Morgan Stanley seem pretty bullish about our neighbours in the report they released today...
AWE Ltd Perth Basin Shale Gas Update
Quick Comment – AWE has reported encouraging gas flow rates from testing underway in the first of three shale gas wells in the Perth basin
Testing of the deepest zone, the High Cliff sandstone (HCSS), in the Arrowsmith#2 well has continued in the past week. Peak flow rates and a stabilized rate of 777 mcfd and 446 mcfd were achieved. In our view, these are good rates given the well is still in “clean-up” phase, and could improve once all the frac fluids are recovered. Over the coming weeks, testing will continue over another four zones at the Arrowsmith well including the primary zones, namely the upper and lower Carynginia shale.
The Arrowsmith well is located in Perth Basin permit EP413. Participants in this permit are AWE (44.2%), Norwest Energy (NWE 27.9%) and Bharat PetroResources (27.8%).
In addition to testing at Arrowsmith, AWE will test two other wells in this campaign, the Senecio well (AWE 50%) and Woodada Deep (100%).
We consider the potential for commercial development to be high. These wells are all located in the Perth Basin, close to existing gas plants, all of which have spare capacity, and pipelines serving the Perth gas market. (Refer to Exhibit 1). Resource estimates are very large, up to 20 Tcf of gas-in-place in the Carynginia shale within permit EP413 and higher across the basin. How much, if any, can be turned to commercial reserves hinges on successful flow testing. Results to date are a positive step toward that goal.
Background Arrowsmith#1 was drilled in 1965 and identified gas in a number of thick, marine shale rocks. Arrowsmith#2 was drilled last year and core analysis confirmed the prospectivity of theshales, as well as the Irwin River Coal Measures (IRCM) and the High Cliff Sandstone. In total, there are five zones to be fracced and tested at Arrowsmith2, starting with the deepest, the HCSS. The Carynginia shale however, is considered to be the primary objective and this zone will be tested in coming weeks.
Concurrently, activity will take place on other wells. AWE will frac and test three zones at Woodada Deep well, and will test one zone at Senecio.
The overall objective of this campaign is to: 1) establish how the shales and other zones respond to fraccing; and 2)establish and measure gas flow rates.
What is a good rate? We would consider gas flow rates in the order of +/- 1 million cubic feet per day (mmcfd) from any zones to be a good figure, bearing in mind that these are vertical test wells.
GEV Price at posting:
19.0¢ Sentiment: Buy Disclosure: Not Held
