AJ Lucas’ shares smashed in early morning trade despite announcing the high-probability of continuous oil production with a low water cut from the Balcombe-2Z well.
In the announcement dated 11 January 2019, AJ Lucas Group Limited (ASX: AJL) came forward to discuss the update provided by the Angus Energy Plc, an operator of the Balcombe well license. The update relates to the post-test analysis of the well testing that was undertaken for seven days at Balcombe till October 2018.
Balcombe oil well license is situated within the Balcombe Field Discovery that is said to be in the ‘sweet spot’ of Weald Basin, Southern England. It has the thickness of 568 meters and highest maturity of the Kimmeridge Layers.
Following the completion of the well testing of the Balcombe- 2Z’s Kimmeridge Layer, Angus Energy announced the return of natural flow at 853 barrels of oil per day (bopd) equivalent, exclusive of 22.5% water. This result was published on 2 October 2018 post which a second flow period was performed including the well flowing naturally at 1,587 barrels of oil per day (bopd) equivalent. The operator stated that these flows were over an extremely short interval of time which outlines the encouraging but inconclusive outcome warranting further testing.
By these results, Angus Energy concluded that continuous oil could be produced from the Balcombe-2Z with a low water cut under normal pumped production conditions. The operations at Balcombe license are reportedly performed through conventional methods. It includes naturally fracturing of Kimmeridge layers without a need for hydraulic fracturing or “fracking.” Further, the report read that Angus Energy now plans to illustrate the production of commercial oil.
Angus fully funded the flow testing under the terms of the farm-out agreement between Cuadrilla, AJ Lucas, and Angus that was announced in January 2018. As per the terms of the agreement, Angus owns 25% interest in the Balcombe license pro rata from AJ Lucas and Cuadrilla, thereby becoming the operator of the license. Angus acquired this ownership at a payment of £4 million, 25% to Lucas and 75% to Cuadrilla. AJ Lucas Group recognized a total of $1,156,000 as profit on the partial sale of its direct interest which was reflected in other income.
Angus also committed to pay the cost of the flow testing of the Balcombe-2z well. Balcome-Z2 is an oil well, located in PEDL 244 in Southern England. Cuadrilla drilled this well in 2013 and had already obtained the Planning permission to flow test the Well.
AJ Lucas Group Limited is an ASX listed company that operates in Oil and Gas, Drilling, and Engineering & Construction services. In today’s trade, AJL stock price plunged 2.326% to last trade at $0.210 on 11 January 2019.
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