How Partners, Collaboration and Experience Combine to Deliver the

Cheviot Field Development

Paul Armitage, Alpha Petroleum Resources

May 2019

The information presented herein is provided for discussion purposes only and is being furnished by Alpha Petroleum Resources Limited (“Alpha Petroleum” or “APR”), an English limited company whose registered office is at 4th Floor Friary Court, 13-21 High Street, Guildford, Surrey, England, GU1 3DL.

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Important Notice

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• Development Overview

• Cheviot (Emerald) Field History

• Technological Advances to Unlock Value

• Development Plan: Project Approach to Unlock Value

• Summary

Outline

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4

Cheviot Development Highlights

• Conventional oil field with medium water depth of 150m

• Geologically de-risked given past appraisal and production

history

• Higher level of subsurface certainty

• Significant reserves & resources with first oil in 2021

• New approach to development

• Re-deployment of the Varg FPSO; minimal changes/upgrades

• Standard equipment design in an attractive services cost

environment

• Result is $38/bbl full cycle oil breakeven and $16/bbl operating

cost

Alpha’s approach has established a unique development opportunity in the UK North Sea

Cheviot Location Map

• Northern North Sea – 2/10b, 2/15a and 3/11b awarded to Alpha (100%) in 21st Round (Oct 2003). Block 3/6a awarded to Alpha (100%) in 29th Round (Jan 2017)

• 56 miles East of Shetland Islands

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Cheviot Timeline and Alpha Approach

Overall Alpha philosophy for the Cheviot development

• Abundance of subsurface data that which allowed Alpha to refine its analysis

• Remaining uncertainties are quantified; manage associated risk through learning the lessons of Emerald development

• Extensive study work based on integration of all data

• Lessons learned are then applied through the deployment of new technology

₋ 3D seismic

₋ Ability to drill long horizontal wells 6

Timeline

1975 1985 1990 1995 2000 2005 2010 2015 2021

Cheviot

first oil

Development

concept selected

& FEED awarded

Extensive study

work

3D seismic

survey

acquired &

processed

Petroleum

Equity acquired

ATP Oil & Gas

(UK) Limited

Production

ceases; field

abandoned &

acreage relinquished

Emerald first

production

Polymer gel

treatments

Tracer

survey

Appraisal

drilling (5 wells)

2/10a -4

discovers

Emerald field

Seismic

re-processed

Detailed Petrel model and

history matched Eclipse model

Varg FPSO

exclusivity

agreement

signed

Cheviot

license

award

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Well 2/15-1 was not

actually the field discovery

well, but the first well in

the oil leg

Sand thickness around 50 ft

Clean sand with high net pay

Excellent reservoir quality

(approx. 30% porosity)

Lower water saturation

Typical Emerald Well Log

Emerald Field Development (1987–1992)

Original Emerald field development

• Emerald field development plan was submitted in 1987

• The development plan was based on classical reservoir engineering view of waterflood:

– “Buckley-Leverett” type displacement

– Water injection into oil leg

– Sealing basement

– 2,000 ft reservoir penetration at producers

– It was focused on main oil fairway

• Field development carried out by Midland and Scottish Resources in 1989-1992 and was characterised by:

– Subsea wells

– FPU (converted semi-submersible into a floating production unit)

– FSO (converted tanker into a floating storage and

offloading unit)

– 55,000 blpd fluid handling capacity

– 60,000 bpd sea water injection capacity

– Gas was flared

Ali Baba semi-submersible

Ailsa Craig FSO

Tove Knutsen tanker

Emerald field

Emerald Field Development (1987–1992)

Original Emerald field development

• Emerald field development plan was submitted in 1987

• The development plan was based on classical reservoir engineering view of waterflood:

– “Buckley-Leverett” type displacement

– Water injection into oil leg

– Sealing basement

– 2,000 ft reservoir penetration at producers

– It was focused on main oil fairway

• Field development carried out by Midland and Scottish Resources in 1989-1992 and was characterised by:

– Subsea wells

– FPU (converted semi-submersible into a floating production unit)

– FSO (converted tanker into a floating storage and

offloading unit)

– 55,000 blpd fluid handling capacity

– 60,000 bpd sea water injection capacity

– Gas was flared

Ali Baba semi-submersible

Ailsa Craig FSO

Tove Knutsen tanker

Emerald field

Data Available at Emerald Field Abandonment (1996)

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Extensive available dataset

7 wells monitored

6 in-field exploration & appraisal wells

5 near field E&A wells

20 development wells/sidetracks- late 80’s to

early 90’s

9 wells

Conventional log suites,

no image logs

Logs

4 years

production

history

Tracer

& salinity

data

CoreWells

6 in-field & 2 near field wells – c400 ft total Emerald core

5 infield & 3 near field wells –415 ft total Precambrian

basement core

3 in-field wells – 204 ft total Devonian core

Seismic Across Cheviot

• Emerald Development Based on 2D Seismic

• TGS Nopec 3D Spec survey 2000

• Field Specific 3D Western Regent Survey 2004

• Reprocessed 2016

– Improved imaging of faults

– Direct image of top reservoir (up to a point)

