Investors in Falcon Oil & Gas (LON:FOG) can celebrate tentatively as drilling has now began at the hotly anticipated Australian shale venture.
The Kalala S-1 well is the first of three wells of this initial programme.
Falcon’s 30% share of the drilling costs will be paid by partners Origin Resources and Sasol (each owning 35%) following a farm-out deal agreed in 2014.
“The spudding of Kalala S-1 well is an important milestone for the company and marks the start of our initial three well fully funded 2015 drilling campaign,” said chief executive Philip O’Quigley.
“The initial drilling programme is designed to test the hydrocarbon saturation and reservoir quality of the basin and determine the prospectivity of this highly attractive basin.”
Dougie Youngson, analyst at finnCap, said: “This drilling programme is what the company and market have been waiting on for some time now, so it is positive that work has finally started and we would therefore expect the share price to respond positively today.”
Saxon Energy Services Australia, a Schlumberger company, is contracted to drill Kalala S-1, and it is expected that it will take between 35 and 50 days to reach the target depth of 2,800 metres.
Kalala S-1’s objective is the Middle Velkerri formation, and the partners primarily aim to assess reservoir quality and hydrocarbon saturation. The well is also designed to evaluate oil and/or gas maturity, and assess the most prospective areas.
This initial exploration drilling phase is expected to give the partners more information about the Velkerri formation and its distribution through the area, and it will also help inform future programmes which will utilise horizontal drilling and production testing.
Kalala is located in exploration permit 98, one of Falcon’s three permits that span some 4.6mln acres in Australia’s Beetaloo basin.
The site is located close to the Carpentaria Highway and existing infrastructure.