SUGARLOAF PROSPECT (20%) Background The Sugarloaf Area of Mutual Interest (AMI) comprises a lease area of approximately 20,000 acres (80 square kilometres) in west Texas . This area falls entirely within a broad 200,000 acre area known as Sugarkane which is thought to be prospective for the well known and prolific Austin Chalk play.
The Sugarkane area is defined by regional analysis of drilling results, hydrocarbon shows and wireline log interpretation from adjacent wells. The Sugarkane discovery well located 6.6km west of Sugarloaf-1 has been producing gas and condensate steadily from a vertical well since 2006 and a nearby horizontal is due to be tested following strong hydrocarbon indications while drilling. Potential reserves have been estimated for the Sugarkane area at greater than 3 TCF of gas and approximately 500 million barrels of condensate.
The Austin Chalk play is well known in Texas and is exploited from a broad regional trend which passes just to the north of the Sugarkane area. The play shot to prominence in the early 1990's when horizontal drilling technology was first applied routinely. The reason for this was that horizontal wells of some 5,000 feet in length were able to access a much longer section of reservoir and in particular were able to intersect and drain hydrocarbons from complex fracture systems.
The Sugarkane area is still in the earliest stages of appraisal. However, it appears to be over-pressured, have relatively high matrix porosity, contain >150bbls of condensate per MMCF of gas, and be vertically fractured – all of which are strongly positive signs for potential commerciality. The reason why the play had been overlooked to date is due to the overall paucity of wells on this trend, the fact that Sugarkane is some 20km south of the main Austin Chalk trend, and the traditional thinking that the Chalk is a relatively low productivity reservoir when compared to other reservoirs targeted by previous wells drilled in this area.
Sugarloaf-1 Well Adelphi originally farmed into the Sugarloaf area on the basis of a large, deep, 4-way dip closed growth fault play in early Cretaceous Hosston Formation clastics. Upon recognition of the Austin Chalk play as an attractive secondary target, we increased our equity in this well from 12.5% to 20% prior to the commencement of drilling Sugarloaf-1.
The Sugarloaf-1 well commenced drilling during August 2006 and reached a total depth of 20,896 feet (6,371 metres) in December 2006 after 116 days.
During drilling and subsequently confirmed by wire-line log analysis, the well encountered indications of hydrocarbons in both the primary and secondary targets. In the primary Hosston Formation, gas indications over both an upper and lower interval of interbedded clastics, and in the Austin Chalk with a 28 metre zone of possible gas pay.
During March 2007, a testing program including fracture stimulation of part of the Hosston Formation intervals was undertaken but formation water and only minor quantities of gas were recovered at rates too small to measure. As a result, the well was plugged off to allow later testing of the Austin Chalk zone.
The Sugarloaf-1 test of the Austin Chalk interval commenced during September 2007 with the fracture stimulation and testing of the bottom-most zone. If a potentially commercial flow of gas and/or gas liquids can be obtained, the well will be production tested so as to obtain productivity information. The scope and timing of testing the remaining two zones will depend on the results of the first.
Kennedy-1 Horizontal Well The drilling of a horizontal well located approximately 1,600m from Sugaloaf-1 commenced on 17 th September 2007. The well, named Kennedy-1 Horizontal (effectively a Sugarloaf-2 well) is planned to be drilled in a north-westerly direction with a horizontal section of some 5,000 feet (1,500 metres). It will be geo-steered so as to fully test the uppermost zone in the Chalk – the same zone that is productive in the Sugarkane discovery some 8km to the west.
Based on limited horizontal drilling results reported to date in a neighbouring lease within the Sugarkane area, it would appear that vertical fractures have been encountered there which would significantly improve the flow potential and well economics of this play. However, this still needs to be confirmed by production testing and further appraisal drilling to determine the existence of these fractures across the wider Sugarkane area including the Sugarloaf AMI. This is also one of the key objectives of the Kennedy-1 well.
It is worthwhile noting that vertical fracturing is a crucial factor in the success of Austin Chalk wells in the established fields to the north due to their relatively lower matrix porosity in the Chalk when compared to the Sugarkane area.
If the Sugarkane area proves to be successful, that is if the horizontal wells deliver an economic return, prospective reserves are estimated to be in the range of 600 BCF to 1 TCF for the Sugarloaf AMI alone in which Adelphi owns a 20% working interest
ADI Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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