P1177 (Block 21/7b)

Relinquishment Report

Figure 1: Block location map October 2008

1. Licence Data Licence Number P1177 Licence Round 22nd Round award Licence Type Traditional Block Number 21/7b Equity Premier Oil 87.5% (op), Reach Petroleum 12.5% (partner) Work programme Summary

Part 1: 150km² of 3D Seismic reprocessing Part 2: Drill one well

2. Synopsis Licence status: Relinquishment after the end of the first licence term Reasons for relinquishment: Premier is unwilling to commit to the expenditure of drilling a well at high equity due to the high risk nature of the identified prospectivity. Premier had very nearly secured a farminee to take a significant equity interest but unfortunately the farminee made a late withdrawal from the opportunity. Premier has been unable to find sufficient interest from other parties.

3. Exploration Activities Activities that have been carried out during first phase of the P1177 licence period are:

• Reprocessing of 325km² 1994 vintage Geco-Prakla seismic data and generation of offset stacks. The reprocessing was completed in 2005 by Veritas.

• Investigation of Amplitude Versus Offset (AVO) response from offset stacks. A separate AVO study was carried out by RockSolid Images.

4. Prospectivity Analysis Initially both the Paleocene and the Upper Jurassic were carried as possible reservoir targets in the P1177 licence. After drilling the unsuccessful 20/10b-5 (Criollo) and 21/6a-7 (Palomino) wells in neighbouring blocks 20/10 and 21/6 in 2004 and 2005, Premier’s view is that the only remaining prospectivity is in reservoirs of Paleocene age. The prospectivity of the Paleocene was confirmed by the successful Scolty and Torphins discoveries in the neighbouring 21/8 block which discovered oil and gas in Balder/Cromarty Formation sandstones of Upper Paleocene age. The P1177 partnership has carried out a detailed AVO study of the area covered with reprocessed seismic including offset stacks, and one prospect was identified in the block; the Typhoon prospect located 4.5km west of the recent Torphins discovery. The AVO

modelling done by Premier Oil and RockSolid Images indicate that hydrocarbon bearing sandstones should exhibit a strong amplitude versus offset anomaly and this technique has been applied to evaluate the Paleocene potential in the block. Figures 2, 3 and 4 are illustrating the Far Offset amplitude response over the Typhoon prospect and seismic lines showing the Near and Far offset seismic response.

Figure 2: Far offset amplitude extraction at Top reservoir showing a strong anomaly at the Typhoon prospect (depth contours are overlain). Gas caps associated with small four way-dip closures can be observed.

Figure 3: Line A - Near offset seismic response across the Typhoon prospect. Note the small anomaly associated with the gas cap and the dimming possibly associated with an oil leg.

Figure 4: Line A - Far offset seismic response across the Typhoon prospect. Note the bright response possibly associated with an oil leg. [NB: change text embedded in figure 4 to read “Brightening on fars possibly associated with an oil leg”}

Reservoir The principal reservoir anticipated in the block 21/7b area is the Upper Paleocene (Ypresian) deep marine sandstones of the Cromarty and/or Intra Balder Formations (“Charlie Sandstone”). These sands were deposited as turbidite fan systems in a basin floor setting. The Paleocene stratigraphic succession and nomenclature for the block 21/7b area is illustrated in Figure 5 below (Paleocene Stratigraphic Column).

The Intra Balder Formation sandstones are a proven reservoir in the 21/8-3 Scolty discovery and the recent 21/8-4 Torphins discovery in the neighbouring block 21/8. It is also proven in the 21/7a block occurring in the 21/7a-3 well which penetrated a 100m thick Charlie sandstone sequence with excellent reservoir properties. This well is the nearest well to the Typhoon prospect and has been used for well calibration and AVO modelling.

Source The organic shales of the Kimmeridge Clay Formation are excellent quality source rocks, and are the principal source rocks for hydrocarbons in the block 21/7b area. The Kimmeridge Clay Formation is believed to be mature for oil generation in the block 21/7b area. Two possible migration routes for migration into the Paleocene section exist. Either long distance migration trough Paleocene sand fairway from the Central Graben or local vertical migration from underlying mature Kimmeridge Clay Formation.

Seal Seal is the Balder Formation tuffs and clays which are regionally distributed in this area are proven seals in both the Torphins and Scolty discoveries. Sele Formation clays are expected to form lateral seals.

Trap Type The Typhoon prospect is a stratigraphic trap reliant on the pinch-out of the Charlie channel sandstones. The prospect is dip closed to the southeast towards the Torphins discovery but depends on stratigraphic pinch-out of the reservoirs along the majority of the seismic anomaly’s outline. Figure 6 shows the depth map of top reservoir at the Typhoon prospect which illustrates the lack of dip closure in many directions. The presence of such pinch-out is supported regionally by facies mapping and well correlations which indicate that the Charlie sand system pinches out towards the northwest as we reach a slope setting. However, the base of the channel sand system is hard to pick on seismic and it is not possible to identify on the seismic the pinch-out of the Paleocene channel system to the northwest. Hence the presence of a trap is based on the identification of the AVO anomaly.

Figure 6: Top Reservoir depth structure map (CI=5m). Projection ED50 zone 31 (X Y ticks on maps are every 500m)

Prospect Volumetrics and Risking The estimated unrisked P90-P50-P10 STOIIP volumes for the Typhoon Prospect are 56-67-80 mmbbl for the Upper Paleocene Charlie sandstones. Average (P50) reservoir parameters used are: Net to Gross: 65 % Porosity: 24 % Water Saturation: 25% Bo 1.2 Risking: an overall probability of hydrocarbons of 0.2 has been given to the Typhoon prospect. A very high risk is assigned to the trapping element (0.3), whereas source (0.9) and reservoir (0.75) have low risk.

5. Reserves Summary Remaining potential in block 21/7b is identified towards the northeast of the block and consists of the continuation into the 21/7 block of the 21/8 Torphins channel system. Reach Exploration and Premier Oil have agreed on relinquishing the entire block.

6. Maps and Figures Figure 1 Block 21/7b location map Figure 2 Far offset Response for the Typhoon Prospect Figure 3 Seismic Line showing Near offset Response Figure 4 Seismic Line showing Far offset response Figure 5 Paleocene Stratigraphic Column Figure 6 Top Reservoir depth structure map

7. Clearance Premier Oil and its partner Reach Exploration gives DBERR the right to publish the relinquishment report.