The Kowalik-1H horizontal well in the Sugarloaf AMI is preparing to carry out a production test following a succession of strong gas shows including flares up to 50 feet in height which were encountered while drilling the upper Austin Chalk.
The Kennedy-1H horizontal well is producing condensate from a limited section of the horizontal borehole within the lower Austin Chalk at a rate of 30 barrels per day plus 100,000 cubic of gas per day with no water. Subsequent to the end of the quarter, Adelphi has been announced as the winning bidder of an onshore exploration block in Indonesia. A farmin by two international companies to this acreage has already been negotiated, subject to finalisation of the Production Sharing Contract (PSC); full details will be provided once Adelphi has concluded all contractual arrangements.
The Wisteria-1 exploration well spudded in August 2008. The well did not encounter any sandstone at the Puffin Formation level, the Montara Formation sandstones were tight, and the Plover Formation sands were water wet. Consequently, the well was plugged and abandoned.
In the Yemen Block 7, seismic data processing of the 280 km2 3D seismic survey acquired during June and July 2008 has commenced.
In Yemen Block 74, regional geological and geophysical work continued during the quarter. Preparations are being made to acquire seismic data in the second quarter of 2009.
During the quarter a total of 13,479,399 shares were issued at 32 cents per share pursuant to a one for six rights issue to raise approximately $4.3 million before costs. This has increased the Company’s issued share capital to some 120 million shares.
EXPLORATION
Sugarloaf Project – Onshore Texas, USA (Adelphi 20.0%)
Activity within the Sugarloaf Area of Mutual Interest (AMI) in west Texas continues to be a major focus for the Company. The area under lease has now expanded to some 23,000 acres (93 square kilometers).
Adelphi continues to be very encouraged by the high levels of production and appraisal activity in the Sugarkane Austin Chalk field area located adjacent to the Sugarloaf AMI.
Kowalik -1H Well The Kowalik -1H spudded on 18 July 2008 and reached total depth (TD) of 16,483 feet on 19 October. During the drilling of the approximately 4,600 feet lateral within the upper Austin Chalk several gas flares were encountered, many of which ranged from 35 – 50 feet in height. Gas readings were consistently higher than 2,000 units. At the end of October 2008 the well was in the process of being completed pending a flowtest. If successful, the well can be put on production in a matter of days because a pipeline to a nearby gas pipeline has already been constructed.
Kennedy -1H Well During the previous quarter, two fracture stimulations were carried out over a 600 feet interval at the toe of the completed well. A total of 7 perforations, each of 2 to 3 feet in length, were made over the two frac treatments. The well flowed on test at a maximum rate of 0.43 million standard cubic feet per day (mmscfd) + 106 barrels of condensate per day (bcpd) before declining over a 3 week period to flow at an average rate of 0.18 mmscfd + 35 bcpd. Flow was not stabilized and only a small percentage of the frac fluid was recovered, indicating that the flow from the well had not adequately cleaned up and the potential flow rate had not been fully evaluated. In order to evaluate future productive potential further, a small production facility was installed to flow and clean up the well. Production commenced on 2 October 2008 at rates of 0.2 mmscfd + 60 bcpd. By the end of October, the rate had declined to 0.1 mmscfd + 30 bcpd. No water is being produced. The flow rates obtained from this well are modest, partly because the well was drilled in the lower part of the Chalk, and partly because the lateral has not been effectively stimulated over a significant portion of the wellbore. Information obtained from the producing operations will help determine whether further improvements to flow rate are possible by alternative methods of perforating and stimulating the remaining 3,000 feet of horizontal section behind pipe.
Weston -1H Well Weston-1H will be spudded following the Kowalik well. It is located approximately 1.5 km east of the Kennedy-1H well and the horizontal section will be drilled in a southeasterly direction targeting the upper Austin Chalk. The planned total depth is 18,405 feet with an approximately 6,000 feet lateral. The dry hole cost of this well was paid for during the quarter.
Blocks 7 and 74 – Yemen (Adelphi 8.5%)
Block 7 Seismic processing of the 280 km2 of 3D seismic acquired during June and July 2008 has commenced. The results will be available late in 2008, and will be interpreted ahead of drilling two planned wells early in the third quarter of 2009. Adelphi will be targeting a similar play-type to the nearby 110mmbbls Habban (Al Uqlah) field that is expected to produce around 32,000 bopd by the end of 2009. The total remaining work commitment for this block comprises the drilling of four wells.
Block 74 Regional geological and geophysical work continued during the quarter and preparations are being made to acquire seismic data in the second quarter of 2009. Results from the regional work have upgraded the prospectivity of the block based upon the likely presence of source rock extending over a much greater area than previously thought. The total work commitment for this block is for 250 km 2D seismic and the drilling of three wells.
NEW VENTURE ACTIVITIES
Indonesia Adelphi was advised on 20 October 2008 that it was the winning bidder for the South Bengara II Block onshore East Kalimantan. Award of the block is conditional upon entering into a Production Sharing Contract (PSC) with the Government of the Republic of Indonesia. A farmin by two international companies to this acreage upon successfully being awarded the PSC has been negotiated. Full details will be provided once Adelphi has concluded all contractual arrangements.
CORPORATE Cash Position As at 30 September 2008, Adelphi’s cash reserves totalled some $4.5 million. This includes the net proceeds of the rights issue undertaken during the quarter (refer below) and is net of the budgeted dry hole cost of the next Sugarloaf Project well (Weston-1H) which was already paid during the quarter.
weston paid for..
ADI Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
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