Elixir Energy Ltd (ASX:EXR) has opened higher after its Mongolian pilot production project reached a new milestone, establishing a flow rate of 100,000 cubic feet of gas per day.
The energy stock’s two-well Nomgon coal bed methane (CBM) program was commissioned back in November and has been in operation for 83 days.
Last week, the combined gas production from the Nomgon-8 and 9 wells reached 100,000 standard cubic feet per day (using a relatively low 180 barrels of water per day) and continues to improve steadily.
What’s more, the Mongolian petroleum regulator has approved Elixir’s budget and work program for 2023, meaning there’s further exploration and development on the horizon.
EXR shares have opened strongly, rising as much as 19.24% higher in the first half hour of ASX trading to A$0.155.
Supporting long-term economics
Although the Nomgon pilot production test still has some months to go, Elixir managing director Neil Young said the results to date had been very encouraging.
"The high gas saturation levels in the coals mean minimal water production and very early gas breakthrough – both of which support long-term economics," he said.
"The gas flows to date are better than regional peers in producing gas fields and in Mongolia we face a long-term lower drilling cost environment than in the likes of Australia – which also supports the economics.
"We look forward to progressing our CBM program in Mongolia this year – now in parallel with our other major projects - Grandis and Gobi H2.”
Closer look at Nomgon-9
With more than 80 days of production data to draw from, Elixir is starting to interpret a clear trend on the longer-producing Nomgon-9 well.
The decreasing reservoir pressure — brought on by coal dewatering and a subsequently higher gas rate — feeds into estimations of an early stage ‘type-curve’, which is key to assessing the well’s commercial viability.
Given the modest costs associated with CBM development drilling in Nomgon-9, combined with other factors such as strong regional gas prices, Elixir is buoyed by the current gas production rates.
2023 program
With the 2023 program and budget approvals under its belt, Elixir hopes to drill at least nine wells — four appraisal and five exploration assets.
The wells’ final location will be determined in the coming months, but drilling should kick off in Q2 this year (subject to annual re-tendering, environmental approval and other administrative processes).
Importantly, Elixir retains the ability to amend the budget during the year in response to the pilot and other results.
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