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3D seismic 3D seismic and reprocessing

Development Wells

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• Baker Hughes has been selected to provide Directional, Geo-

steering and Reservoir Navigation technology

• Use of modern technology provides a better understanding of

the drilling envelope (well stability, stress caging, torque and

drag)

• Reservoir sections of 1500 – 5000 ft

• Standalone sandscreen completions

18 wells: (13P + Peel + 2WI + 2GI)

Circles @ approx 1, 2, 3, 4km

N1

N109

Q202

Q203

Q201

N108N16

N6

Q205

N101

N5

N4

N11

W2

W3

G1

G2

Padon (gas)

Peel (oil)

Well Construction Strategy

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• Alpha’s Well Construction strategy is to:

⎻ Engage with key drilling contractors and professionals to

efficiently drill and complete the Cheviot and Peel wells

⎻ To manage the drilling process through an integrated

company/contractor team including Integrated Drilling

Services (IDS)

⎻ Promote the interaction and alignment of the in-house

subsurface and wells team with IDS team and establish

an integrated geo-steering team.

⎻ Build on previous geo-steering experience (internal and

external) and to take advantage of technically advanced

techniques

• Continuity of the teams over the 3 years drilling

programme should result in learnings and efficiencies not

reflected in the current well costs

Drilling interfaces

DPMS

IDSRIG CO

Cheviot Development Plan

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Redeployed FPSO with suitable oil, water and gas handling capacities

• Petrojarl Varg

• Proven North Sea vessel, low redeployment cost

• Minimum cost and short time to first oil – c. 2.5 years from FID

Well numbers and locations optimised and tailored to the capacity of the FPSO

• 18 sub-sea, long horizontal wells (40,000 ft vs original 2,000 ft) spread over 3 drill centres

⎯13 Cheviot producers; 2 water injectors; 2 gas injectors

⎯1 Peel producer (Peel is shallower Palaeocene field)

• Alpha appointed Baker Hughes for the provision of

integrated drilling services

• Contract signed with Stena Drilling for Stena Spey rig

Standard SPS & SURF Equipment

• To minimise engineering-driven changes to scope and cost

Low cost, simple standard and proven infrastructure with relatively low associated decommissioning costs

SURF/SPS

Cheviot Full Development Execution Team

• Post FID, the “Cheviot Team” will comprise in excess of 150+ Alpha employees and dedicated contractors

• Execution management team in place

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Wells Manager

Alpha Petroleum

SURF/SPS Delivery

Manager

Alpha Petroleum

FPSO Delivery

Manager

Alpha Petroleum

30 employees dedicated Cheviot

team30 employees

dedicated Cheviot team

45 employees dedicated

Cheviot Team

Project Manager

Alpha Petroleum

In-house team of 30 employees across G&G, Petroleum Engineering, Procurement, Commercial, Finance, IT,

HSE, building to 50 after FID

Alpha Partners

Subsurface Manager

Alpha Petroleum

Project Services

Manager

Alpha Petroleum

Wells FPSO

Alpha management team role

• To enable our vendors to succeed

• Ensure integration across all aspects of the project

• Provide the Operator perspective

• Assurance and verification

• Rigour and discipline in project execution

• Prepare for successful operation

Development Execution – Service Providers as Partners

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1

• Traditionally the Operator of a development field

would set the rules, technical specs and technology

to be used

• This historically led to over-specified equipment

and cost overruns/delays

• Alpha contractors are not just providing services,

but are playing the role of “partners” in the

development of the Cheviot field

• As partners, contractors are all incentivized in

developing the field according to plan

• Simplification of engineering

• Remove multiple interfaces

• Improved cost and schedule certainty

The approach ensures the project team is individually and collectively providing the right

solutions to the Cheviot development

Alpha partnership approach to the Cheviot development

execution to Create a ‘One Team Environment’Alpha – Operator

Overall Management and CoordinationSteering committee

Oversight and Conflict resolution

Drilling Services Subsea Equipment & installation FPSO

Parties Communicate from inception to execution rather than silos

Integration Execution Benefits and Savings

Contractors

Mutual reliance to deliver – identify problems and solutions from FEED to execution

Summary

• Cheviot Development

• Relatively low subsurface risk

• Project matured and risks mitigated

▪ Blue Chip partnerships

▪ Industry standard designs

▪ High proportion of fixed cost /

lump sum contracts

• Attractive economics

▪ $38/bbl full cycle oil breakeven

• Experienced management team with individual and corporate track record of delivery

• Significant upside potential through establishment of a new North Sea hub in an under exploited area

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