New Standard Energy Ltd (New Standard) is pleased to advises volumetric resource calculations of its Heintschel gas condensate field in its Colorado County Project have revealed a significant potential hydrocarbon resource that is substantially larger than first predicted.
Highlights:
• Successful flow tests at Heintschel #1 achieved
• Heintschel #1 tied into sales network, awaiting fraccing
• Contingent recoverable hydrocarbon resource of 59 Bcf gas & 1.1mm bbls condensate based on the Mid Case scenario
• Substantial potential net revenues direct to New Standard assuming success
AKG (the US based operator of New Standard's joint venture projects in Texas) has calculated contingent recoverable resources in the Heintschel structure to range from 25.6 billion cubic feet of gas(Bcf) and 0.46 million barrels of condensate (mmbc) to 88 Bcf and 1.6 mmbc - with a Mid Case estimate of 59 Bcf and 1.1 mmbc.
Importantly these numbers are based on the potential recoverable resources in the field and not simply gas in place.
New Standard Energy Managing Director Sam Willis said AKG's in-house volumetric potential resource calculations for the Heintschel gas condensate field had confirmed a significant and potentially lucrative discovery.
'The size of the discovery and the ability to fast track production and chase potential revenue has prompted the New Standard board, along with the other joint venture partners, to focus on theHeintschel field development as its number one near term priority in the United States,' Mr Willis said.
'Assuming a successful result on the upcoming frac program, the primary focus will now be on evaluating the field to establish and accelerate a solid cash flow from gas and condensate sales.'
Mr Willis said that based on the Mid Case potential of 59 bcf and 1.1 mmbc, and using the current gas and oil prices, the Heintschel field could potentially deliver net revenues (ie; after royalties) to NewStandard of more than A$100 million (undiscounted) assuming a successful development scenario unfolds and the Mid Case potential of the field can be realised.
New Standard's share of total costs of a development of this scale (assuming 12 vertical wells) would be ~A$10.8m over a period of time, with estimated ongoing operating costs of less than $A30k per well per annum - reinforcing the low overhead environment once the wells are in production.
'The results from the Heintschel to date have reinforced our decision to invest further in targeted onshore exploration in Texas, USA, because it provides low drill costs, high success rates when drilledon valid 3D seismic, meaningful prospects and a short pathway to production,' Mr Willis said.
'Our experience at the Heintschel to date ticks every one of those boxes. Further work on the fraccing and flow testing needs to be undertaken to de-risk the opportunity further but the potential size of the Heintschel field is very encouraging.'
Heintschel Mapping
The Heintschel field has been remapped based on 3D seismic after incorporating the Heintschel #1 well results and has a maximum closure of approximately 4,460 acres - which is approximately 10 times the pre-drill anticipations. The mapped closure now includes four structural closures, two of which were previously considered to be separate structures.
Heintschel #1 intersected 282 feet (86 metres) of gross sands following the inclusion of the lower sand that was tested, illustrating a minimum of 160 ft (49m) of net sands and a minimum of 111 ft (34m) of net gas pay. This is considerably more gas pay and a much thicker hydrocarbon column than anticipated in the pre-drill prognosis (refer to earlier ASX releases for more detail on the results of theHeintschel #1 well).
New Standard has a working interest of 32.5% in the Heintschel field and a ~25.5% Net Revenue Interest (i.e. after royalties are taken out). Tax rates are also low with condensate ~ 4% and gas~7.5%. The undiscounted potential net revenue number of ~A$100m outlined above does not include the real possibility of significantly greater resources than 59 Bcf and 1.1 mmbc in the Heintschel field,as provided for in the High Case scenario in the table above.
Forward Program
The immediate forward program is to fracture stimulate (frac) and test the Heintschel #1 well which flowed between 1.0 and 1.4 mmcfd of gas plus condensate prior to fraccing. Fraccing equipment iscurrently in short supply and the well is on waiting lists with three fraccing companies. It is uncertain at this stage when Heintschel #1 will be fracced, but it is likely to be sometime in September.
After the Heintschel #1 has been fracced, well performance will be monitored and evaluated for approximately 1 month. With the benefit of this information the joint venture will be able to design anefficient appraisal and development drilling program for the Heintschel field, which will follow shortly after. It is currently anticipated that drilling will recommence on the Heintschel field during the month of October.
'New Standard is now seeking to move into a development phase for the field and, whilst we will recommence drilling wild cat exploration wells again in the near future, the immediate focus will be onevaluating Heintschel #1 (whilst earning valuable revenue) and then shifting to drilling additional Heintschel appraisal/development wells,' Mr Willis said.
'The Heintschel is exciting and the current revenues we are earning prior to fraccing are adding to revenues from the Brasher 1 well and will be further bolstered by future revenues from the recent Joanngas condensate discovery and possibly the updip potential recognised in the Moeller prospect.'
'In addition there are a large number of Wilcox and other prospects in our drilling inventory which provide a platform from which to build a substantial business as we progress our exploration program inthe United States.'