Byron Energy Limited informed that it has contracted Hercules Drilling Company LLC to drill the South Marsh Island 71 #1 well (“SM 71 #1”), located in the South Marsh Island Block 71 (“SM 71”) lease.

Byron will utilise Hercules Rig 264 to drill the SM 71 #1 well. Currently Byron expects to spud SM 71 #1 well in the first quarter of 2016, subject to farm-out/funding and obtaining all necessary regulatory permits. Under the contract with Hercules, Byron also
has an option to utilise Rig 264 to drill a second well.

The SM 71 #1 well will be drilled in the north half of the SM 71 lease, adjacent to a major salt dome, approximately 230 km southwest of New Orleans, offshore Louisiana, in the shallow waters of the Gulf of Mexico at a water depth of approximately 130 feet (40 metres). Byron has a 100% working interest and an 81.25% net revenue interest in
SM 71 and is the operator of the block, through Byron Energy Inc, a wholly owned subsidiary of the Company.

SM 71 #1 well will be drilled to a depth of 7,250 feet (2,210 metres) measured depth and 7,100 feet (2,164 metres) true vertical depth. The SM 71 prospect has two shallow non-pressured targets.

The reserves and prospective resources estimate for Byron’s 100% working interest and 81.25% net revenue interest in SM 71 was originally released to the ASX on 4 September 2015, comprising undeveloped proved, probable and possible reserves* of 1.04 million barrels of oil and 0.65 bcf of gas (net to Byron) with net prospective
resources* of 4.6 million barrels of oil and 3.4 bcf of gas.

The SM 71 #1 well will test two prospective sands, the J Sand and the D5 Sand. The JSand has been assigned net proved and probable reserves of 686,000 barrels of oil and 0.37 bcf. The primary D5 Sand target has been assigned net prospective resources of 4.6 million barrels of oil and 3.4 bcf.

Maynard Smith, Byron’s CEO, commented, “SM 71 is a relatively low risk project with very attractive economics even at current oil prices. SM 71 #1 well is targeting oil prone non-pressured sands at relatively shallow depths. In terms of costs, we have estimated drilling costs in the range of $US4-5 million.”

Mr Smith added, ”Significant gains were made in D5 sand prospective resources for SM 71 in 2015, as reported in our reserves release on 4 September 2015, reflecting additional detailed technical work at SM 71 in which the prospect area compared favourably to analogous D5 oil production in adjacent blocks. This work significantly improved our understanding of trapping mechanisms, reservoir continuity, and potential trap sizes at SM 71, thus further de-risking the project.”