production rates & 2p reserves

Someone recently gave me a prod to look at BOW's recent reserves announcement. I had a good look and thought wow... they are doing a good job in talking themselves up and getting some nice 3P reserves recorded. But that's not what the prod was about.... it was about the lack of 2P reserves.

Now I am not an oil and gas expert. What I know I have taught myself as I have researched my stocks in a desire to better understand the announcements. But the lack of 2P reserves got my mind ticking over as to what you need to do to get 2P reserves. 2P are proven and probable reserves. 3P add in the possible as well.

From my experience 2P reserves are certified when the reserves are probably commercially viable, and this requires a production well to be completed to show that the gas will actually flow and be produced. So I am guessing that BOW has no 2P yet as they have not actually done a production test on their acreage.

I am going to be very very intereted to see how BOW's well's do flow once they actually do production testing. The whole area of flow rates has had me trawling through CSG company announcements of all sorts for the last hour or so. From what I can see, a flow rate over 1MMscf/d is a very good well. I know back in the good old days when I had some QGC shares, they had some very good flow rates often above this level. Even Gloucester had flow rates approaching this area, but most peaked around 750Mscf/d I think.

Looking at AOE, their average flow rate for wells in the surat basin in 2007 was about 260Mscf/d, 2008 was just over 300mscf/d and 2009 they are getting to just over 600Mscf/d.



PES had flow rates of the following from the start of the year at the Cameron project:

"Cameron-28 pilot well completed and tested at rates up to 225 mcf/d in the Juandah Coal Measures

Cameron-29 pilot well completed and tested at rates up to 425 mcf/d in the Juandah Coal Measures"

ESG had this in their recent June Quarterly Report

"Multi-lateral Production Pilot Successful
The Bibblewindi multi-lateral production pilot has proved to be an outstanding success, with aggregate gas production reaching 250,000 standard cubic feet per day during the Quarter. The pilot has confirmed the suitability of drilling, steering and intersection techniques adopted by ESG, and has demonstrated that the spacing between adjacent laterals can be significantly increased (to around 1 km), thereby materially reducing gas production costs."

WCL had this in 2008 about their production tests:

"Gas flows of up to 127 mscfd (thousand standard cubic feet per day through a 5/32inch choke) have been observed from the Paranui #6R well. It is not expected that gas flow rates will increase further until accumulated coal fines are removed from the well. No well workovers to remove the coal fines are scheduled prior to reserve certification as these would disrupt the current stage of the testing program which is designed to measure pressure movements throughout the reservoir."

Since this time WCL hasn't said much more at all about rates.

Now is it just me or is MPO's flow rates proving to be drastically better than those of its peers!?!?!?! I know the well completion techniques are much more expensive, but it is delivering the results, and looks as though it will pay off handsomely. We can all be satisfied at least that MPO are skilled in actually producing gas and are continuing to acquire knowledge as to how to actually produce the gas in meaningful quantities. This is after all what will delvier the dollars to the bank account.

That is a long way ahead of BOW and others who are at this stage have only proved up reserves by drilling a lot of "core" wells, which from my understanding have little use other than being able to analyse the coal to test permeability etc and to obtain a "possible" 3P reserves figure.

It also means that it is more than likely that MPO will be the first of BOW, WCL, BUL etc to actually have a developed field that is producing successfully and cash flow positive. Now that will be a day when the share price is much higher.

Enough from me for now....

Cheers

Pukin