Empire Energy Group Ltd (ASX:EEG, OTC:EEGUF) has achieved a 17% upgrade to the IP30 or 30-day average flow rate of its Carpentaria-2H (C-2H) well on the EP187 licence in Australia's Beetaloo Basin, boosting the rate to 2.81 million standard cubic feet.
This is particularly relevant as the reservoir has already been partially depleted following a recent 51-day flow testing program. The current flow rate sits at 2.3 million standard cubic feet a day.
Empire says this result validates its well-soaking strategy, which will be incorporated into development planning for the Northern Territory project.
In more good news, North American reservoir engineering firm Subsurface Dynamics, Inc’s analysis of C-2H has indicated wells at 3-kilometre intervals could generate a total estimated recovery of 6.2 billion cubic feet of gas per well on a P50 (50% probability) basis and 8.1 billion cubic feet on a P10 basis.
Most of this gas would be produced in the first 3-5 years, which would facilitate the rapid recovery of invested capital.
Well-positioned for ESG regulation
"The upgraded IP30 rate that Empire has achieved at C-2H, the company’s first horizontal appraisal well within an experimental and therefore unoptimized stimulation design, demonstrates that EP187 has the potential for commercial outcomes in development scenarios,” Empire Energy managing director Alex Underwood said.
“Our planning process for the pilot project is continuing and we look forward to sharing results with shareholders as key milestones toward a Final Investment Decision (FID) are achieved.
“Drilling results to date have proven that Empire’s Beetaloo Sub-basin shales have world-class scale and quality.
“Empire has proven that we can drill and fracture stimulate long horizontal wells in our acreage in a cost-effective manner.
“As observed in the US shale gas industry, improvements in gas rates and total gas recovery are achievable through established learning curves.
“Empire is seeing such gains in EP187 despite only drilling a small number of wells.
“In an increasingly carbon-constrained world, underscored by recent Federal legislative announcements in relation to the Safeguard Mechanism, Empire believes that it is well placed given the very low in reservoir CO2 content of less than 1% in our tenements.”
Low-cost high-reward potential
Empire estimates that planned wells could be drilled, fracture stimulated and completed for production for about $20 million per well, which would translate to upstream development costs of about $2.00 to $3.00 per million standard cubic feet in future development scenarios.
The company’s cash balance sits at $15.7 million with about $3.5 million remaining to be paid in relation to the 2022 drilling and stimulation programs.
A further $15 million undrawn credit facility is also available and the final Beetaloo Cooperative Drilling Program progress payment of about $7.6 million is expected soon.
Empire says this war chest leaves the company well capitalised to carry out preparatory work for the Pilot FID.