BPH Energy Limited (ASX: BPH) has continued its extensive work at its exploration well at the Baleen drill target in the PEP11 offshore permit in NSW.

Today, the company provided a report on the geochemical support for the planned exploration well within PEP11, in the offshore Sydney Basin.

Asset Energy Pty, a wholly-owned subsidiary of Advent Energy Ltd, an investee entity of BPH Energy Ltd holds 85% of PEP 11, with Bounty Oil & Gas NL (ASX: BUY) holding the remaining 15%.

Today's report discusses historical exploration activity and its implications for the group's planned initiatives once it receives the green light to move ahead with its own exploration program.

The geochemical report reviewed the hydrocarbon analysis performed on sediment samples, recovered from a number of sites at potential drilling targets, obtained within PEP11 during 2010.

The geochemical investigation utilised a proprietary commercial hydrocarbon adsorption and laboratory analysis technique to assess the levels of naturally occurring hydrocarbons in the seabed sediment samples.

The report supports the theory that the area surrounding the proposed drilling site on the Baleen Prospect appears best for hydrocarbon influence relative to the background samples.

The Baleen Prospect appears to hold a higher probability of success than other prospects.

Citing an independent report (The Leading Edge), BPH is buoyed by its comments which in part say "A recent review of more than 850 wildcat wells - all drilled after geochemical surveys - finds that 79% of wells drilled in positive anomalies resulted in commercial oil and gas discoveries."

BPH cashing up

Having raised $449,813 in late July, BPH has also undertaken a non-renounceable rights issue of two shares for every five shares held by shareholders at an issue price of 1.5 cents per share to raise up to $2,419,346 together with one free attaching Option for every two shares subscribed for and issued.

The money will be used to increase BPH's shareholding in Advent Energy from 23% to 36% (subject to any required approvals or via an underwriting of an offer by BPH).

Approximately $2 million of the capital raised will also be used by Advent to progress well planning, engineering and environmental approvals for drilling at Baleen.

Notably, Advent has submitted to the National Offshore Petroleum Titles Administrator (NOPTA) an application to enable the drilling of the Baleen drill target in the PEP11 permit.

Rig availability for the drilling of the Baleen drill target is also being evaluated.

Oil and gas potential

BPH has cited information from studies conducted by prior tenement holders, Santos and Ampolex with the former reporting that the offshore Sydney Basin was prospective for gas and that 10 structural leads were identified in four structural provinces with a total potential gas in place of 1 TCF.

While the geological and geophysical interpretations are based on seismic survey conducted nearly 40 years ago, management sees them as still being relevant in terms of assessing the area's prospectivity.

The PEP 11 area extends across most of the shallow (less than 200 metres) offshore Sydney Basin covering more than 4500 square kilometres.

Though the Basin is considered gas-prone, management said that numerous significant petroleum shows have been reported, supporting its assessment that there is an active petroleum system.

Associations with systems in Queensland and New South Wales

Management said that an active hydrocarbon system has been demonstrated that is analogous to major discoveries in Queensland's Surat/Bowen Basin.

The company also referred to Sydney Basin systems, noting that offshore oil and gas seeps have been recorded from Long Reef to Catherine Hill Bay, giving rise to periodic oil slick occurrences along the coast, especially in the Cape Three Points, Terrigal area, perhaps supporting its view that the Basin contains an active petroleum system.

The Early Permian with a stronger marine influence is considered to have the better reservoir potential, and there is a view that reservoir potential should increase to the east, in the offshore, where palaeo-depositional environments had greater marine influence.

PEP 11 represents a unique opportunity to explore a frontier Permo-Triassic basin complex containing mature source rocks and active petroleum systems adjacent to Australia's most strategic gas market.

Making further references to fields in a similar area, BPH noted that ESP Exploration (1982) reported that of the 68 wells drilled in the onshore Sydney Basin since 1910 almost all had gas flows with 41% flowing gas on test, mostly from the Triassic Narrabeen Formation.

Further seismic exploration was conducted in the PEP11 permit area in 1991, 2004, and 2017, and all early seismic data that was acquired in PEP11 has been reprocessed.

A report completed by Pangean Resources in 2010 following a review of prior seismic concluded, "Undiscovered gross prospective recoverable gas resources for structural targets within the PEP11 offshore permit have been estimated at 5.7 Tcf (at the Best Estimate level).''

If PEP 11 does emerge as a commercial discovery it would certainly be good timing with the supply-demand situation on the east coast of Australia likely to support robust gas prices in the medium-term.

PEP 11 is immediately adjacent to the largest domestic gas market in Australia and is a high impact exploration project that remains one of the most significant untested gas plays in Australia.

Successful exploration and identification of a commercial well that can be developed would be significant, particularly at a time when supply is diminishing and demand is growing.

This projected timing of reduced supply (five years) would be at the forefront of BPH's thinking, as it takes some time and financial support to move from authorisation to drill, to establishing an exploration program, making a discovery, confirming commercial viability, obtaining funding, constructing infrastructure and delivering oil and gas from an offshore project to onshore users.