At a glance it seems really good. The entire work over will cost $3M AUD of which SHE will kick in 50% ($1.5M AUD) and for that we will receive 25% of the revenue.
Myall Creek-2 Upper Tinowon formation initailly flowed at 5.7mmscfd and after 5 years was flowing at 0.5mmsfcd and in those 5 years produced 1.7 bcf (billion cubic feet of gas). To put that into prospective at todays gas price of say $5USD per mmbtu 1.7bcf is 1.7m mmbtu or $8.5M USD. in the first 5 years without fracture stimulating. After fracture it flowed again at 3.0mmsfcd from a depleted well.
Now to look at what SHE are going to do is fracture it first. SHE are saying they expect the pressure and well to be similar before fracture ie expecting it to flow at 5.7mmscfd without fracturing it as it is a untouched reservoir. But they are going to fracture it and they are saying the upper formation performed 6 times better after fracture from a depleted source. The next part is the guessing game. When we fracture it will it flow at 6 times rate 30mmscfd which is equivalent to about 30,000mmbtu or $150,000 USD per day/how big the formation is and how much gas is there that can be extracted. And always there are risks involved with wells.
However even if the well performs inline with the upper formation and will pull out 1.7m mmbtu (1.7BCF) 12M AUD SHE Share is 3M AUD and we double our money in 5 years with another 2 years on some income before we hand over a depleted well back to Armour.
If it flows hard like SHE is expecting and we see a number even close to 30mmsfcd initially and the formation has alot of gas to extract this will be ABSOLUTELY MASSIVE!!! as i said 30mmscfd is $150K USD / DAY SHE would double their money in the first year.
Really keen to know everyone elses thoughts on flow potential and if they have seen how similar workovers perform.
SHE Price at posting:
2.1¢ Sentiment: Buy Disclosure: Held
