Buru Energy (ASX:BRU) is focused on exploring and developing the petroleum resources across its extensive Canning Basin acreage in Western Australia’s southwest Kimberley region.
The company, which is partnered with major international company Mitsubishi Corporation, has a number of operations underway that are due to deliver results in the coming weeks.
These include:
- Results from the Praslin 1 testing; and
- The Victory 1 well expected to encounter the primary target early next week.
The company also expects to spud the Senagi 1 well next week and start a 3D seismic survey next week.
In addition, the Laurel Formation Tight Gas Pilot Exploration Program (TGS) continues to produce encouraging results while the coastal farm-in restructure had provided a cash injection.
Production at the company’s Ungani Oil Field has been temporarily shut-in while the trucking contractor for the transport of crude oil investigates a recent truck rollover incident.
However, this is not expected to have a material effect on the company’s cash position.
Eric Streitberg, executive chairman, commented:
“We are eagerly awaiting the results from Praslin once we have unloaded the drilling fluid.
“The rest of the operations are going very well and we are particularly excited about the results of the TGS program.
“The initial flow results from Valhalla North of high quality gas with significant amounts of accompanying condensate are an excellent result in the context of global, and particularly Australian test results in vertical wells. They demonstrate the potential value of the gas resources in the basin.
“The results to date also provide additional confirmation of our interpretation that the Canning Superbasin contains a very large basin centred gas system.
“The testing program going forward will be aimed at quantifying the observed condensate content and the excellent gas quality we have seen during this very initial stage.
“This will enable us to confirm the independent expert reports that assigned very large prospective resources of gas and hydrocarbon liquids to the accumulation, and to convert prospective resources to contingent resources.
“We are also working carefully to ensure that the contractor’s response to the recent trucking incident is appropriate, and that our oil shipment operations are as safe and as low risk as practicable, and look forward to resuming production from Ungani.”
Praslin 1 Drilling Program
Testing of the Praslin 1 well has commenced with the wireline swabbing unit.
The drilling fluid lost through the drilling operation is currently being recovered.
It is expected it will take several more days to recover the drilling fluid and obtain a sample of reservoir fluid. Further results of the operation will be made available as they are obtained.
Praslin 1 had intersected a 23 metre hydrocarbon column, confirming the Ungani petroleum system.
Laurel Formation Tight Gas Pilot Exploration Program (TGS)
The TGS stimulation program continues to produce encouraging results.
Current operations at the Asgard 1 well are preparing to run the completion tubing configured to allow testing of separate zones.
Fluid returns during these operations have included encouraging amounts of gas.
At the Valhalla North 1 well initial clean-up flows are being undertaken prior to running the completion tubing.
These initial flowback results have resulted in strong flows of gas and condensate.
Valhalla North 1 is interpreted to currently be producing from the top stimulation zone, with some contribution from the next lower zone.
As the well is on cleanup flow it is producing up the 7 inch casing to flare which restricts its ability to lift fluid, and significantly higher rates can be expected once the completion string has been run.
Overall gas rates and specific condensate ratios will be able to be obtained once the well is cleaned out and the production string is run.
Initial field analysis of the gas has confirmed that it is very high quality and has no detectable CO2 content.
All operations continue to be carried out in accordance with all government and regulatory approvals and with continuous environmental monitoring. No effects of the operation on the environment have been observed by this monitoring program.
Groundwater monitoring program carried out over the last 18 months has confirmed that there have been no impacts of the company’s activities on groundwater.
Laurel has a regional Best Estimate Prospective Resource net to Buru of 47 trillion cubic feet of gas and 1.2 billion barrels of condensate.
Victory 1
The Victory 1 well is targeting a large structure on the Ungani trend with prospective Lower Carboniferous and Upper Devonian reservoirs.
This has Best Estimate Prospective Recoverable Resources of 40 million barrels of oil.
Operations have been progressing well and it is expected the well will encounter the primary reservoir within the next 10 days.
Senagi 1
Road and site construction for the Senagi 1 well is close to completion, and DDH1 Rig 31 is currently being mobilised from south of Broome where it was laid down after the completion of the its last well for another operator.
Senagi is a robust structural closure on the Ungani trend in the EP 458 permit.
The well has a maximum total depth of 1,200m and is following up the encouraging results encountered in a nearby mineral core hole which encountered extensive dolomitised reservoir with oil shows.
It is intended to fully core the predicted reservoir section and evaluate any hydrocarbons encountered with a production test.
Ungani Production
Production at the Ungani Field has been temporarily shut-in while the trucking contractor for the transport of crude oil from the field to Wyndham Port investigates a recent truck rollover incident on the Great Northern Highway.
Once the investigation is completed, Buru Energy will work with the trucking contractor to ensure its system for transporting crude oil is operating in a way that reduces the risk of this type of incident to the appropriate risk level.
The company has also recently been informed that its oil charter vessel requires drydock repairs which may take up to 28 days.
Consequently the field will remain shut-in for a period of weeks while these matters are resolved.
The shut-in will also allow the acquisition of very valuable pressure buildup data from the wells.
In addition, the structure of the company’s various contracts and the current low oil prices means the shut-in will not have a material effect on its cash position.
Ungani (Buru 50%) started commercial production on 16th July 2015 at a rate of 1,250 barrels of oil per day after producing about 470,000 barrels of oil during the extended production test.
The field has Best Estimate Contingent Resources of 6.1 million stock tank barrels of oil.
Seismic Acquisition
Surveying and clearance of the 200 square kilometre Yakka Munga seismic survey is progressing well and the Terrex seismic crew is currently being mobilised to the survey area.
Acquisition is expected to commence shortly and take up to five weeks to complete. The crew will then acquire a 2D survey over the Raphael prospect.
Corporate
Last week, the farmin agreement with Quadrant Energy over the Coastal Permits (EP 390, 438, 471 and 473) was restructured.
Quadrant, a consortium of Brookfield Asset Management (NYSE:BAM) and Macquarie Capital (ASX:MQG), has paid the Buru and Mitsubishi joint venture $10 million (about $4.9 million net to Buru Energy after adjustments), in fulfilment of its farmin obligations.
Proceeds will be applied to Buru’s future exploration and development activity on its core permits.
Analysis
Buru Energy has a large 45,000 square kilometre acreage position in the highly prospective Canning Superbasin in Western Australia that significantly has drawn Mitsubishi Corporation as a partner.
Already, the company has production from the Ungani Field that is cash flow positive at current oil prices while further development is relatively low cost.
In addition, Mitsubishi is carrying its share of development capital expenditure through the end of 2016 up to $9 million.
Separately, the Laurel Tight Gas pilot program is funded by Alcoa (NYSE:AA) with the next repayment due in mid-2017.
There is significant news flow ahead with further results from its 5-7 well oil exploration program that started in May 2015, results from the Laurel TGS stimulation program and development of further prospects.
As at 30th June 2015, Buru had $41.9 million in cash. It is budgeting to have about $26 million at year end.
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