an excellent take point to produce hydrocarbons from the B65 sand.

Further petrophysical analysis of the net oil pay counts confirmed the preliminary analysis, reported on 27 December 2017. The net oil pay counts based on transmitted data, will serve as final internal pay counts as the additional higher resolution LWD memory data was not retrieved. Real time “log-while drilling” porosity data indicates the porosity of both the B65 and D5 Sands to be consistent with other wells in the area with porosities ranging up to 31% with a high net to gross sand ratio in each zone.

The Company’s reserves and resources as at 30 June 2017 were reported on 28 September 2017 (refer to the Company’s ASX announcement dated 28 September 2017) and were prepared by Collarini and Associates, Houston, TX. The results of F2 well are expected to result in a material uplift in Otto’s proved and probable reserves at the next review.

SM 71 F3 Development Well
Given the high quality and thickness of the D5 sand encountered in the F2 well and the fact that the joint venture had a one-time option to drill a second well under the existing Ensco drilling contract, it was decided to drill OCS G-34266 #F-3 well (“SM 71 F3”) well immediately following the casing of the SM 71 F2 well using the Ensco 68 rig, rather than releasing it.


The F3 well was drilled to a final total depth of 7,717 feet Measured Depth (“MD”) on 26 January 2018. After logging the well with open hole triple combo logging tools on 27 January 2018, operations to run 7 ⅝” casing to total depth prior to temporary suspension for completion in the D5 Sand were underway. Hydrocarbons in five discrete intervals were measured using both Log While Drilling (LWD) gamma ray and resistivity tools and wireline Triple Combo porosity tools.

The primary target in the F3 well was the D5 Sand which logged 211 measured depth feet of oil pay (175 feet TVT net oil pay) as determined by open hole logs. While only 70 feet away from the previously drilled SM 71 F2 well, the D5 Sand was 45 TVT feet thicker in the F3 and exhibits excellent rock properties with porosities in the 32% range. With the base of the D5 Sand in the F3 well 150 feet below the base of D5 Sand in the F2 well, the D5 Sand oil column has been further extended downdip. This means the total oil column proven by the three D5 wells is an astounding 1,160 feet. The F3 well will be the second take point in the D5 Sand reservoir at SM 71. The SM 71 F1 well drilled in 2016 will be the other D5 producer and contains 91 feet TVT net oil pay in an updip position.

With the additional penetration of the D5 Sand in the F3 well, the Operator has re-evaluated pay counts in the F2 well based on bed geometry and well bore angle. This has resulted in an increase in TVT oil pay thickness in the F2 well from the previously reported 117 feet TVT net oil pay to 132 feet TVT net oil pay. These net pay counts will result in a reserve upgrade for the D5 Sand in the Company’s next reserve report.

Because of the northerly well bore trajectory of the F3 well, only the very updip portions of the three other oil sands were penetrated. The J1, B55 and B65 Sands each logged approximately 5 feet TVT net oil pay in the F3 well, consistent with pre-drill expectations. The data points of these three sands willserve to delineate the size of each reservoir for future reserve determinations.

In addition to the J1, B55 and B65 zones, the F3 well also intersected 12 feet TVT net oil pay in the C10 which is productive in other parts of the salt dome but, to date, not productive at SM 71. Pre-drill mapping did indicate that the F3 would be at the very updip edge of the C10 in this well bore and this result sets up a further opportunity to be exploited in future well bores.

The F3 well marks the end of the 2017 drilling program.

SM 71 Production Plan

The next phase of the SM 71 project will be to complete the F1, F2 and F3 wells for production utilizing modern sand control techniques common to the Gulf of Mexico to optimize production rates and longevity. Concurrently, final piping and instrumentation work on the SM 71 F platform is nearing completion. Production start-up is targeted for March.