To be honest, I was initially a little dissappointed with the report: It is short on information although there will be a detailed update before trading commences on Tuesday.
I have a feeling that the call to shut down operations was that of the rig owner under a clause within its own insurance agreement. It would have come as a surprise to MEO, hence the trading halt. Cyclone Helen is now heading east and forecasts by BoM are that it will be reclassified as a tropical low on Jan 5 at 7am. Work on the rig should restart by midday Saturday.
Production testing seems to have been underway for a while with the well flowing a combination of drilling fluid and hydrocarbons. It's not uncommon for clean-up activities to run for an extended period. Good news here is that the well is flowing to the surface...
There is no casing in the bottom hole. This limits the ability to artificially fracture past the clogged formation. In a development scenario, the production casing could be blasted through in a fracture stimulation exercise.
MEO is left to see natural flow rates from the open fractures that still exist. The production test may be deemed inconclusive and will require further appraisal work which will allow for improved well design.
Initial market reaction may not be pretty but then that it the ebb and flow of the market. There is a natural tendency of investors to panic in these situations where others see opportunity!
I think the message on Tuesday will need to be clear and detailed to give an indication of the gas flow rate to date, the composition of the gas and next steps with respect to the well. MEO should also provide their initial assessment on the Heron North reservoir.
MEO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
