Are Red Sky and 88 Energy a step closer to paydirt? Investors evidently think so
The pair of companies have oil wells in South Australia and Alaska respectively and both provided an update that put them among the ASX’s biggest winners this morning.
Red Sky Energy told shareholders it had completed a petrophysical evaluation of its Killanoola Southeast-1 well in South Australia that identified 16 metres of net pay zones.
“Pay” in a geological sense alludes to the part of the reservoir that has economically producible hydrocarbons generally.
Net pay zones allude to intervals in the reservoir that meet certain criteria such as permeability and hydrocarbon saturation meaning production is viable considering the technology, prices and costs of production.
Red Sky Energy had previously estimated only 1.5 metres of net pay at Killanoola SE-1 and managing director Andrew Knox hailed the result.
“This excellent result from the petrophysical evaluation at Killanoola SE-1 is very encouraging,” he said.
“We are incorporating the testing of this well into our initial work program as we continue to determine and extract full value from the resources at Killanoola.”
Red Sky Energy said its next steps were to perforate (pierce) and test the well and if this was successful – it could book oil reserves associated with Killanoola SE-1.
Shares in Red Sky rose by 50 per cent this morning.
88 Energy (ASX:88E) also provided an update on its operations.
Just days after drilling began at its Merlin-1 well, the company has reached a depth of 1,512 feet and is now drilling ahead towards its planned depth of 6.000 feet to intersect the primary Nanushuk targets.
Initial indications from logging while drilling and mudlogging into the prospectivity of the well, which is being drilled as a production well, could come in within three to five days.
Should a subsequent wireline logging suite return encouraging results, Merlin-1 will then be completed with casing and a flow test conducted.
The company also announced drilling contractor ELKO had agreed to subscribe for shares at a 225 per cent premium to the last capital raising undertaken last month.
Managing director Dave Wall said ELKO’s endorsement was encouraging and said he wished all shareholders “good fortune over the coming days”.
88 Energy is free carried for the first $US10m of the cost of drilling the crude oil well, which targets 645 million barrels of gross mean prospective resource.
Its acreage lies close to Oil Search’s (ASX:OIL) holdings, which are estimated to contain a resource of 968 million barrels of oil equivalent.
Other oil companies operating in north Alaska include US-based company Armstrong Oil and Gas, Australian company Borealis Petroleum, and US company ConocoPhillips.
88 Energy shares rose by nearly 30 per cent this morning in a move that made it and Red Sky Energy among the ASX’s biggest winners.