--ADDS BROKER COMMENT--
Andes Energia (LON:AEN) has revealed its fourth discovery in Argentina’s Vaca Muerta shale play, as the Las Varillas x-1 well was successfully fracked and tested.
Some 125 metres of gross oil pay encountered in the Vaca Muerta shale. The well was completed and fracked in three stages.
Over a 48 hour testing period the well naturally flowed oil at an average rate of 90 barrels per day, and following the installation of artificial lift equipment flow increased to 108 barrels per day.
Significantly, Las Varillas is a vertical well, unlike the majority of shale wells internationally – which are typically horizontal - and as such it is cheaper to both drill and complete.
The project also benefits from comparatively high domestic oil prices, as in Argentina there is a regulated price of US$77 per barrel.
Andes said the Las Varillas well continues in production and it is undertaking a series of mechanical works to increase productivity.
Las Varillas is the company’s fourth successful well in the Vaca Muerta, where it has interests in 250,000 net acres.
It is a partnership with Argentina’s state operator YPF and Andes has a 40% stake in the production and reserves. The company’s financial participation in the Las Varillas programme was fully carried.
"We are very encouraged with the results of Las Varillas x-1 well, which represents our fourth discovery and test in Vaca Muerta and our second well currently producing from Vaca Muerta,” said chairman Nicolas Mallo Huergo.
“We believe the future for the development of our acreage in Vaca Muerta is extremely positive."
Zac Phillips, analyst at SP Angel, describes the result as ‘promising’ but highlighted that more work will be needed to determine the project’s economics.
“The test isn't the economics suggested by the instantaneous initial flow rates, but the economics over the full cycle of the well, including its decommissioning,” he said in a note.
“As an initial guide, however, today's results are promising, but much more is required before the results can be declared commercial.”