Financial Review Article, page-3

From AFR article 6/6/19. – I especially liked this bit

"At these types of condensate yields we think the prospect of a condensate stripping project in addition to a Caley oil development is a distinct possibility ahead of a full field development to recover gas."

ARTICLE IN FULL BELOW

Santos is hailing the Dorado oil and gas discovery off the coast of Western Australia as even bigger than expected as the latest drilling result put the icing on the cake of its Quadrant Energy acquisition.

Kevin Gallagher-led Santos said on Thursday that the Dorado-2 appraisal well had confirmed a major oil and gas resource in the Bedout Basin about 160 kilometres north of Port Hedland.

Santos chief executive Kevin Gallagher says the Dorado discovery is bigger than anticipated. Attila Csaszar

The latest drilling results build on the initial discovery last year that was hyped as Australia’s most exciting oil find in decades.

The well was drilled down-dip about two kilometres from the Dorado-1 discovery and encountered 85 metres of net reservoir in the primary Caley Formation.

The results provide more certainty about the size of the prize ahead of development planning and a final investment decision potentially in 2021.

The latest Dorado boost comes less than a year after Santos acquired WA domestic gas business Quadrant from Brookfield and a group led by Macquarie Capital for $US2.15 billion ($3.1 billion).

“This is a great result which indicates the Dorado discovery is larger than anticipated and which significantly de-risks a future development,” Mr Gallagher said on Thursday.

“The value of the discovery is greatly enhanced by the high quality reservoirs and fluids and the shallow-water setting, which should facilitate a cost-competitive development.''

Mr Gallagher said Dorado opened a new, highly prospective basin where Santos had a strong equity position and rich exploration inventory with potential to substantially grow the resource base.

“Acquisition of a major new seismic survey, the Keraudren 3D survey, is in progress to mature additional exploration opportunities for drilling along this significant hydrocarbon resource play,” he said.

Santos owns 80 per cent of the Dorado project alongside Carnarvon Petroleum with 20 per cent.

The Santos share price rose 1.1 per cent to $6.72 on Thursday, slightly below a 12-month high of $7.46 hit in May. Carnarvon shares jumped by more than 13 per cent to 62¢ before skipping back to 56¢.

Carnavon managing director Adrian Cook said Dorado had proved to be a world-class resource and the joint venture operated by Santos could now confidently continue with its plans for a fast-tracked Caley oil development and a more substantial full-field development.

“The Dorado-2 well was very important to Carnarvon because of its
potential to transition the company into a significant producer in the future," he said.

"This highly successful result makes this a very tangible reality."

RBC Capital Markets oil and gas analyst Ben Wilson said the Dorado-2 update firmed up the prospect of commercial oil development, confirming oil-water contact in the primary oil bearing Caley formation.

"Observations in the lower reservoirs are positive in terms of larger than anticipated gas columns with very high levels of condensate yield," he said.

"At these types of condensate yields we think the prospect of a condensate stripping project in addition to a Caley oil development is a distinct possibility ahead of a full field development to recover gas."

Carnarvon said it was preparing revised volume estimates and expected to release as soon as possible.

"Importantly, the well encountered high quality and productive reservoirs in each target," it said.

"Initial indications [pending confirmation from laboratory analysis] are that fluid compositions are similar to the light oils and gases that were sampled in Dorado-1, where high condensate yields range from 70 to 245 barrels per million standard cubic feet."

RBC said the fact Santos and Carnarvon were so enthusiastic underlined the strength of the appraisal result.

Santos said the Dorado-2 well result increased confidence in the presence of large hydrocarbon columns in the Baxter and Milne reservoirs, which should result in a significant increase in gas resources relative to pre-drill estimates.

Wireline pressure testing has confirmed that all the reservoirs are in pressure communication with the equivalent intervals in Dorado-1, mitigating one of the key pre-drill risks to a future development.

Initial indications are that fluid compositions are similar to the light oils and gases that were sampled in Dorado-1, where condensate yields ranged from 190 to 245 barrels per million standard cubic feet in the Upper Caley, Crespin and Milne formations, and from 70 to 90 barrels per million standard cubic feet in the Baxter Formation.