Buru Energy (BRU) appears to have recovered from the shock of...

Buru Energy (BRU) appears to have recovered from the shock of the unexpectedly disappointing results of its Ungani-3 exploration-appraisal well, and has announced its plans for the next 12 month, which include up to four Canning Basin oil exploration wells, but the delayed delayed fracking of its tight gas fields until 2015, an announcement that has caused its shares to slump to new lows.

The company has undergone a shake-up of late with managing director Dr Keiran Wulff stepping down after just 18 months and the return of company founder and major shareholder Eric Streitberg in an executive role after just six months on the bench.

Streitberg has announced that Buru hopes to drill four low-cost but high impact exploration wells for the remainder of 2013 in addition to the testing of the Ungani-3, Ungani North-1 and Paradise-1 wells, while the much anticipated fracking of the Laurel right gas formation will now happen early in the 2015 dry season.

The exploration program includes twoApache Energy farm-in wells in the Coastal JV permits, Olympus- and Commodore-1.

Little is known about the wells, however they are being drilled in the under-explored Kidson Sub-basin and have both conventional and unconventional prospectivity, with targets above 1,500 metres.

A rig is still being selected but the wells should be relatively cheap, Buru says.

In addition, the company is in negotiations to use the DCA7 rig, which is drilling Dunnart-2 in the Perth Basin.

This rig could then mobilise to the Canning Basin for the much-needed workover of Ungani-1, and then for the drilling of additional wells in the basin at low cost.

Key Petroleum (KEY) had been planning to mobilise the rig for two of its own wells, but that now seems unlikely this year, so it is entirely possible the rig could stay in the Canning Basin for some time.

Buru says it and Mitsubishi are once again looking at shallow wells on the Ungani trend, the companies apparently feeling braver after the Ungani-3 result, while Buru is also returning to targets in its 100% owned EP 129, which is host to the small Lloyd and Boundary fields.

It drilled a few wells on the first 3D seismic in the Blina area in 2010, Leander-1 and Fairwell-1 in L8, with little to show for its tests, although the wells were drilled quickly and on budget using the company's Fairway rig, which now appears to have been mothballed.

Buru says it has had some interest in farming-out EP 129, which is close to the location of most of the production in the frontier basin since the 1980s.

Testing

The testing program will finally investigate the flow potential of the Ungani North-1 well, after which Buru will attempt to assess the upper zone of Ungani-3 where there is still hope for some oil production.

At 2010's Paradise-1 Buru and Mitsubishi want to assess the Grant Formation oil zone that, if productive, could be a play-opener for the Winifred Member.

Beyond drilling Buru has another Terrex Siesmic crew clearing lines for the 123 km Commodore West seismic survey in EP 471.

There are up to a total of 800 kilometres of seismic planned in various permits that are subject to the receipt of heritage reports and various other approvals that should help define drilling targets for 2015 and beyond.

Also included is the planned Jackaroo 3D seismic program between Yulleroo and Ungani that will join the two existing 3D grids to give seamless coverage between the two fields and upgrade targets on the Ungani Trend, notably the large Jackaroo oil prospect, which is a lead candidate for drilling.

Operationally Buru says that it has now sold 177,000 barrels from the Ungani extended production test, and that Ungani-2 is still producing at above 1,000 barrels of oil per day, however Ungani-1/ST1 continues to disappoint as an attempt to re-complete the well as a dual producer and water injector was not successful.

The planned workover with the DCA7 rig will hopefully restore production from the well.

Tight gas



The Laurel Formation program is the other big ticket item as Buru and Mitsubishi attempt to prove their significant gas resource is commercial.

The previous success of the trial's low impact reservoir stimulation of the Laurel Formation in Yulleroo-2 demonstrated that the Laurel Formation will produce high quality wet gas at potentially economic rates with a relatively minor stimulation program, and this has led to the drilling of a series of exploration wells that have defined a major gas accumulation in the Laurel Formation.

The company now wants to frack the wells, and has its approvals in place, but delays in getting its approvals mean the bulk of the program won't take place until next year.

The Asgard-1 and Valhalla North-1 well sites will be prepared before the onset of the wet season, with a coiled tubing unit sourced to condition the wells. A mini-frac will also be undertaken to help prepare for the return to site after the wet season.

In March 2015 the frac spread will be mobilised and the fracking will be undertaken, with the estimated total cost of the total fracking program in excess of $40 million.

Buru’s 50% share of the costs will be covered by the previously announced agreement withAlcoa, although Buru is seeking a farm-in partner for that program in an effort to share some of the risks and rewards.