Activity abounds for Metgasco in dual oil and gas pursuit
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An observation made at sea many years ago rings true to this day for Metgasco CEO Ken Aitken.
A petroleum engineer by trade, Aitken was a recent graduate on his first offshore trip when he stood on a North Sea oil-producing platform at night, looked out to the lights beyond and noticed the platforms were placed more or less in a line.
That may seem simple, given Mother Nature’s penchant for trends in geological formations, but for Aitken it was something of a lightbulb moment which continues to feed back into his work to this day.
“You looked out to sea and you could see all sorts of different structures many kilometres apart, but what was obvious by night was that there was always some sort of alignment indicating the prolific Brent oil-producing sandstone trend,” he told Stockhead in West Perth recently.
It’s fitting that Metgasco (ASX:MEL) – a JV owner of the Vali-1 gas discovery in South Australia and Queensland’s prolific Cooper Basin and an exciting large conventional oil exploration project at Cervantes in the Perth Basin, sees similar trend potential at each of its projects.
Metgasco farmed out a 50% stake and operatorship in the ATP 2021 block holding Vali to Vintage Energy (ASX:VEN) and a further 25% to privately-held Bridgeport in 2019. These deals allowed Metgasco to be free carried on the circa $5mill Vali-1 ST1 gas discovery well with 25% of the project remaining. The Vali-1 ST1 well-produced 4.3mmscf/d of gas during a well test in August last year.
Vali-1 has independent gross 2P reserves of 33.2 petajoules – granting 8.3PJ net working interest to Metgasco – and sits a short distance from existing infrastructure.
Aitken acknowledges this is a modest holding on its own, but it’s the potential of the ATP2021 and neighbouring PRL211 Licences for not just gas….. but oil as well – a jewellery box a string of pearls…with one pearl found, as he puts it – which has Metgasco excited about the Cooper Basin.
The ATP2021 and PRL211 joint venture’s are currently planning to drill two gas wells(Vali-2 and Odin) starting in April to assess the resource upside within the Vali gas field and surrounding areas to determine optimum flowline sizing, with a view to developing a production hub in the area. Vali-2 and Odin-1 – are highly prospective areas with a high chance of success which the company believes could add substantial additional reserves to those recently certified at Vali-1.
A rig contract has been signed with Schlumberger to use SLR Rig-184 to drill Vali-2 and Odin-1, with an option to drill a further ATP 2021 Vali well. It is expected that Vali-2 will be drilled in April 2021 and take approximately three weeks to reach total depth. Once drilled, the well will be secured and the rig moved to the Odin-1 location in South Australia. The SLR 184
The results of this drilling and any subsequently-defined reserves to come of it will allow Metgasco and its JV partners to right-size a flowline through to existing Santos gas processing infrastructure at the Beckler field.
“A successful appraisal campaign has the potential to build a substantial gas reserve base – delivering the string of pearls into production in Q1 CY2022, which will enable us to right-size our pipeline and not have to build brand new gas facilities,” Aitken said.
With gas prices on the up in the Eastern States, Metgasco is bullish about the potential of its Cooper Basin assets.
In the Perth Basin, Metgasco and Vintage signed a basin entry farm-in to drill the Cervantes oil exploration prospect in the L14 licence by each paying 50% to earn 30% with the remaining 40% interest free owned by RCMA Australia who are free carried.
The project is something of a return to roots for Aitken, who in a past life managed the Jingemia oil project immediately to its northeast.
The prospect sits along trend from Jingemia and a number of other oil fields both on and offshore, as well as some gas fields of regional significance.
An independent resource report completed by RISC late in 2019 calculated Mid/P50 prospective recoverable oil resources at the Cervantes prospect to be 17.4 million barrels of oil. Cervantes is potentially one of the largest undrilled oil opportunities in the Perth Basin.
Here’s a visual. Given that the total produced oil from nearby fields is 27 mmbo, and the substantial NE/SW geological trends on show, Metgasco believes it could be onto something significant at Cervantes.
Importantly, the Cervantes prospect is located close(3km) to established infrastructure – at Jingemia, no less.
“I don’t like building big plants or structures, the countryside and environment always needs to be looked after,” Aitken said.
“We’re looking to minimise the amount of land clearing by drilling a deviated exploration well on Cervantes– the plan is to install an underground pipeline from the discovery well to the Jingemia facility, which I operated in a previous life.
“At the moment the Jingemia field has about 6000 barrels per day of capacity which is not being used.
“If we install a pipeline of roughly 3km in and allow it to go through to the Jingemia facility, then it’s simply a case of separating the associated gas and future water production and the oil is ready to be sold. From there it is planned to be transported by road trains to Geraldton, or Kwinana and stored prior to being sold to a future customer in the Asian oil markets.”
The chance of success in drilling Cervantes is 28% – high for a project of this nature – and its proximity to Jingemia gives a significant leg-up.
A contract is currently being negotiated to drill Cervantes late in the second quarter of 2021, subject to government approvals.
With so much work on the cards in the months to come and the demand for oil and gas on the rise, Metgasco will be one to watch.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.