Carnarvon Petroleum (ASX:CVN) has reported that drilling of the Roc-1 well in permit WA-437-P in Australia's North West Shelf is underway as the operator Quadrant Energy spuds the well in a known oil reservoir.
Progress of the well will be closely watched following last year's discovery of a new oil province in the North West Shelf and the Phoenix South-1 oil well success in August 2014.
Roc will target the same Lower Keraudren reservoir in which oil was discovered in the 2014 Phoenix South-1 well by the same joint venture partners in an adjoining area of the wider Phoenix project.
Now that Roc-1 has spudded, drilling is expected to take around 35 to 40 days to reach a Total Depth of 4,700 metres.
Equity interest holders (upon satisfaction of the farm in agreement terms) in WA-437-P are:
Carnarvon Petroleum - 20 percent
Quadrant Energy (Operator) - 40 percent
JX Nippon - 20 percent
Finder Exploration - 20 percent
Spudding of the well has been carried to US$70 million by JX Nippon and Quadrant – a consortium between Brookfield Asset Management (NYSE:BAM) and Macquarie Capital (ASX:MQG).
There are grounds for optimism for Roc-1 well as it is a larger structure than Phoenix South residing in a shallower water depth and a shallower reservoir than Phoenix South. It is also up-dip to the Phoenix South structure.
Carnarvon and joint venture partners are targeting a best-case estimate of 42 million barrels of oil at Roc.
This would represent a substantial portion of the larger Phoenix resource, estimated in a best-case scenario to total 104 million barrels of oil over only 5% of acreage held by Carnarvon.
Success at Roc-1 would see the well suspended then re-entry for evaluation and further testing (including flow testing) and coring in the third quarter of 2016.
Analysis
Roc's high prospectivity as a target well for a substantial proportion of the oil in a known reservoir bodes well for the current drilling campaign.
Carnarvon is in an enviable financial position with circa $103 million in cash plus up to US$32 million in future cash flow from oil receipts and debt free. This is against a market capitalisation of $119 million.
Roc-1 is well funded to US$70 million (gross) by Quadrant Energy and JX Nippon.
So results will be eagerly awaited as will further exploration of the greater Phoenix area in 2016.
The addition of Dr Peter Moore to the Board is timely given his experience in the North West Shelf particularly as a former head of exploration for Woodside Petroleum.
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