The results are in: Strike, Warrego hit ‘significant’ gas at West Erregulla; shares shoot up nearly 50pc
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Strike Energy (ASX:STX) and Warrego Energy (ASX:WGO) have reported a “significant” conventional gas discovery at their West Erregulla-2 well – news that propelled shares in both companies much higher on Thursday morning.
The discovery was made during drilling into the Wagina sandstone down to 4,229m.
The Wagina is a secondary target to the Kingia-High Cliff sequence, but gas shows on the way to a main target are a good sign – especially when the JV partners themselves weren’t expecting much from this target.
Strike said the sudden influx of over-pressured gas into the well whilst drilling through the Wagina exceeded expectations.
“This is a significant discovery and comes from a secondary target which carried a low pre-drill probability of success,” Strike managing director Stuart Nicholls told investors.
Warrego’s shares hit a peak of 25c — an over 47 per cent gain — this morning, while Strike’s shares rallied 28 per cent to an intra-day high of 16c.
The target was found to be about 74m-plus in thickness and made up of sections of clean sand with interpreted blocky porosity development that was observed to have hydrocarbons present throughout.
The hole condition in the lower parts of the Wagina did not enable reliable logging to be achieved, however where credible logging results were captured at the top of the Wagina, this confirmed 14.2 per cent porosity over a 2.5m section.
Nicholls said it provided further confidence in Strike’s predictions of good porosity development within Permian reservoirs being possible at depths greater than that of the Waitsia gas discovery made by AWE Limited in the Perth Basin in 2014, and to the southeast.
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 Japanese giant Mitsui for $600m in 2018 on the back of the well’s results.
“With good porosity trends continuing with depth, Strike believes that it is on track to find a good quality reservoir within its primary target in the Kingia-High Cliff,” Nicholls said.
West Erregulla-2 is being drilled to a planned total depth of 5,200m.
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.