production test success means $$$

AMU this morning announced the results of production testing of the first of its two successful deep gas wells on its Halletsville South Prospect, in Lavaca County, USA. Testing confirmed the well will flow oil and gas at commercial rates, and will now proceed to full commercial production.

Long term production at the rate of 1.5-2.0 MMscfgd and 35-50 bopd appears likely from the zone tested. This announcement means plenty of dollars will be added to Amadeus's annual revenues and profits for years to come.

Assuming a flow rate of 1.8 MMscfgd and 35 bopd, at current prices AMU's 22.5% share means this would generate annual revenues of around A$1.5 million, and profits of around A$1 million. The significance of this juicy annual addition to AMU's bank account is even mouth watering when you realise that these wells typically produce for 25-30 years.

Stabilised flowing pressure at end of testing was an impressive 5337 psi, indicative of excellent reservoir characteristics.

Even more good news was that there are two additional pay zones uphole of the zone tested, and that these will remain in the 'behind pipe' category - to be brought into production down the track.

Testing of the second successful well has commenced. I would expect it to deliver similar results, and with a 25% share of this next well, AMU looks like it will have even more dollars to add to its bottom line.