Elixir Energy Ltd (ASX:EXR) shares were trading higher after the company confirmed its plan to spud the Daydream-2 appraisal well within the Grandis Gas Project in Queensland in late October this year.
The Grandis Gas Project has already booked a very material and independently certified 2C contingent resource of 395 billion cubic feet of gas.
A key objective of the Daydream-2 appraisal well is to materially expand this contingent resource.
Read: Project Grandis update
Elixir has executed a rig services contract with a subsidiary of global oil field services SLB (previously known as Schlumberger (NYSE:SLB)).
The contract is for the provision of SLB 185, which has recently drilled two highly successful wells in the Taroom Trough for a neighbouring Operator.
These were drilled with great efficiency, demonstrating both the well-understood nature of the local geology as well as SLB’s world-class capabilities.
Elixir has received the necessary landholder and regulatory approvals to start preparatory civil works in the field.
Initial work is expected to start in late July with water bore drilling.
Thereafter the well pad site preparation and upgrading of the access to the well pad will start in August.
The well will drill to a total depth of ~4,200 metres and target the gas-saturated Permian section that was proven at Daydream-1, drilled ~5 kilometres to the west of Daydream-2.
The well will focus not only on the sandstones in this gas-saturated Permian section, but also on the gassy coal seams therein.
“Potentially the most impactful well in Elixir’s history”
Elixir managing director Neil Young, said: “We are very pleased to have locked in a rig and a time slot for the drilling of the Daydream-2 appraisal well – and in particular with a rig that has very recently demonstrated its capabilities in the Taroom Trough.
“I consider this as potentially the most impactful well in Elixir’s history – as in the success case it will materially increase the Company’s contingent resources - in a great location which can readily access both domestic and international gas markets”.
Notably, the Federal Government will pay for 43.5% of the total cost of the Daydream-2 well through its R&D Tax Incentive mechanism.
Project debt finance is readily available to Elixir, secured only on this R&D grant, if considered advantageous.
Read more on Proactive Investors AU
