Here we are folks. Bruised, battered, some of us in the black already, the rest hoping to be, but without exception, everyone is tired. A serious case of investor fatigue. I wasn’t a shareholder when H-2 was drilled back in 2007/08, but anyone who has hung around must have relentlessly exerted enormous effort to maintain patience.
All the details, have been discussed to no end and soon mother nature will have her say. The moment of truth is almost upon us.
Anchan – written off. In effect, this well has reduced MEO’s drilling costs of S-1 by about $1.5m, so a good outcome for MEO.
The primary Baong sandstone at Gurame has come in exactly as we had hoped and has all but been shown the gas to be recoverable (matrix porosity, fractured, pressured, MDT). The flow test will be all but a tick the box exercise, to get some serious data on stabilised flows, composition and so on. Before this well, even my favourite ultra-conservative analyst friends at WHTM were calling the worst-case scenario at Gurame a small scale gas development worth ~$200m in NPV to MEO. By small scale, we are talking 100bcf over 10years. MEO have already discovered more than 3x this in the Baong alone, already. The Belumai has probably already been drilled down to TD, if not the top of the oil-prone carbonates. This is all upside from here.
Now to the Greater Heron.
Just to reiterate the TH announcement.
“MEO Australia Limited (ASX: MEO) requests a trading halt of its shares for up to 2 days effective immediately pending an announcement regarding production testing the lower zone of interest in the Heron South-1 exploration well in NT/P68.”
Note, “…up to 2 days…”. Given eni cannot perforate or stimulate this section, the fact that they need until next Tuesday suggests that the well has or will flow.
It is surprising how many details of these wells have been released, and how long it takes for the market to catch on. I was indicating that Gurame had come in as prognosed at least a week before MEO made the unambiguous suggestion. Heron again. Based on the depth, extent of shows, mud-weights and coring a lot was deduced even before being confirmed. EVERYTHING is pointing to these wells both being highly successful.
Whilst it was different being their in person, the following really does provide a very clear idea of where MEO are at these projects.
5:06 - “They (upper Frigate Sands) are thicker in HS-1 than in other two wells” (H2 & H1)
5:26 – Secondary objective (Upper Frigate) has come in, looking good. “until we test it, I can’t tell you how good”.
5:42 – “The big uplift is down here” [as DM points his green laser down to HS-1, Elang Plover.
5:42 – “Eni have managed to drill the deepest section yet of the Elang-Plover”. “If you look carefully, we have gas appearing at the TD”. The reason DM appears nervous, is because he has Eni in one ear saying keep this thing under wraps until we farm in to everything from OXX/Total acreage to the west and MGN to the south, but in the other ear has JH saying, for F’sake, tell the people what we have uncovered.
6:25 – “We have LWD logs down to the base of the well, so we know what’s there.” Note, this is a definitive statement, and backed-up by the firm commitment to ensure they case and test this section.
7:00 – “It is encouraging though that we have seen significant reservoir sections with high gas saturations and this is basically as good as you would have expected before going into the well
7:45 – “cautious pleasedness”.
DM elaborated after the presentation about the “bigger uplift” and I expect the flow rates, even from the narrower slotted liner to confirm this resource to be of commercial grade. DM wraps up his talk by indicating that there is a very large resource at Heron, and implying it will be produced. The worst case scenario is that future wells will need to be deviated, have a horizontal section, be stimulated, or any other optimisation, but the discovery risk has now been all but removed.
<45days to Blackwood decision. (DM's remarks that eni have done most of the work on the Blackwood seismic and see great upside, suggests that eni have the latest (most accurate) view, hence why I expect this upside scenario to unfold.
MEO Price at posting:
28.0¢ Sentiment: LT Buy Disclosure: Held
