Golden Gate Petroleum (ASX:GGP) has started producing oil from SRH-5H--its first horizontal well in the Permian project in Texas-- with the oil cut increasing to 21.1% from 11.5% in a 24-hour period.
The SRH-5H well, was put on a bottom hole pump and run at a 990 barrels of fluid per day rate after the well continued to return frac fluid without pump assistance for two weeks.
The unaided frac fluid flow back was believed to be due to the use of Halliburton's Perm Stim frac fluid, which typically is found to result in higher frac fluid recovery.
The use of Halliburton's frac fluid in other nearby wells has resulted in the recovery of up to 40-50% of the frac volume before hydrocarbon breakthrough and led to higher recovery of frac fluid for less blockage in the wellbore.
However, the SRH-5H well that was drilling in the Upper Wolfcamp Interval, referred to as the A Bench, experienced oil breakthroughs plus gas at a very early stage of pumping.
The pump rate has since been slowed down to 550 barrels per day so as to run the production through the temporary production facilities.
The oil cut was recorded at between 52 barrels to 118 barrels of oil and and gas based on a 24 hour operating period. An early hydrocarbon breakthrough is not considered a metric of initial production levels at which the well will hold long term production.
Higher oil and gas rates are expected once more of the total frac fluid is recovered and pumping rates are calibrated.
Based on other horizontal well estimates by other major operators in the area, the SRH-5H well could hold an estimated ultimate resource potential of about 400,000 barrels of oil equivalent, primarily of oil and gas liquids.
The SRH-5H horizontal well showing early hydrocarbon breakthrough could potentially be the harbinger of prospects for Golden Gate Petroleum's other wells in the project area.
Initial hydrocarbon shows hold promise with the oil cut increasing to 21.1% from 11.5% in a 24-hour period.
With the use of Halliburton's Perm Stim frac fluid that typically results in higher frac fluid recovery, and less wellbore blockage, higher oil rates are expected.
The oil show marks a milestone for Golden Gate, which remains well capitalised for further drilling activity in the Permian, having recently secured A$7.5 million in funding from U.S asset management firm Lind Partners.
The company also previously raised $3.2 million through an entitlement offer and successfully sold its 10% working interest in the Cutlass project in Texas for US$1.7 million.
Shares in Golden Gate have ranged between $0.002 and $0.004 in the last month and a validation of the early results could deliver significant upside for the shares.
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