Real Energy Corporation (ASX:RLE) expects to spud by the end of this week, its highly anticipated Tamarama-1 well to unlock the potential of its Cooper Basin acreage in Queensland.
Any commercial gas discovery will find ready customers given the growing demand in eastern Australia with the liquefied natural gas export projects at Gladstone driving pricing.
The Ensign International drill rig 916 has been mobilised and is now been rigged up at the wellsite in ATP 927P.
Tamarama-1, the company’s maiden well, is designed to confirm the presence of gas in the Toolachee and Patchawarra formations and to determine reservoir production potential.
Two additional wells, Queenscliff-1 and West Flynnes-1, have been scheduled for drilling subject to results of the Tamarama-1 well.
Successful wells will be cased and suspended for flow testing in early 2015.
Tamarama-1 success or failure to find basin-centred gas at the two formations does not impact on the presence of other forms of hydrocarbons.
ATP 927P
ATP 927P comprises four separate blocks with a total area of approximately 1,718 square kilometres that are located 100 kilometres northwest of Eromanga in southwest Queensland.
It is considered to be very under-explored with no wells drilled within the permit.
However, a number of oil and gas fields and discoveries are located in close proximity.
The existing seismic grid includes 435 kilometres of multi-vintage 2D regional seismic data.
The target Toolachee and Patchawarra Formations are present across the entirety of the permit.
This is reflected in elevated gas readings that are reported from wells in the area that were drilled as off-sets on local palaeo-highs, and reported elevated gas readings over the entire interval.
ATP 927P and the nearby ATP917P contain Mean Gross Estimated Petroleum Initially-in-Place of 10.2 trillion cubic feet of gas in the Toolachee and Patchawarra formations.
Cooper Basin
The Cooper and Eromanga Basin is Australia’s premier onshore oil and gas production province with existing production and infrastructure.
Its first commercial gas discovery was made in 1963 and in 1981 followed up with the Jackson oil field which is Australia’s largest onshore oil field. Total production from both basins up to the end of 2012 is 6 trillion cubic feet of gas and 300 million barrels of oil.
There are currently 160 gas fields and 80 oil fields that are producing from 800 gas wells and 350 oil wells. Over 3,000 petroleum wells have been drilled across both basins, and pipelines have been installed to transport gas to major Australian markets and three LNG export facilities.
Despite this, it is still considered to be an undeveloped basin for unconventional resources.
Operators in the Cooper Basin include Santos, Chevron, Beach Energy (ASX:BPT), Origin Energy (ASX:ORG), BG Group, Senex Energy (ASX:SXY), New Hope Group (ASX:NHC), Energy World Corporation (ASX:EWC), AGL Energy (ASX:AGK), Drillsearch Energy (ASX:DLS) Cooper Energy (ASX:COE) and Icon Energy (ASX:ICN).
The US Energy Information Administration ranks the Cooper Basin as one of the most prospective global locations outside the United States for development utilising fraccing technology.
Analysis
With the rig now on site and expected to spud the Tamarama-1 well by the end of this week, trading could pick up in the stock ahead of drilling, which will help determine the gas potential of ATP 927P.
In the event of a successful well, Real Energy will drill up to two additional wells that will provide further validation of any available resource.
Notably, a gas discovery will find a ready market in eastern Australia given that local gas production is being earmarked for the export LNG projects at Gladstone, Queensland.
Indeed, EnergyQuest, an Australian-based energy advisory firm, is forecasting a price range of $8-$11 per gigajoule of gas that will apply in 2017.
Share price catalysts include:
- Results from Tamarama-1;
- Decision to drill Queenscliff-1 and West Flynnes-1;
- Results from Queenscliff-1 and West Flynnes-1; and
- Flow testing of wells in 2015.
In April, Proactive Investors estimated a share price target of $0.35 to $0.68 for Real Energy when its share price was at $0.20. This is fast becoming reality with shares in Real currently trading at $0.32.
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