RWE Dea UK SNS Limited (50%), Faroe Petroleum (UK) Limited

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1 1. Licence information Licence Number P1975 Licence Round 27 th (2012) Licence Type Traditional Blocks 3/28c & 9/3e Licensees Work Programme 2. Synopsis RWE Dea UK SNS Limited (50%), Faroe Petroleum (UK) Limited (50%) Purchase 120 km 2 of additional 3D seismic data; Re-process 100 km 2 of 3D seismic data to PreSTM; Conduct AVO analysis on the re-processed dataset. Drill-or-drop: drill one well to 1500m or 10m into the basement, whichever is the shallower, or surrender the licence. The drillor-drop period being 2 years from the beginning of the licence. Licence P1975 is located on the East Shetland Platform in the Northern North Sea, 140 km east of Lerwick on the Shetland Islands. The Licence was awarded to RWE Dea UK and Faroe Petroleum as part of the UKCS 27 th Licensing Round with a two year drill-or-drop commitment. The work programme included a commitment to purchase 120 km 2 of additional 3D seismic data and re-process 100 km 2 of 3D seismic data to PreSTM as well as carry out AVO analysis on the re-processed volume. A number of Palaeocene prospects were identified on the licence. However, upon completion of the work programme the licensees concluded that drilling was not warranted. The licence was therefore surrendered, effective 31/12/ Regional Setting The majority of P1975 lies on the East Shetland Platform. The Viking Graben Bounding Fault runs north-north-west, south-south-east across the licence. On the East Shetland Platform the Mesozoic section is mostly absent and the stratigraphy comprises Palaeocene to recent sediments at shallow depths of <1,650 m. As a result of shallow burial, hydrocarbon accumulations in the region have been biodegraded and the area is predominantly a heavy oil province. The Bentley, Bressay and Kraken discoveries, which lie to the south and southwest of P1975, contain oils of between 10º and 18º API. At the time of writing, all three of these discoveries were being progressed towards development. Palaeocene reservoirs in the vicinity of P1975 exhibit excellent reservoir qualities and similar reservoir properties were expected within the P1975 licence area. 1

2 4. Exploration Activities Purchase of additional 3D seismic data RWE purchased 120 km 2 of CGG s Quad 3 South (1994) survey covering the northern half of P1975. RWE also had access to CGG s Quad 9 (1998) survey, which covered the southern half of the licence. Together, the Quad 3 South and Quad 9 3D datasets provided seismic coverage across the whole licence area. Re-processing of 3D seismic to PreSTM In order to create a single 3D volume over the licence area, data from Quad 3 South and Quad 9 were merged as part of the re-processing project. The re-processing was undertaken by Geokinetics. Detailed interpretation of the re-processed volume The re-processed 3D volume allowed for detailed 3D sequence stratigraphic interpretation of the Palaeocene and Eocene within the licence area and a number of potential reservoir horizons were identified. Only one well could be tied within the re-processed area, well 3/28b-3. AVO analysis The re-processed dataset was used to undertake AVO modelling and fluid substitution for the target reservoir sands. Data from P1975 was compared to modelled data from the Bressay and Kraken fields. Analysis of these fields, as well as information from literature, suggest that there is very little difference in seismic response between brine and the heavy oils which are present on the East Shetland Platform. Geochemical study A geochemical study of the East Shetland Platform was conducted by IGI with the aim of better understanding hydrocarbon composition, charge and biodegradation history in the area. As at Bentley, Bressay and Kraken, any hydrocarbons trapped in the Palaeocene of P1975 are likely to be biodegraded. 5. Prospectivity Three potential reservoir intervals were mapped within the Palaeocene to Eocene section, the Heimdal Sandstone, the Teal Sandstone and the Hermod Sandstone. Both the Hermod Sandstone and the Heimdal Sandstone have local analogues with the former being the reservoir at the Bressay discovery and the latter the reservoir at the Kraken field. All three of these sandstone systems were deposited in a deep-water environment and are sealed by shales that were deposited following marine transgressions. Very little structural closure has been identified within the licence area and all but one of the identified prospects invoke stratigraphic closure. The stratigraphic trapping mechanism was identified as the key risk for all the prospects bar Heimdal Structural. Hermod Slope Fan The Hermod Sandstone of the Sele Formation was deposited as part of a west-east trending turbidite system. Following a relative fall in sea level, the Hermod system incised sediments of the younger Dornoch delta, crossed the Dornoch shelf-slope break and continued eastwards across P1975. Seismic isopach mapping is supportive of a thickened Hermod interval directly east of the Dornoch shelf-slope break, which is interpreted as a slope apron fan. Top seal is provided by shales of the Sele and Balder Formations and a stratigraphic trapping mechanism is invoked to the west. The Hermod Slope Fan was the highest ranked prospect on P

3 Teal Channel - A seismically resolvable, incised channel attributed to the Teal Sandstone has been mapped in the licence area. Top seal is provided by shales of the Sele Formation and the trapping mechanism is stratigraphic with slope by-pass required to prevent leakage to the west. Heimdal Stratigraphic Seismic isopach mapping suggests localised thickening of the Heimdal interval in parts of P1975. The thickened section is elongate in a north-west, southeast direction and is interpreted to represent a channel system. Top seal is provided by shales of the Lista Formation and isopach mapping is supportive of a stratigraphic trapping mechanism up-dip to the west. Heimdal Structural A small structural closure can be mapped at Heimdal level. However, seismic isopach mapping is not supportive of a channel system within the closure and therefore the presence of reservoir carries a high risk. As with Heimdal Stratigraphic, top seal is provided by shales of the Lista Formation. In addition to the potential targets described herein, additional prospectivity has been recognised in Jurassic and Eocene sands as well as fractured Basement. 6. Reserves and risk summary Hermod Slope Fan 20% Teal Channel 17% Heimdal Stratigraphic 13% Heimdal Structural 30% Table Conclusions CoS Mean P90 P50 P Upon completion of the work programme Hermod Slope Fan was the highest ranked prospect on P1975. However, due to the risk associated with stratigraphic trapping mechanism and likely biodegraded nature of hydrocarbons the licensees concluded that drilling was not warranted and surrendered the licence. 3

4 8. Figures Figure 1. Licence P1975, the prospects described herein and surrounding fields. 4

5 Figure 2. Hermod Sandstone isopach with the Pinsent Hermod prospect outlined in white. Figure 3. West-East and South-North seismic lines through P1975 taken from PresSTM reprocessing. Top Sele represents top reservoir for Pinsent Hermod. The vertical red line marks a notional well location. Input data for reprocessing provided by CGG. 5

6 9. Clearance Seismic Crossline 4070 and Inline 1620 are part of the PreSTM reprocessing undertaken by the P1975 licensees, both of which have given their clearance for publication. CGG s ownership of the underlying seismic data is hereby acknowledged. 6