Ann: Southern Cooper Basin Gas Project - Operations Update, page-16

You can't really make that sort of comparison. As has been said a CSG flowing at 200 mscfd doesn't mean that's it's peak rate. CSG wells take months to years to reach peak gas rate and you can't really know where they will peak until they get there. They can have pretty long peaks before they go into decline too.

A conventional well starts off at its maximum rate (after cleanup) and then just declines from there, usually quite quickly.

Then you have the difference in DCF. A conventional well that produces, say, 2 bcf will tend to have a much higher DCF than a CSG well that also produces 2 bcf but takes months or years to peak.

Then you have to deal with the water in CSG too which adds extra costs.

All in all the economics of this play are going to be quite complicated because it's a world-first.

Going off what I know of CSG well costs in Qld and conventional wells in the Cooper I would estimate that in a development setting I would say these wells will probably cost around $5M total. That's drill, case, frac, install surface facilities and connect. STX have said previously $3.5M back in the "gas saturated coals" days but they didn't say whether that included connections and they will need separators now that there is water as well as gas.

For a CSG well Origin have said they currently pay around $3.3M on average for mostly non-frac wells. And in the Cooper it's $7-10M for frac wells. So $5M supports that too.

The update was very interesting. I haven't had time to go over the numbers yet but the bit about the pressure only going back to 2400 psi is going to have some massive implications. It basically suggests there isn't any real permeability down there (or else the reservoir would be recharging) and since they've told us how much water LC has produced, we now have enough information to try to do some mass balance calculations to work out what the drainage area of LC is. That in turn should tell us how much gas they are likely to recover. Unfortunately like everything where this project is concerned there are still a lot of uncertainties (we don't know porosity or coal compressibility) but it should be enough to make a rough estimate.

It basically means that they might as well restart LC and keep pumping. Shield wells aren't really necessary any more because the reservoir is not recharging and LC has good water rates. As long as they've got tank space they should keep pumping.

Also if they have got the reservoir pressure down to 2400 psi and the reservoir is 90% saturated that suggests they haven't got the reservoir pressure down to desorption pressure yet. So the apparent lack of significant gas is nothing to worry about at this stage. When they do hit desorption pressure (which my rough calculation suggests will be somewhere around 1000 to 1500 psi) then we should start to see significant gas flows, if STX have got the saturation calculation right.