Background
The Forbes Gas Project is located in the Sacramento Basin, which is located in the northern part of California (inland from San Francisco). Within this project, Solimar Energy owns a substantial interest in the Buckeye and the Arbuckle projects, and a 50% interest in the South Buckeye 1-18 well.
The Forbes sandstone area within which the Project is located is a proven gas province. By industry standards, drilling in the Forbes is relatively shallow and low cost
The key attributes of the Forbes Gas Project to Solimar are:
• High historical rate of exploration success in the province;
• Extensive 3D seismic coverage;
• Relatively shallow, low risk drilling;
• Gas gathering and transportation infrastructure;
• Potentially low development costs with quick lead times to production (upon any success);
• An active US domestic gas market; and
• Additional deeper “high impact” secondary targets.
California is amongst the strongest markets for natural gas in the world, with commensurately high gas prices. It imports a significant component of its gas requirements so any gas discoveries have a ready and active market.
The Forbes’ sandstones in the Sacramento Basin have produced natural gas since 1934. The producing fields extend from Redbank Creek to the north of the Project Area to Dunnigan Hills to the south over a distance of nearly 100 miles. Approximately 1,300 Forbes gas wells have been drilled in the Sacramento Basin with cumulative production to date of 600 Bcf and more in reserves under production.
The target depths for the Project Area are 1,800-2,700 meters (6,000 to 9,000 feet) which is shallow for the oil and gas industry, but in the Forbes sandstones this is considered deep as most past exploration targeted the sandstones at shallower locations. This appears to be the principal reason this area was not actively drilled prior to more recent improvements in seismic imaging and increases in gas prices.
Based on the Forbes wells drilled to date, and 3D seismic data, a reasonable estimation of the recoverable resource potential for an average successful well within the Project Area could be 1 to 1.5 Bcf, assuming an initial flow rate of about 1.2 mmcfd. At current gas prices this represents an attractive commercial proposition. The Project Area has excellent infrastructure, including extensive gas pipelines, enabling successful wells to be rapidly tied in for production.
Drilling Program
During the 2006/07 financial year, the Forbes Joint Venture with Orchard drilled the South Buckeye 1-18 and Heavenly 2-28 wells. The drilling of these 2 wells targeted the gas bearing stratigraphic traps in the Forbes formation, analogous to the gas discoveries made at the Larner 1-12 and 2-12 wells.
South Buckeye 1-18 Well
The South Buckeye 1-18 well was spudded on 24 October 2006 and encountered gas in one of the objectives between 9,315 feet and 9,345 feet. Based on the electric logging of the well, there appeared to be approximately 10 to 15 feet of net pay in this Forbes formation interval. The amount of net pay encountered in this well was consistent with Forbes formation gas producing wells located in the area. The decision was made to set pipe and complete the South Buckeye 1-18 well.
Production testing of the South Buckeye 1-18 well commenced in November 2007. The primary objectives in the Forbes interval were perforated. After swabbing, the well flowed high quality gas but not at commercial flow rates due most likely to a tight reservoir section in this location. The joint venture partners are now evaluating the possibility of fracture stimulating the perforated intervals across this tight section. The well has other shallower potential gas bearing sections which are also being evaluated for possible testing in the near future.
Heavenly 2-28 Well
The Heavenly 2-28 well was spudded on 27 November 2006 and drilled to a total depth of 9,920 feet.
Electric logging of the well suggested only small amounts of gas present in the targeted Forbes sandstone objectives of this well.
Following analysis of the electric logs a decision was made for the well to be plugged and abandoned.
Forbes and Guinda Exploration Strategy
The Forbes Exploration Strategy is to identify prospects with both low risk Forbes targets and deeper higher risk Guinda formation targets The Forbes sandstone formation are located at depths of 8,000 to 9,500 feet, and the deeper Guinda formation are below 9,500 feet. The prospect sizes (recoverable resource potential) vary according to which objective formation is considered the primary target, however in general the sizes vary from 1 to 5 billion cubic feet for the Forbes. Some of the deeper targets in the Guinda formation are tens of billion of cubic feet.
