A consortium of British onshore oil and gas firms have now decided to fast-track the Wressle project into field development.
It comes just a year after the discovery in an exploration well, and follows a period of testing and analysis.
Shares in Egdon Resources (LON:EDR), the operator, and partners Europa (LON:EOG) and Union Jack Oil (LON:UJO) all moved higher shortly after the news in London this morning.
Significantly, they reckon production in excess of 500 barrels of oil a day per well can be achieved from the Ashover Grit interval.
The operator Egdon Resources (LON:EDR) has come up with a ‘tool kit’ of procedures to combat a localised near well bore formation damage known as a high skin factor, which depressed the previously reported flow rates to around 80 barrels a day.
Drilling and test data from the Wressle-1 well together with reprocessed 3-D seismic data will be used to compile the field development plan and also to quantify the resource volumes at Wressle.
The quality of the information garnered to date convinced the partners to accelerate the process and eschew the further “time-consuming and costly” testing operations on both the Ashover Grit and Penistone Flags intervals, as had been originally intended.
“We’re at the point where we don’t need to do any further testing,” Mark Abbott, Egdon managing director, said in an interview with Proactive Investors.
He added: “We have modelled what the productivity of the well should be, and what subsequent wells would be, so we’re comfortable in now making the decision to develop.”
The Wressle discovery was an important exploration success, both in its own right and for potential follow on projects in the nearby area.
Abbott explained that typically in these kinds of onshore wells in the UK, one would not expect to see all targeted reservoirs charged with hydrocarbons; though that is what happened with the Wressle well.
Testing immediately after the well was drilled yielded aggregated flows in the order of 710 barrels oil equivalent per day from four intervals.
Whilst not all reservoirs will be produced at once, in a single well, the result gave confidence for the projects potential commerciality.
It means there was a greater amount of optionality as the partners looked at development.
Today’s announcement revealed that production should start from the Ashover Grit reservoir, which now is expected to initially produce, with the help of pumps, at a rate of 500 barrels per day.
Such a productive number may be seem an added bonus for those following the project over the past year, as the Ashover Grit previously flowed at just 80 boepd in tests.
Investors will look closely at the upcoming field development plan (FDP) for more information about the project’s longer term forecasts – including possible decline rates from the initial 500 boepd, and the prospective rates for Wressle’s other reservoirs.
The development plans in pencilled in for submission to the UK Oil & Gas Authority in the early part of 2016, putting the field on course for production in the second half of the year.
Shore Capital analyst Craig Howie in a note said: “the FDP will quantify developable resource volumes at Wressle and we are highly encouraged by the partners’ decision to accelerate monetisation of this successful discovery with commercial production targeted for next year.”
Elsewhere, Sam Wahab, analyst at Cantor Fitzgerald, in a note today, highlighted that due to the low operating costs of onshore UK production discoveries such as Wressle are economically viable in the current environment.
“We are encouraged by today’s update from Egdon, with the partners having sufficient confidence to move directly towards FDP preparation for Wressle, without further costly and time-consuming testing,” he added.
And, VSA Capital’s Mark Anis-Hanna added: “We remain confident on the outcome of this discovery which is now brought forward by the partnership targeting commercial oil production in the second half of 2016.”
It is expected that as the Wressle development process advances current resource estimates - pre-drill set at just 2mln barrels - will be updated and upgraded. That promises to be another potential catalyst for investors following the partners in the project.
Wressle is one of a number of similar sized projects in the area which could further expand production.
About 8kms from Wressle is the North Kelsey project. Here, Egdon and Union Jack are partnered with Celtique Energie, with the listed firms owning 40% and 10% respectively.
Egdon is the operator and drilling – which has been de-risked by the Wressle success – is expected to start before the end of this year.
Similarly, Egdon and Union Jack are partnered in a well at the Biscathorpe project which is also slated for the latter part of this year.
Biscathorpe is a modern appraisal of a 1987 BP discovery. Abbott explained that the past well encountered a thin reservoir at the crest of a structure and EDR sees as thickening away”.
He described the project as a “higher potential” exploration well.
In the meantime, all attentions will be fixed upon Wressle and the Ashover Grit as commercial production approaches.