Brookside Energy Ltd (ASX:BRK, OTC:RDFEF) has confirmed a pathway for continuous development of the SWISH Area of Interest (AOI) within Oklahoma’s Anadarko Basin with Full Field Development (FFD) expected to begin in early 2025.
The FDD is expected to yield a threefold increase in net production for FY2028 to 4,500 barrels of oil equivalent per day (BOEPD) comprising 72% liquids.
At US$70/Bbl WTI and gas at US$2.50/Mcf the SWISH AOI FFD is expected to deliver revenue of US$104 million and net income of US$51 million for FY2028.
Strong leverage to higher prices
The low operating costs and high liquids yield at the SWISH AOI provide strong leverage to higher oil prices.
A US$20/Bbl increase in WTI to US$90/Bbl would take revenue to US$132 million and net income to US$67 million in FY2028 while an increase in natural gas prices to US$3.50/Mcf, which is consistent with the outer years of the current forward strip, and with oil held at US$90/Bbl, would see revenue increase to almost US$139 million and net income to US$70 million for FY2028.
During the next five years, the SWISH AOI is forecast to generate cumulative revenue of US$360 million and cumulative net income of US$156 million.
This path will be followed after successful completion of the multi-well Flames-Maroons Development Plan (FMDP) being executed within the company’s Flames Drilling Spacing Unit (DSU) and Brookside expects to fund the SWISH AOI FFD from forecast cashflow and a modest credit facility.
“Exciting milestone”
Managing director David Prentice said: “I am delighted to provide our shareholders and investors with details of this exciting milestone on the pathway for the monetization of the high-margin, low-risk oil and gas reserves we have defined within our SWISH AOI.
“Today’s announcement of the SWISH AOI FFD, sets out details of our continued journey to becoming a substantial oil producer and follows our recent commitment to the FMDP multi-well drilling program that is currently underway.
“Following the execution of the FMDP operations in FY2024, the company will kick-off operations for the SWISH AOI FFD early in 2025, with our net production forecast to average approximately 4,500 BOE for FY2028, a more than threefold increase from current production rates.”
Forecast net production (left) and forecast revenue & net income (right).
FFD plan
The FFD will see a further 16 horizontal wells drilled in pad development campaigns across the Bruins, Jewell and Rangers DSUs.
Brookside’s share of the capital expenditure to drill, complete and tie-in these wells to sales is estimated to be US$126 million over three years and this is forecast to be funded from working capital and a modest credit facility of up to US$15 million.
The financial forecasts assume average realised prices of US$70/Bbl WTI and gas at US$2.50/Mcf.
On these assumptions and production forecasts, net operating margins for 2028 are estimated to be ~US$31 per BOE, reflecting the high liquids content (72%) of the SWISH AOI reserves and the low operating expenses.
The forecast low operating expenses are a function of minimal produced water, proximity to refining and gas processing facilities, as well as low transport and marketing expenses.
“Significant free cashflow”
“The SWISH AOI FFD will see us move forward with the efficient and cost-effective development of approximately 8.5 million net BOE of low-risk high liquids content reserves contained within the Bruins, Jewell and Rangers DSUs,” Prentice said.
“The significant free cashflow that will come from this initiative will provide the platform for further growth and importantly enable us to continue to deliver value to shareholders via the prudent execution of capital return initiatives, including further buy-backs.
“We look forward to providing further updates on the SWISH AOI FFD and the FMDP during the balance of this year as we continue to focus on creating value per share for all of our shareholders.”
Reserve estimates
Independent reserve estimates.
Brookside has also provided its year-end 2023 (FY2023) reserve update as independently assessed by Haas & Cobb Petroleum Consultants with an effective date of January 1, 2024.
The updated Independently Certified Reserves of 11.6MBOE net to Brookside, with 8.5MBOE net undeveloped reserves to be unlocked via pad development of the Bruins, Jewell and Rangers DSUs.