Page 11 - Sun Resources Annual Report 2013

REVIEW OF ACTIVITIES
The Board of Sun Resources NL (“Sun” or “the Company”)
and Sun’s key stakeholders have worked together on
our focused strategy to purchase and retain a material
lease position in the Woodbine Tight Oil Play of East
Texas. Through the course of the reporting period, and
immediately post-30 June 2013, the Company had
acquired the mineral rights (all horizons) in over 20,000
net acres of oil and gas leases. This effort delivered to Sun
a material working interest in five separate, but nearby
project areas covering a gross lease position of over
31,000 acres (Table 1B).
Figure 1B: schematic of Sun’s Woodbine Project areas, Leon and Madison
Counties.
Further, with its second round of equity funding
(completed July 2012), Sun has participated in five ‘proof-
of-concept’ horizontal Woodbine wells; two in the Upper
Woodbine (‘A’) and one in the Middle Woodbine (‘B’)
sands within the Beeler Oil Project, plus two laterals in the
Lower Woodbine (‘C’) in the SW Leona area of the Amerril
Oil Project. At the time of reporting, all five of those wells
had been successfully drilled and fracced with all having
flowed back oil. In the last a few months, the Woodbine
play has been de-risked by Sun’s peers, including EOG,
Encana and especially, Halcón Resources Corporation
(“Halcón”), in the neighbouring areas.
Additionally, oil has been recovered from each of the Upper,
Middle and Lower Woodbine intervals, in line with Sun’s
stated objective of proving multi-layer potential within the
Woodbine, or Eaglebine as it is often referred. At the time
of going to press, the fifth well in the current program,
T. Keeling #1H had been test fracced and flowed back in
the course of refining the fraccing design to perfect and
maximise the flow potential of the oil that is trapped in the
section. To date, the only outstanding strategic objective yet
to be fulfilled in this initial testing phase of the play fairway is
a highly competitive, commercial, initial oil production rate
(or IP rate). The best IP rate achieved so far is the Ellis #1H
well that has confirmed a 90-day IP rate of 150 barrels of oil
per day (bopd) from the Woodbine B sands.
By the end of the financial year ending 30 June 2013, the
Board of Sun had delivered on its commitment to focus
solely on the Lower Woodbine Oil Play in East Texas, by
removing the Malta project (Area 4 - Block 3, Area 5; total
20% working interest) and Butterfly project (M40/110;
5% Net Profit Interest) from its portfolio; by farming out
100% of its interests in the Thailand Phitsanulok Basin
exploration permit, L20/50 to Siam Moeco Limited (as
announced in 29 October 2012), and finally, selling its
minority interest in the Retention Lease WA-47-R (the
Sage #1 stranded oil discovery) to Hydra Energy Limited.
At the time of writing, Sun continues to hold over 20,000
net acres of quality leases that covers the major oil-rich
Woodbine trend, principally in Leon County, East Texas.
Sun is well positioned to continue to unlock substantial
value from its strategic Woodbine Oil Project areas by
progressively establishing economically significant oil
production using the fraccing recipe that has worked for
our neighbouring operators. Sun has added a second
operator to its stakeholder group during the reporting
period, by entering into a binding agreement with Petro-
Hunt LLC to jointly explore and develop an Area of Mutual
Interest (AMI) consisting of approximately 7,832 gross
acres in northern Leon County, Texas. Petro-Hunt is
privately-owned independent oil and gas company based
in Dallas, Texas and also the largest shareholder in Halcón.
Under this agreement, Sun is contributing 810 net acres
from the Delta Oil Project and Petro-Hunt is contributing
2,430 net acres that it owns to develop an Area of Mutual
Interest (AMI), Sun will hold a 25% interest in the AMI.
Currently, Amerril Energy LLC (“Amerril”) is Sun’s second
largest shareholder (12%) and in the coming year, Sun’s
Board will work closely with the operator, Amerril in the
development of Amerril, Normangee and Beeler (nee
Richland) Oil Projects. In addition, Sun hopes to develop a
strong relationship with its newest and largest shareholder,
Hancock Prospecting Pty Ltd (18.5%), as the Company
progresses its efforts to unlock the value of the Woodbine
Tight Oil Play.
Focused strategic interest in the Woodbine Tight Oil Play
REVIEW OF ACTIVITIES 9