production rates & 2p reserves, page-17

Gday Jake

I am no expert whatsoever on drilling and vertical vs horizontal. I am more of a numbers man myself. I am not sure on the cost of vertical wells. I would say they are a fair bit cheaper than horizontal wells, but have the obvious downside of reduced flow rates. I know ESG are doing laterals, but I am not sure what techniques the rest are using. But as we have seen with MPO at mungi, vertical wells sometimes won't get the results required, and horizontals are likely to produce better results with better economics.

I know the horizontal wells cost at least $2.5m. I am not too sure how much this increases for each new lateral that you add. In Mungi20a, they had 6 laterals. They also had 6 laterals in Mungi 20V..... but they were a lot longer.

Noellyn posted the following table in the afr streettalk thread back in June. I think it is originally from Baillieu research.

Net cash payback from the Mungi lateral wells
Daily prodn rate 1mmcf/day
= $0.8M Annual net revenue
= 3.4 yrs payback period
= 21% pretax return on capital employed

Net cash payback from the Mungi lateral wells
Daily prodn rate 1.2mmcf/day
= $1.3M Annual net revenue
= 2.1 yrs payback period
= 34% pretax return on capital employed

Net cash payback from the Mungi lateral wells
Daily prodn rate 1.4mmcf/day
= $1.9M Annual net revenue
= 1.4 yrs payback period
= 50% pretax return on capital employed

Net cash payback from the Mungi lateral wells
Daily prodn rate 1.6mmcf/day
= $2.7M Annual net revenue
= 1.0 yrs payback period
= 69% pretax return on capital employed

It points to Mungi20a costing around $2.7m. Not sure how much more Mungi20V would have cost... I won't even guess but considering it is just longer laterals rather than extra laterals, maybe its not too much more. I would expect that at this stage the wells would be pretty expensive given they are going through a sort of trial period, and trying to get as much data as possible. It is very important to note in the announcement made when they completed 20V that they said they are gaining considerable experience and knowledge drilling the wells and that the last lateral was drilled and completed in 7 days. As time goes by they will get more effective and efficient in their drilling, and costs should hopefully reduce.