Falcon Oil & Gas Ltd (LON:FOG) has confirmed significant indications of gas in both the Middle Velkerri and Lower Kyalla formations at W-1 well it the Beetaloo Basin in Australia.
“Excellent gas shows” were discovered at two prospective shale sweet spots at the top and base of the Middle Velkerri formation, which Falcon said was comparable to those encountered during last year’s drilling programme.
The Lower Kyalla formation – which is considered as a secondary shale target – also provided excellent gas shows within “a 150m thick liquid rich sequence”.
Dublin-based Falcon added that hydraulic stimulation at the horizontal Amungee NW-1H well has been completed, and expects gas to start flowing back to the surface “in the next week or two”.
“The results of Beetaloo W-1 to date and the successful hydraulic stimulation of Amungee NW-1H represent further positive steps for the exploration phase of the program,” said chief executive Philip O’Quigley.
“Encountering significant net pay in the Middle Velkerri formation, 85km from our 2015 drilling programme along with significant net pay in the Lower Kyalla is very encouraging.”
The Beetaloo W-1 well – the fourth of five wells planned for 2015/16 programme – was designed to test the presence, depth, thickness and physical reservoir properties of the Kyalla and the Middle Velkerri formations.
Falcon retains a 35% stake in the Australian shale venture with partners Origin and Sasol each owning 35%.
A farm-out deal in 2014 that brought in the two partners sees them pay all Falcon’s share of costs for the initial programme of five wells, estimated at around A$64mln.
Later, planned for 2017, they will also cover costs associated with two horizontally fracture stimulated wells, 90 day production tests and micro seismic data collection – Falcon’s carry is capped to A$53mln for this phase.
And in 2018 a further two well horizontal drilling programme, including fracking and 90 day tests, will see Falcon carried for up to A$48mln.
Away from the drill results, the newly-elected Australian government will follow through with its pre-election pledge to put a moratorium on fracking in the Northern Territory.
The moratorium will be introduced today and will remain in place until the government has reviewed the recommendations of an independent scientific inquiry.
Shares in Falcon dipped 0.25, or 5%, to 5.25p.