i met one of the petra guys on the site visit who is EX AWE & is all overs WEStrikeEnergy Limited (STX) - Initial conventional gas discovery in the Wagina
STX has announced an initial conventional gas discovery in theWagina sandstone confirming good quality reservoir characteristics within agross gas column of 74m. The West Erregulla-2 well in EP 469 (STX 50%,operator) has now been drilled to the second intermediate section TD of~4,229m. The well section was finished without observing the end of the Waginaand there is potential for further Wagina sands to be found in the finalsection of the well, which will also include the primary target within theKingia and High Cliff sands (69% COS). The Wagina, historically has been atight sand, so initial porosity of 14.2% confirmed in the initial top sectionis encouraging with potential implications for porosity preservation at depths >4,000m. Drilling to primary target will begin shortly. Wemaintain our BUY on STX and target price of A$0.20/sh.
Potential for further Wagina sands in next section
· After encountering gas at 4,117m, the well has now been drilledto the second intermediate section TD of ~4,229m. Wireline logging tools haveconfirmed the well encountered a total gross Wagina sandstone of ~74m TrueVertical Thickness (TVT) with a confirmed minimum net pay of 2.5m over the4,106m to 4,180m interval. Continuous measurements of gas were encounteredwhile drilling through the Wagina sands.
· The well section was finished without observing the end of theWagina. It is believed there is potential for further Wagina sands to be foundin the next section. Wireline logs and correlation with nearby offset wellsalso suggest that the Basal Wagina sandstone, the formal secondary target ofthe well, is yet to be encountered.
Production testing expected post drilling
· The influx of over-pressured gas while drilling through theWagina due to unbalanced mud weight resulted in bore-hole breakout along thewell bore. This meant that the logging tools were unable to form a closecontact with the sides of the well bore. However credible logging results wereachieved at the top of the Wagina, which confirmed 14.2% porosity over a 2.5msection before the bore-hole breakout occurred.
· There is another 6m of clean porous sands below this initial2.5m section suggesting a net pay of ~8.5m or 11.5% vs Kingia High Cliffhistoric net pays of 16-30%.
· Perforation of the lined well, is expected to allow well testingto be carried out, post the completion of the Primary target which will bedrilled to the final hole section at 5,200m.
Maintain BUY PT $0.20/sh, Risked NPV10 A$361m
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