Empire Energy Group Ltd (ASX:EEG, OTC:EEGUF) has reinforced its commercialisation strategy after receiving encouraging flow testing results from the Carpentaria wells within the Beetaloo Sub-Basin in Australia's Northern Territory.
After reopening C-2H, production quickly built to more than 3 million standard cubic feet per day (mmcf /day) and has now stabilised at 3.25 mmcf /day.
This represents a 33% increase compared to the corresponding flow rate after the first eight days of pre-shut-in initial flow.
Consequently, the C-3H well is currently ‘shut in’ for soaking and Empire believes that higher flow rates will be achieved when the well is reopened.
At Carpentaria-4V, early petrophysical interpretation indicates the net pay at the recently drilled C-4V well within the Carpentaria East Area is materially greater than the earlier drilled C-1V, C-2H and C-3H wells.
Stabilised flow rates
Empire managing director Alex Underwood: "The Empire team is highly encouraged by the stabilised flow rates we have achieved at C-2H.
At this stage, the rates appear to exceed the thresholds that others in the Beetaloo have proposed as being commercial.
“Empire has high earnings leverage due to the reduced capital costs we enjoy at shallower depths than other parts of the Beetaloo and high net revenue interest (working interest adjusted for royalties) in our Beetaloo properties.
“This result has significantly de-risked EP187 and propels us towards a final investment decision on our pilot project later this year.
“We are rapidly optimising how to drill, stimulate and complete the Middle Velkerri B shale and expect further improvements as we drill future pilot wells that, along with C-2H and C-3H, will generate production revenue (subject to FEED, sales and transportation agreements, financing, regulatory approvals and FID).
“Netherland, Sewell & Associates are due to upgrade our EP187 Contingent Resources including our recent C-4V results. We anticipate a material increase.
"C-3H has remaining fluid that the Empire team wants to remove to see the full C-3H well result.
“We expect soaking to reduce water saturation and to increase gas pressure that will help to remove the remaining fluid, in addition to providing the other matrix gas benefits seen in C-2H."
Carpentaria 2H update
C-2H was reopened in late February after about five months of shut-in to soak.
Soaking is the practice of shutting in a shale gas well for a period following fracture stimulation to seek to improve long-term productivity through redistribution and interaction of the residual water with the rock.
This is a normalised flow rate of 3.5 mmcf /day per 1,000 metres at C-2H, demonstrating that soaking has had a material beneficial impact on flow rates, consistent with productivity improvements seen in other wells in the Beetaloo Sub-basin and US shale gas basins.
Empire intends to continue flow testing C-2H to develop an early production-type curve that will be incorporated into its ongoing front-end engineering and design (FEED) process.
Carpentaria 3H update
C-3H has flowed at rates of up to 5.7 mmcf/day with an average production rate over the first 27 days of over 2.6 mmcf/day.
The initial flow period showed an even shallower level of rate decline than seen on the initial C-2H flow back, indicating that the well is still cleaning up.
C-3H is now shut-in to test whether soaking, now demonstrated as highly effective at C-2H on the same well pad, will improve productivity.
Rising demand
Underwood adds: "The global gas market remains in serious structural deficit.
“New sources of responsibly sourced, low CO2 gas are urgently required to avoid more seasonal price spikes.
“The IEA recently forecast that LNG demand from the world's largest importer, China, is expected to increase by up to 35% this year as its economy reopens, but new sources of supply are not coming onstream quickly enough.
“The NT gas market is undersupplied due to production issues at legacy fields, so our short-term opportunity is to support the NT Government to ameliorate forecast gas shortfalls by bringing our pilot project online quickly.
“These flow testing results reinforce our commercialisation strategy."