Dorado & Pavo Project

Dorado Project Background

Carnarvon secured its interests in the Bedout Sub-Basin permits (WA-435-P, WA-436-P, WA-437-P and WA-438-P) in 2009. The offshore permits cover an expansive area of 21,652km2 which is located approximately 110km from the coast, offshore of Port Hedland in Western Australia.

Historically, the Bedout Sub-Basin was significantly underexplored in comparison to the prolific Carnarvon Basin to the south-west and the Bonaparte Basin to the north-east. Exploration drilling within the area was limited to a string of four wells in the 1970’s, which were followed by the Phoenix-1 and Phoenix-2 wells drilled in the early 1980’s. At the time, the Phoenix wells were considered gas discoveries and were not pursued further. The unexplored potential across this vast area and the presence of hydrocarbons within the region, led to Carnarvon’s initial interest in the basin.

Carnarvon’s preliminary work on the permits involved an extensive geological study and the acquisition of modern 3D seismic data which was a marked upgrade to the existing legacy 2D seismic. The 3D seismic acquisition confirmed two significant prospects in Phoenix South within WA-435-P and Roc in WA-437-P.

As a result, interest in the permits grew and the Bedout Joint Venture (Joint Venture) farmed out equity in the project to new partners who funded the exploration drilling costs to test the Phoenix South and Roc targets.

The Phoenix South-1 well was drilled in 2014, discovering light oil within a high-quality reservoir. The discovery at Phoenix South was followed by the discovery and appraisal of a condensate rich gas in the Roc field. These results proved to be the catalyst for this region which warranted further exploration.

In 2018, the Dorado-1 exploration well discovered a significant light oil column in the primary Caley Member, and condensate rich gas in four additional reservoirs. The subsequent appraisal of the Dorado discovery was successfully completed with the well test results exceeding pre-test expectations and confirming the high quality of the reservoirs in Dorado. Dorado is a world-class discovery which has ignited interest in the Bedout Sub-basin and has proven to be transformational for the Company.

Dorado Development (WA-437-P)(Carnarvon 20% (pre-divestment),

Santos is the Operator) The Dorado Field is located approximately 140 km north of Port Hedland in the Bedout Sub-basin with water depths of approximately 90 metres.

Dorado consists of five separate light oil and rich gas condensate accumulations, with high quality hydrocarbon fluids within excellent quality reservoirs.

Production of the large quantities of valuable hydrocarbons at the Dorado Field are planned over a multi-phased development, with the initial development (Phase 1) involving the extraction of the liquids (oil and condensate), targeting a 2C contingent resource of 162 million barrels (gross) (see page 15).

Gas and LPG’s from the field will be re-injected before being assessed for subsequent production in a second stage of development (Phase 2). The reinjection of gas during Phase 1 is expected to considerably enhance the recovery of liquids from the field. As a result, the initial gross oil production rate from the field is targeted for between 75,000 and 100,000 barrels per day.

Plans for the Phase 1 development consist of a single Wellhead Platform (WHP) in 90 meters of water depth, connected to a nearby Floating Production Storage and Offloading (FPSO) vessel via sub-sea flowlines and control lines.

The FPSO is planned to be located around two kilometres from the WHP and will be connected to the seabed by a disconnectable turret mooring system. The FPSO includes the processing facilities for the oil and gas being delivered from the reservoir via the wells and the WHP. It also allows for storage of oil and condensate as well as offloading to a separate oil transport tanker.

The scale and quality of the Dorado Project has enabled the Joint Venture to progress the project through the development planning phase with the Front End Engineering Design (FEED) process now substantially complete. However, in August 2022, the Joint Venture, with consideration of the inflationary cost environment and period of supply chain uncertainties, adopted a prudent approach which did not support a Final Investment Decision (FID) in 2022. With costs now beginning to stabilise, the Joint Venture expects the Dorado Project FID during 2024.

Despite the delay, the Joint Venture has continued to progress the activities required to support sanctioning the Dorado development and achieved some key milestones during the period.

In February 2023, the Offshore Project Proposal (OPP) for the Dorado development was approved by the regulator, which is a key regulatory approval required for the development. The OPP provides approval for the Dorado Phase 1 liquids development (including the re-injection of gas to enhance resource recovery), as well as the tie-back of future resources to the Dorado facilities, such as the Pavo oil discovery.

The Company also continued to make good progress on the necessary work to ensure that it has the required funding for its share of the Dorado Phase 1 development costs via debt funding and partial divestment of the Bedout portfolio.

During the year, Carnarvon entered into a binding agreement to divest a 10% interest in its Bedout assets to OPIC Australia Pty Limited, a wholly owned subsidiary of CPC Corporation, Taiwan (CPC), Taiwan’s national oil and gas company, subject to conditions precedent. The transaction was completed following the end of the period in August 2023.

Under the agreement, Carnarvon will receive a total cash consideration of US$148MM. This comprised an upfront payment of US$58MM on completion of the transaction, and a further carry of US$90MM of Carnarvon’s forward expenditure in the Bedout permits once FID is taken on the Dorado development.

The proceeds from the divestment, together with prospective debt finance and Carnarvon’s existing cash, will be used to fund Carnarvon’s share of the Dorado development costs along with further activities that include exploration in the Bedout Sub-basin and appraisal of the recent Pavo discovery.

Figure 3: Proposed Dorado Field Development Layout and tie-backs of Pavo North and Pavo South.

Pavo Oil Discovery (WA-438-P)(Carnarvon 30% (pre-divestment), Santos is the Operator)

In 2022, Carnarvon and its Joint Venture partner made another successful discovery with the Pavo-1 exploration well, which encountered a 60-meter gross oil column within the Caley Member. The oil column is wholly contained within the northern culmination of the Pavo structure (Pavo North) (Figure 3) and is assessed to contain a 2C contingent resource of 43 million barrels of oil (mmbbls) gross (see page 15).

Importantly, the discovery, which is located 46 kilometers east of Dorado, provides valuable back-fill potential to the proposed Dorado facilities. During the period, the Joint Venture made significant progress on the Pavo Assess Phase Study to determine the preferred development for the Pavo Field and to ensure that any requirements for modifications to the previously completed design for the Dorado FPSO, topsides and WHP are understood to allow for optimal tie-back. The study concluded that the recommended development option for the Pavo field is in fact a tie-back to the Dorado facilities with some changes to the FPSO design.

The potential to tie-back Pavo liquids to the Dorado facilities is a significant opportunity for the Joint Venture as fluid production rates from Dorado are expected to naturally decline after a plateau period of 2-3 years, at which time there will be spare capacity in the crude oil handling facilities, allowing for back-fill from new fields such as Pavo (Figure 4). The Pavo North oil discovery proves the extension of a working petroleum system some 46 kilometres east of Dorado and demonstrates that quality reservoir and trapping mechanisms are effective in this area, which hosts a suite of other exploration targets. These will now warrant further assessment for drilling.

Given its close proximity to Pavo North, and near identical prospect elements demonstrated by seismic, the Pavo South structure is interpreted to have an excellent geological chance of success (Figure 3). Indications of a deeper, residual or paleo-oil-water contact in the Pavo-1 well may indicate that the two Pavo culminations were connected at a previous point in time. If this was the case, a common deeper contact supports the charging of both structures with the same oil that was discovered in the Pavo North structure.

The Pavo South resource (once drilled and confirmed) could also be tied-back with additional wells potentially being connected to the Pavo facilities (Figure 3).

Figure 4: Illustration of the potential to optimise Dorado facilities’ production capacity and demonstrating the flexibility to incorporate future resources such as Pavo.