Pancontinental Oil & Gas NL (PCL) Rig Contracted to Drill...

Pancontinental Oil & Gas NL (PCL)
Rig Contracted to Drill Cormorant-1
Pancontinental Oil & Gas NL (“PCL”, the “Company”) has provided updates on Namibia and California. PCL has announced that a rig contract has been executed to drill the Cormorant Prospect (PCL 20%) offshore Namibia, with a target spud date of the 1^st September, 2018. Tulainyo (PCL 13.33%) flow testing started at the end of February and is expected to take approximately one month to complete. Testing of Zone 3 in the Dempsey 1-15 well (PCL 10%) is also imminent (testing flow without stimulation).
Namibian Drilling Confirmed
PCL has announced that a rig contract (the Ocean Rig Poseidon) has been executed to drill the Cormorant Prospect offshore Namibia, with a target spud date of the 1^st September, 2018. PCL (20%) is fully carried (uncapped) for this well and will receive circa A$7 million upon spud. PCL estimates that Cormorant has the potential to contain Prospective Resources of 124mmbbl of recoverable oil on an un-risked Best Estimate basis. The cumulative Best Estimate oil resource potential of the leading four mapped prospects in the block total 915mmbbl recoverable oil. The drilling of the Cormorant prospect in 2018 will likely be one of the most exciting wells drilled this year by any ASX listed O&G player and was recently identified by Oil Consultancy Wood Mackenzie as one of the ‘Top 20 exploration wells to watch in 2018’. We currently value PCL’s position in Namibia at $40m, success at Cormorant would be worth in excess of A$110m to PCL (unrisked NPV10) and additionally upgrade the value of the other prospects in the block.
California Well Testing – Tulainyo and Dempsey
Tulainyo (PCL 13.33%) flow testing began at the end of February. The Tulainyo 2-7 well was drilled as planned to a total depth of 5,710 feet (1740 metres) with multiple stacked reservoirs encountered in over–pressured geological conditions within the very large anticlinal structure. Post-drill analysis indicated potential net gas pay of 56 metres (183 feet) across multiple stacked sandstone units from within a gross reservoir section of up to 118 metres (386 feet). All zones are gas saturated with the flow test program expected to take approximately one month to complete. Testing of Zone 3 in the Dempsey 1-15 well (PCL 10%) is also imminent (testing flow without stimulation). The operator (SGC.asx) plans to pull the current completions from the well and to run a completion that will allow access to two shallower gas filled reservoir zones (Test Zone 3) covering an interval of some 400+ feet (120+ metres) at the same time as allowing access to the currently producing interval (Test Zone 2). At the end of January, the well was flowing at a rate of approximately 140 mcf/day. As a rough rule of thumb, every 1bcf net to PCL discovered in California would likely be worth around US$500,000.
Maintain Speculative Buy Recommendation
PCL is one of our top Oil & Gas sector picks for 2018. We recently upgraded our price target to 1c per share on the back of more certainty around Namibian drilling, while the Tulainyo flow test will provide clarity on reservoir quality on the Western Flank of the Sacramento Basin.