going it alone - is it enough?, page-15

A little perspective...

From AJQ's unfinished well (the drill is continuing in gas bearing formations)...

"After 45 minutes of testing the total flow on a 16/64 inch choke from the Glyde #1 lateral well was 606 thousand standard cubic feet per day equivalent (mscf/d) at 412 psi pressure. A 30 minute, surface shut in, pressure of 554 psi was observed after flowing on a 16/64 inch choke.

After 10 minutes of testing with a full open choke of 64/64 inch, the Glyde #1 lateral well was flowing at 3.33 million standard cubic feet per day equivalent (mmscf/d) at a pressure of 125 psi. This reading validates the high unimpeded flow potential of this reservoir as observed during drilling with gas chromatography readings."

Now, go back to the prospectus and you will find the following...

"Principle source rocks in the McArthur Basin Principal source rocks include the thickened sections (generally exceeding 150 m) of the gas rich Barney Creek Formation. Previous exploration drilling for zinc and other minerals encountered numerous shows of gas, Liquids condensate, oil and bitumen, including a gas blowout in 1979 at mineral hole Glyde River 9 which flowed at at least 140 PSI for several months before being plugged."

I am by no means an expert on these things, but it would appear from the Glyde River mineral well that pressures in the 140psi range can be maintained for long periods without decline or degradation, at the very least suggesting good migration, interconnectivity, deliverability and scale (no apparent depletion) exists within the Barney Creek Shales.

So...given the Glyde #1 lateral well flowed at 3.33 million standard cubic feet per day equivalent (mmscf/d) at a pressure of 125 psi...one might assume this rate is not only sustainable over long periods, but may posibly improve?

Remember...these flow-rates came from an unfisnished well!

The other important aspect of course is that these flow rates were achieved without fraccing...one wonders what they may increase to if/when they do?

They may even decide it is not necessary?

It is worthwhile putting these results in context with recent "game changing" results from Santos and Beach...both major players in shale gas in Australia. Interestingly, their recent Moomba 191 shale gas well was a vertical well, but used extensive fraccing...

From http://www.theaustralian.com.au/business/opinion/moomba-191shale-gas-well-is-a-game-changer/story-fnciil7d-1226452907259

It's early days with the Santos-led joint venture's testing of the shale gas potential of the Cooper Basin in Central Australia.

But the fact that the blandly named Moomba-191 well has achieved Australia's first commercial flow rate of 2.6 million cubic feet-a-day from shale is potentially game-changing stuff.

The shorthand of it all is that Australia's security of energy supply has just gone up a serious notch. The gas potential of the Cooper Basin's shale has been long been put at more than 200 trillion cubic feet. That's monster sized gas in anyone's language, remembering that the North West Shelf gas project kicked off on the strength of about 20tcf, Gorgon has about 40tcf and good old Bass Strait has about 7tcf to go.

But up until the drilling of Moomba-191, the shale potential of the Cooper Basin was just that -- potential. The basin has been producing "conventional" gas from reservoirs above and below the shale tapped in Moomba-191 for more than 40 years. But nothing from the shale.

The ability to extract previously ignored gas trapped in shale at commercial rates is revolutionising the US energy scene. And the hope has been that it can be repeated here to some extent, delivering greater energy security, greater export earning potential, and for all of those energy-intensive energy industries worried by rising input costs -- lower cost energy.

But before shale gas here has anywhere near the impact it has had in the US, there are a couple of things to note about the result from Moomba-191. Santos chief executive David Knox described the result as a milestone, while the group's vice-president for Eastern Australian operations James Baulderstone said the flow was an "unambiguously excellent result".

All very true. But helping to make Moomba-191 "commercial" is its location -- 350m from a flowline that connects the gas to the Moomba gas processing plant some 8km across the sand dunes. And it is known that if Moomba-191 were to flow gas from the shale zone, Santos will make sure it does it in style, by subjecting the shale zone in the well to quite possibly the biggest fracture stimulation ever seen in this country.

None of that detracts from the excitement of the initial result for the partners -- Santos (66.6 per cent), Beach (20.21 per cent) and Origin (13.19 per cent).

It is just a reminder that there is a long way to go before the broader commerciality of shale gas in the Cooper is proven.

And even then, it is a question of how much money will be invested into building shale gas production.

Shale gas is more expensive than gas from conventional reservoirs and gas produced from coal-beds. At current eastern state gas prices of about $4.50 a gigajoule, Cooper Basin shale gas would be a tough business, except where the wells are close to existing infrastructure, as is the case with Moomba-191.

So higher gas prices will be needed --upwards of $8 a gigajoule for the domestic market and more still for the export market.

- end

Interestingly, both Santos and Beach Petroleum saw price rises on the back of this news, which effectively adds value to ground previously of little value...and in the process added more value to their respective market caps (multiples in fact) than AJQ's entire market cap.

The market can be a little slow...but I am sure it will catch on soon.

Perhaps when the Company updates the market shortly...both of the Glyde-1 drilling progress and perhpas it's significance in the bigger scheme of things?

Good luck all...I am hopining for a nice ride that might even make SIR look under-done.

Cheers!