This long-serving Eastern Goldfields explorer that has recently announced a corporate shift to focus on a big picture oil and gas play in the western state of Utah.
Should Golden State Resources ambitions pay off the project could be delivered with a windfall in excess of $US4 billion.
The market will get its chance to take a punt on the merits of Golden State's ambitions when the company launches its prospectus seeking up to $15 million.
Golden State's American adventure is centred upon the 29,737 acre (12,043 hectare) Golden Eagle prospect in Utah's Paradox Basin, a proven hydrocarbon-bearing region that has thrown up a number of substantial discoveries over the past 50 years.
Subject to receiving shareholder and statutory approvals, Golden State is acquiring a substantial interest in the prospect from private Denver-based company Eclipse Exploration Corp, which is led by geophysicist George Handley a man who has dedicated himself exclusively to the prospect for the best part of the past decade.
The 30,000 square kilometre Paradox Basin is no wild moose pasture frontier. It is home to 171 oil and gas fields containing estimated recoverable reserves of one billion barrels of oil equivalent, or six trillion cubic feet of gas equivalent. Over its history, it has produced 500 million barrels of oil and 3.5Tcf of gas.
Geologically, Golden Eagle is described as a look-alike to two other major Paradox Basin fields the Lisbon Field (which has produced 50 million barrels oil and 0.78Tcf gas since 1961) and the Greater Aneth Field (with production of 385 million barrels oil and 0.35Tcf gas since 1956).
The prospect is also very well placed the Greater Cisco field sits 16km to the project's north, the Lisbon Field sits 64km south, and a pipeline with plenty of spare capacity clips the project's north-eastern corner.
Golden State plans to have the project underway by the second quarter of next year. According to the company's exploration manager, John Hasleby, Golden State's initial well will drill through no fewer than 11 distinct potential pay zones on its way to its target depth of 14,600 feet.
"These 11 potential pay zones have contained hydrocarbons not just elsewhere within the basin, but elsewhere within the immediate area," Hasleby said.
Drilling that well will not come cheaply Golden State will have to reimburse Eclipse up to $US1.3 million for seismic data and the right to drill the hole, which will cost about $US4.3 million but the potential payback could be huge.
Seismic over the prospect has led to estimations of a mid-case target potential of 440 billion cubic feet, and an upside estimate of 3000Bcf.
That makes this project a genuine potential company maker.
Achieving Golden State's "most likely" mark of 440Bcf would deliver a mind-blowing project cash flow of more than $US4.8 billion using prevailing oil and gas well head prices.
Since Golden State currently has a market capitalisation of about $10 million, it is easy to see that the potential rewards offer pretty handy compensation for the risks involved.
Golden State has enlisted the services of two locals Houston-based petroleum geologist Neville Henry and Denver-based petroleum engineer Gary Nydegger to operate for the company at ground level.
Utah is ranked as the second best jurisdiction in the US, behind Nevada, for exploration and development. Unlike most of the country, the state and federal governments own much of the prospective land and minerals in Utah, and the area has the bonus of having no major environmental issues or conflicting land usage.
It all prompts the question how this promising slice of the US could have been overlooked by the nation's home-grown energy companies.
The prospect has, in fact, spent much of its history without attention due to an incorrect interpretation of the area published by Rocky Mountain Association of Geologists in 1972. The area was deemed to be lacking the required source rocks due to some formations in the area, but work by the likes of Mobil and Exxon disproved that analysis.
Past rock bottom oil and gas prices meant that continued evaluation of Golden Eagle did not eventuate. Handley continued to believe in the project's potential, and Golden State was eventually introduced to Eclipse and the project late last year by associates of Golden State chairman John Hopkins.
That led to the fleshing out of the current deal, under which Golden State will pay Eclipse up to $US1.3 million for seismic data and the right to drill a first well, and then an additional amount of up to $US1.3 million for the right to drill a second well. Thereafter, Golden State will have an 83.3% working interest and a 65% net revenue interest.
Facilitating all this will be the proposed capital raising. The current shares on issue will be consolidated on a 1 for 3 basis taking the issued capital to about 54 million shares, and up to a further 75 million shares will be issued to raise a maximum of $15 million. The consolidation and share issue are subject to Golden State shareholder approval.
In the meantime, Golden State will continue to work on the hard rock assets it had at its core before Golden Eagle came into the picture. The future of those existing assets, which include gold and base metal targets in the Eastern Goldfields of WA and substantial uranium prospects in the US, will be determined by the progress of Golden Eagle. It's going to be a thrilling ride.
"This has got to be one of the most exciting potential opportunities going around the Australian oil and gas industry," said Golden State executive director Richard Sciano. That excitement will only continue to build as drilling of that initial well nears.
A gas wellhead in the Paradox Basin. The Paradox contains estimated recoverable reserves of one billion barrels of oil equivalent.
Ends
Not all relevant now but shows the potential of the field. You can see why there is much talk of field value, and not just value of this one well. If a commercial flow can be established from PB3, gdn will have the key to unlocking the field's potential and thats why the success of this well will attract plenty of attention IMO These next few weeks should be interesting to say the least. A lot is riding on these flow test results. I won't be surprised if more work is required with the clean up to ensure we get a true indication. Still a way to go but IMO we will get there in the end. More testing times for holders likely IMO. Hold tight B Rubes
GDN Price at posting:
7.0¢ Sentiment: Hold Disclosure: Held
