Oil and gas group Encore Oil (LON:EO.) , this morning reported that testing operations had been successfully completed at the Cladhan appraisal well, located in UK Northern North Sea Block 210/29a. The company is still working on identifying the size of the Cladhan accumulation but believes the current well could eventually produce at over 15,000 barrels of oil per day (bopd). Separately, EnCore said it was hoping to begin a programme of drilling between two and four wells on its Catcher discovery in the North Sea in late September or early October.
A discovery was first made at Cladhan in December 2008 and the follow up well aimed to refine the range of oil volumes by gaining a better understanding of the distribution and thickness of the Upper Jurassic reservoir sands. The well 210/29a-4Z flowed at a stable rate of around 5,903 bopd for over 13 hours through a 28/64 inch choke with a final wellhead pressure of 1,874 psi (pounds per square inch). The flow rate was restricted by the capacity of surface facilities and due to the small diameter of the testing tools and the 3.5 inch tubing used while testing. The well operator, Sterling Resources, has indicated that with larger 4.5 inch completion tubing the well is capable of producing over 15,000 bopd. The testing confirmed light oil with a gravity of approximately 34 degrees API and a gas oil ratio (GOR) of 245 scf/bbl.
After completing the well test operations, the well will be plugged back and a further side-track well will be drilled downdip and to the southeast of the original discovery to better understand the location of the oil water contact (OWC) in the field. The side-track operation will commence later this week and is expected to take approximately two weeks subject to weather and operational delays. The equity in the Cladhan joint venture partnership comprises EnCore Oil (16.6%), Sterling Resources Ltd (39.9%, operator), Wintershall (UK North Sea) Ltd (33.5%) and Dyas (10%). For discussion about EnCore Oil and the Cladhan discovery, click here.
Alan Booth, EnCore's chief executive, said: “The quality and deliverability of the Cladhan reservoir has been further confirmed by this excellent test result. Until we can establish the depth of the OWC, it will be difficult to accurately define the size of the Cladhan accumulation although…
The shares are at 98p after this latest result. Earlier this year they could have been bought for 15p.....which was roughly equal to the net cash on their balance sheet.
The two prospects that have succeeded this summer were "valued" by the market back in February as being completely worthless - but today the market seems to value them at about 83p per share.
Efficient markets? Pah!
I've no idea what the technical CoS of the two wells would have been, but I'd guess close to 20% on average? Given what we now know, that indicates that the shares should have been around double their actual market price back in February, if the market had done a (half?) decent job of pricing their exploration prospects!
Yet more proof that the market simply doesn't understand oil and gas exploration, especially when being done by the smaller companies.
ee
