Development Plan

The nature of unconventional reservoirs is that each well can be considered a project in its own right. The in-place volumes of hydrocarbons are substantial and each well that is drilled drains only the area immediately around it. In the case of the Eagle Ford shale this area is extended by treating the rock with a fracture stimulation. This is designed to break up the rock in the vicinity of the wellbore and increase drainage surface area and therefore increase recovery. Due to this limited drainage radius it is necessary to drill a large number of horizontal wells to efficiently drain the whole resevoir.

The wells within the Aurora acreage are proving to be very economic. The variable in the development plan for our acreage will be the ultimate well spacing. A number of pilot programs have been drilled and producing since 2012, and Aurora provided provisional early guidance on the first 13 pilot wells with over 6 months production data in March 2013. The company plans to provide detailed development spacing guidance by the end of 2013.

There are also two Austin Chalk pilot programs underway, with encouraging early indications, that Aurora will report on in due course.

A summary of current pilot activity can be seen in the graphic below.

Together with the other working interest owners, Aurora holds leases on mineral rights that are valid for a certain amount of time. Once a well has been drilled and is producing in a particular area then a designated unit (comprising an area of land around the well bore) is considered to be ‘held by production’. Therefore the initial drilling schedule and locations are driven by the lease expiry dates until all of the acreage is held by production ("HBP"), at which point the infill drilling on a tighter spacing will commence. The amount of land held by each well depends on location and rules set by the Texan legislative body known as the Texas Railroad Commission (“TRRC”). By the end of 2012 Aurora estimates that 90% of our leases are now HBP and those remaining expire between now and 2014. As the HBP program comes to an end, locations will be selected based on reservoir performance and facilities. Furthermore it will now be possible to drill multiple wells from the same surface location which will yield capital and operating cost savings.

The non-operated acreage that Aurora participates in now has 9 centralised processing facilities constructed and completed for full field development. Each of the Central Processing Facilities includes separators, dehydration units, gas sales meters, oil tanks (~10,000 bbl), water tanks, flow lines (including water and gas lift), frac water pits, bores, pumps etc. Each facility is designed at 50 wells at initial production, so natural decline will create capacity for additional wells. These centralised processing facilities reduce well and operating costs and allow for the continued separate extraction and sale of NGLs.

Significant regional infrastructure exists and consequently Aurora’s oil and gas production is being sold under long term contracted pipeline capacity.