The latest results from Buru Energy’s (ASX:BRU) drilling program on the Ungani Far West 1 well in Western Australia have enhanced the project’s potential by demonstrating an important geological connection to established regional oil accumulations.
The well has so far produced intermittent oil shows consisting of spotty and trace fluorescence and cut that have some similarities to those observed in the equivalent formations on the Sundown and West Terrace oilfields near the Blina oilfield – the first commercial oil discovery in the Canning Basin.
This is a significant update because it suggests that the initial operations at Ungani could be expanded into a similar-style resource area with commercial potential in line with that of these early fields.
Progress at the Ungani Far West 1 well has included drilling to a current depth of 1,060 metres.
The shows will be assessed and potentially tested once the well reaches 1,200 metres. Drilling will resume targeting the Ungani Dolomite primary oil objective below 2,100 metres.
Ungani Far West 1 has a programmed maximum total depth of 2,600 metres.
The Ungani Far West closure lies within the greater Ungani structural complex and is mapped as being an independent structural feature with vertical closure of some 50 metres.
By no means a wildcat target, this well is considered low-risk with high value-adding potential since the discovery of oil here could add significantly to currently estimated Ungani volumes close the existing production facilities at Ungani.
The well is located on an all-weather drilling pad approximately 1 kilometre off the Ungani access road within Production License L21, 97 kilometres east of Broome and 3.3 kilometres southwest of Buru’s Ungani oilfield.
The well is being drilled under the terms of the Ungani Development Funding agreement with Diamond Resources (Fitzroy) Pty Ltd, which has a 50% equity interest in the project.
Buru’s conventional oil discovery at Ungani in 2011 was the first significant onshore oil discovery in WA in 10 years.
Commercial production at the Ungani site began in July, with cashflow being generated and excellent reservoir performance confirmed by an extended production test (EPT) and flow testing.
Production during the EPT was about 470,000 barrels gross.
Initial start-up production was at 1,250 barrels of oil per day, with targets of 2,500 and 3,000 barrels of oil per day planned to follow as the project advances.
Analysis
This exploration progress represents a compellingly low-risk project development that positions Buru on the cusp of possibly making a significant discovery in an established oil province.
Considering this substantial upside, such a discovery could set up Buru with long-term operational potential that could outlive the short-term rockiness in oil prices currently pressuring much of the sector.
Ongoing development of Ungani therefor offers significant upside for Buru’s resource expansion and will provide strong newsflow which could represent price catalysts for the company’s stock.
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