Stand by for West Erregulla numbers: Warrego
Link copied to
Special Report: Warrego Energy’s Perth Basin plans will become a little bit clearer soon, with wireline logs to be run on the ‘Waitsia lookalike’ West Erregulla-2 well, and a leading analyst says the chance of geological success appears assured.
Warrego (ASX:WGO) is in a trading halt after well operator Strike Energy (ASX:STX) drilled ahead to 4229m at the well, deeper than the Waitsia-4 discovery well, and stopped to collect wireline logs on four key formations.
Strike observed “continuous strong gas shows” in the latest of these formations, the Wagina Sandstone.
While the Wagina is a secondary target to the Kingia-High Cliff sequence, success in secondary targets will still be welcomed by the JV partners.
Gas shows on the way to a main target are usually considered a good sign of things to come.
Strike has now mobilised a Schlumberger unit to conduct the wireline log testing on the Lesueur, Woodada Siltstones, Hovea Sandstone — along with the aforementioned Wagina Sandstone.
Warrego said the results from the logging should be available before Thursday’s trade — results that will be keenly watched by observers of the Western Australian energy market.
The well is being drilled to target Permian-aged sands which bear an uncanny resemblance to the Waitsia gas discovery made by AWE Limited in the Perth Basin in 2014.
Waitsia-4, in particular, flowed 90 million cubic feet per day — which is the highest-flowing onshore gas well in Australia’s history.
AWE was acquired by Japenese giant Mitsui for $600 million in 2018 on the back of the well’s results.
Should West Erregulla-2 be successful, it may prove up a broad regional play, with gas produced able to fairly easily be put into one of two major pipelines that run past the block, the Dampier-Bunbury pipeline and the Parmelia pipeline.
While the wireline logs are being run over four target formations, the well has not yet hit the main game, the Kingia-High Cliff sequence — which was responsible for Waitsia-4’s flow.
Strike expects to hit the Kingia-High Cliff sequence in West Erregulla -2 in mid-August.
Strike and Warrego are 50-50 joint venture partners in the well, with Strike taking operating responsibility.
Interestingly, Warrego also has another North Perth Basin permit under application (STP-EPA-0127), which if granted, would become the largest permit in the basin at a whopping 2.2 million acres.
The Company says the permit would have many of the same rocks that have made the Waitsia field so prolific, and also have access to deeper Devonian-aged rocks.
In a report prepared for Bridge Street Capital, well-known oil and gas analyst John Young said the “geological probability of success” from the Wagina target has now gone from a 12 percent pre-drill estimate to a 100 percent chance.
He said the strong market reaction to the continuous gas shows throughout the well and the Wagina formation supported his view — lifting his commercial probability of success up to 60 percent.
“Although the Wagina (and other shallower formations of interest) has not yet been logged, the presence of string continuous gas shows, gas flared to the surface and observations of clean porous sandstone in cuttings suggest the Wagina is likely to be productive,” he wrote.
Young also said that Warrego represented the cheaper exposure to West Eregulla-2 upside, estimating that the Company’s interest in the well was being valued at 22-24c per gigajoule.
By comparison, he estimated Strike’s interest in the well was being valued at 24-42c/GJ, with the lower range assuming material value ascribed to the company’s Southern Cooper Basin Gas Project and other Perth Basin assets and the higher range assuming full value ascribed to West Erregulla -2.