Carnarvon Petroleum Ltd (ASX:CVN) has outlined that partner Quadrant Energy has executed the contract to drill the Phoenix South-3 well with Transocean Limited, which is located on the North West Shelf of Australia.
The GSF Development Driller-1 semi-submersible drilling rig will drill the well, and currently the well commencement window is between 1 February and 1 April 2018.
Quadrant (80%) is the operator, and Carnarvon holds 20%.
Goals at Phoenix South-3
The Phoenix South-3 well is being designed as a redrill of the Phoenix South-2 well that discovered gas and condensate at the top of the Caley interval.
Phoenix South-3 is to be located within close proximity to the Phoenix South-2.
The Phoenix South Caley structure is estimated to contain a gross mean recoverable prospective resource of 489 Bscf of gas and 57 million barrels of associated condensate, which is being 143 million barrels of oil equivalent.
The estimated condensate-to-gas ratio is very significant and is based on surface gas sampling from a permeable section at the top of the Caley Sandstone encountered while drilling the Phoenix South-2 well.
Objectives and costs
The primary objective of the Phoenix South-3 well is to evaluate the Caley interval that the Phoenix South-2 well drilled into but was unable to drill through and evaluate.
The Phoenix South-3 well design is being constructed to specifically allow for the evaluation of this Caley interval, unlike the Phoenix South-2 well that was designed to evaluate a broader range of reservoir intervals.
The successful control of the increased pressure encountered in the Phoenix South-2 well led Carnarvon and Quadrant to submit cost recovery claims under their respective insurance policies.
These claims are currently in the final stages of assessment by the insurance underwriters.
Proceeds from the claims are expected to cover the majority of the cost of drilling the Phoenix South-3 well.
Strong cash position
Carnarvon remains well-funded with $53 million in cash at the end of June 2017, and with a market cap. of circa $73 million, the enterprise value is just $20 million.