In the event of successful oil and gas production from Thomas 119-1H, Winchester has the right to a 12.5% working interest back-in following the recovery by USEC of all costs associated with completion activities.
Importantly, success at Thomas 119-1H will potentially add significant value to Winchester’s acreage at the Wolfcamp ‘D’ shale.
The Wolfcamp ‘D’ shale is a known oil producing unit on Texas’ Permian Basin, extending over the Eastern Shelf.
It is present across some 15,000 acres of Winchester’s leasehold on the Eastern Shelf.
The Wolfcamp shales in the Midland Basin portion of the Permian Basin contain an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids, according to an assessment in November 2016 by the U.S. Geological Survey.
Adding value to Winchester’s leasehold position
On top of the opportunity to back-in to a potentially producing well, any success with completion activities undertaken by USEC at Thomas 119-1H will add significant value to Winchester’s surrounding Wolfcamp ‘D’ leasehold position.
Winchester managing director Neville Henry said: “The initial evaluation of the oil producing potential of the Lower Penn/Wolfcamp ‘D’ shale within the Company’s leasehold has commenced with US Energy planning a fracture stimulation of the Lower Penn/Wolfcamp ‘D’ Formation in the vertical wellbore of Thomas 119-1H.
“A successful result from fracking with even a modest oil rate of 20 - 50 boepd (barrels of oil equivalent per day) from a single stage vertical frack over a 200 feet interval of the Lower Penn/Wolfcamp ‘D’ Formation in Thomas 119-1H would be significant.
“That translates into a much higher number in a 5,000 foot or longer horizontal well and this has the potential to re-rate the value of Winchester given the ubiquitous presence of these units throughout the company’s leasehold position and existing wells.”