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Case Studies

Leveling the Playing Field: Helping a Small E&P Firm Compete with the Majors

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Kurdistan / 2009 — 2018 / Reserves Certification

Uncovered +10,000 bopd initial opportunity

Supported client in a highly complex geological environment

Provided deep geoscience expertise

Enabled a small E&P company to compete with the majors

Challenge

  • The client believed that an area in Kurdistan offered significant potential, which other larger companies had passed on because of political unrest. As a small E&P company, however, the client required additional technical expertise and manpower to continue to take advantage of their “first mover” position after the Iraq war
  • The reservoir was expansive; while the first discovery in the region was made in 1927, the area was underexplored, data was limited, and wells were scattered over a very large land base
  • Limited infrastructure in the region would require additional investment into roads, pipelines, plants, and facilities, increasing the investment risk
  • In 2014, as a publicly listed company, the client required independent third-party analysis to confirm the first determination of proved reserves and secure financial support for the E&P plan. In 2017, the client again required independent analysis to satisfy public stock market reporting requirements, but also, due to the success of the initial development, to secure lender financing to buy back the stock and go private

Solution

  • For the initial exploration phase, Sproule experts provided 2D and 3D seismic interpretation that validated the faulting and complexities of the field
  • Sproule’s integrated geoscience and engineering team supported the development of the client’s drilling program
  • Sproule’s geoscientists generated probability distributions for the reservoir parameters such as gross rock volume, net-to-gross ratio, porosity, and water saturation encompassing the associated uncertainties of each parameter
  • Sproule then provided independent probabilistic estimation on the volumes that supported the company’s estimates
  • Drilling resulted in two significant discoveries. The original concession was divided into two new license areas, justifying further drilling. After conducting a significant test program on one of the initial exploration wells in 2014, the client declared the opportunity commercially viable
  • The Sproule team audited the company’s reservoir simulation model and ran additional cases to support an independent reserves and resources evaluation. The resources justified further investment and gave the client insight into the potential upside, while also providing third-party validation of initial volumes in place

Value

  • A long-term relationship with the client enabled Sproule to have in-depth knowledge of the reservoir, which helped the company with exploration through to production and cash flow generation
  • Technical support helped the client achieve initial production prior to approval of their field development plan
  • Since the assignment of reserves in 2014, through initial production in 2015 to today, Sproule has continually increased the estimates of proved reserves based on performance, providing further confidence in the commerciality of the opportunity
  • Sproule continues to support the company in reaching development milestones