We sincerely hope that the thickness will compensate for the pores, which is not the highest. I would like to say that in Sea 2 there was better porosity, something in the area of 12-13% in a section of 6 meters and that's where they opened. We're going to open a lot more, much larger sections, and we hope that the thickness of the sections that we'll open up to us will give us quantities of commercial oil." (Page 2)
- In other words, the electrical logs tests revealed a positive figure regarding the presence of oil marks in a thick layer, along with an up-to-date and non-positive figure according to which the porosity rate is 2%-6%, which is lower than expected. Alongside these, there remains a question mark regarding the cracking, which can compensate for the pore values, but for which there was no concrete up-to-date data at the time.
- The defendants' reference to the change in the pores can also be found in a report published by Shemen on March 27, 2014 (P/1). This report was published as a clarification and as a follow-up to an updated resource report conducted after the production tests (hereinafter: Latest Resource Report). In the latest resource report, it was reported that the volume of the reservoir is smaller than previously estimated. Shemen informed the public that this conclusion was due, among other things, to the change in the pore figure, which became clear after the verifying tests.
Because of its importance, I will bring the full text of the report (P/1):
"Further to the Conditional and Predicted Resources Assessment Report in the License, which were included in the Company's periodic report for 2011, which was published on March 28, 2012... (the "Previous Report"), and further to the updated report regarding the valuation of contingent and predicted resources in the license published by the Company today, March 26, 2014 ... And at the request of the Israel Securities Authority, the Company wishes to clarify as follows:
- Drilling in the area of the license (hereinafter: "Promotion of the Yam-2"), which was drilled by previous owners of the area on which the license extends, was drilled in the years 1989-1990. In a production test carried out at Yam Drilling 2, a total of 152.2 barrels of oil was received from a specific segment over a period of 4.5 hours, reflecting a production rate of 800 barrels per day in this segment.
- Due to the high pressures and temperatures that prevailed in the Yam-2 drilling and equipment limitations, it was decided at the time to abandon the Yam 2 drilling, which reached a depth of about 5,370 meters.
- Following the Yam 2 drilling, Yam-3 drilling was drilled in the license area (hereinafter: Yam Drilling-3).
- The Yam-3 drill was drilled at a distance of 2 km from the Yam-2 drilling, and in the same reservoir where the Yam-2 drilling was carried out, it reached a depth of about 5,700 meters but was found to be dry drilling.
- The assessments included in the previous report were based, among other things, on the findings of the Yam-2 drilling.
Following the findings of the production tests conducted at the Yam 3 drilling, the editors of the new report found that contrary to the assessments in the previous report, which Based on the findings of Yam Drilling 2, the entire area of the reservoir cannot be treated as a net reservoir, as estimated in the previous report It is not possible to rely on the rate of pores on which the previous report was based. As a result, the new report modified, among other things, the following parameters with respect to contingent oil resources.
The parameter of Net to Gross Reduced to 0.3-0.7 (vs. 1 in the previous report)
Pore Parameter (Porosity) reduced to 2-6% (compared to 4-10% in the previous report).
As a result, among other things, to the change in the aforementioned parameters, it is estimated that the volume of the "Yam Reservoir" is smaller than what was observed following the drilling of Yam 2 and prior to the execution of the Yam 3 drilling, as reflected in the new report.
In addition, it became clear in the production tests carried out at Yam 3 drilling that it is not possible to produce from the reservoir in the specific location where Yam 3 drilling was drilled. However, the Yam 3 drilling did not rule out the existence of a reservoir, and therefore contingent resources were assessed in the new report, albeit on a lower scale." (emphases added, M.R.)
- This report was presented to Levy in his testimony, and he claimed that at the time of publication of the report on September 8, 2013, Shemen did not have all the data detailed in it. In real time, some of the data in the defendants' possession were better than expected, and others were different, but not significantly. According to Levy, there is no significant difference between a porosity rate of between 2% and 6% and a porosity rate between 3% and 8%, which is the rate that he claims was reported in the first place in the resources report (page 21, 16-33):
"A. I am glad that you refer me to this report. When you go to a production test, you rely on the results of the electric blogs and the time when the decision is made to go to a production test. When we decided to conduct a production test, we had all the parameters from the drilling, which were as follows: We had a resource report that said 3-8 after the resources report,
- Is it before the logs? Blogging was 2 to 6, and that's before the production tests.
- There were other data that we had in front of us, such as layer thickness, which was much more than we estimated in the resource report. There was a water content in the oil that was better than in the resources report, when the resources report showed up to 40% of the water content, and the resources report had 20%. We had good parameters and there were slightly less good parameters, I correct slightly different but not substantially, because 2 to 6 is not fundamentally different from 3 to 8 in the oil world. The 3 to 8 pore 4 to 10 is made up of 2 types of pores. The relevant figure for comparison 2 to 6 is 3 to 8, and there is a fracture which is the refraction of the rock which is the conductivity that was 1 to 2. Therefore, 3 to 8 and up to 2 is 4 to 10. At the time of the decision, we only had data about the matrix, which is these pores, the holes in the rock.
Regarding this given fracture, it is the so-called image that gives the conductivity of the rock and at the time of the decision there was no decoding of it and it takes 3 months to decipher. At the time of the decision, we did not have the figure of the fracture. But there were data from out of the rock regarding conductivity."
- The defendants reiterated this argument in their summaries as well, although they referred to the updated resource report published on March 26, 2014, and not to L/1, which is the clarifying report (paragraph 186 of the defendants' summaries). From the most recent resource report, the defendants quoted the following:
"Comparison of the data from the new report with the data from the previous report
There are significant differences between the data from the previous report and the data from the new report. In light of the results of the "Yam 3" drilling, the parameters in calculating the reserves were changed in the new report in relation to the previous report. The main parameters that have been changed and changed the valuation of contingent resources are:
The Parameter Net-Gross Ratio - which in the previous report stood at 1, in the new report it stands at 0.3-0.7, the change is due to the fact that prior to the drilling, it was estimated that there were open cracks along the entire section of the potential reservoir, while according to the results of the drilling, it turned out that this was not the case.