Oil and gas exploration and production company, Eon NRG Limited (ASX: E2E) has been making solid progress in the development of its US exploration assets. The 2019 June quarter turned out to be great period for the company’s PRB (Powder River Basin) project with the filing of drilling permits for its first PRB well Govt Kaehne 9-29 well, which was subsequently approved in July 2019.
Production and Sales Summary
In terms of oil production, June quarter turned out to be significantly better than the previous quarter. The company reported oil production of 17,318 Bbls in the June quarter, significantly higher than the output of 14,343 Bbls in the March quarter. Besides this, the company reported a gas production of 22,352 BOE and NGL Production of 3,801 Bbls in the June quarter. The total barrels of oil equivalent for the June quarter was 43,471 BOE, higher than 42,443 BOE reported in the previous quarter.
The company sold 13,675 bbls of oil in the June quarter and generated a revenue of US$796,833 from it, representing an uptick from the March quarter. The Average Sale Price for oil in the June quarter was recorded as US$58.27 per barrel which is around US$4.9 higher than the previous quarter figure.
The company reported that 26,058 net barrels of oil equivalent was sold during the June quarter, which generated a total net sales revenue of $976,063 (Q1FY19: US$943,238). The increased oil sales revenue in the June quarter is mainly due to stronger oil prices and an increase in oil sales volume.
In its quarterly report published on 30th July 2019, the company informed that the Oil sold from Sheep Springs and Round Mountain fields, both located in California, has been fetching a premium price of US$68.14/barrel and $65.40/barrel, respectively.
Progress with Exploration Assets
During the quarter, the company carried out substantial environmental, wildlife and archaeological assessments in the PRB region for filing the permitting application for the Govt Kaehne 9-29 well. Recently in July 2019, the company received the approvals from the concerned authorities, following which, it commenced the groundbreaking work on the Govt Kaehne 9-29 well, regarded as a crucial stage in the Company’s development program.
After carefully analyzing the tenders from various contractors for civil works, drilling and equipment supply, Eon chose CapStar, a contractor with exceptional safety and performance history, as the drilling contractor of the well. It is expected that the Govt Kaehne 9-29 well will be drilled to a depth of ~6,300 feet to reach the total depth, following which the company will perform the drill stem testing (DST) and open hole logging to evaluate the reservoir deliverability. It is expected that the first PRB well will soon be completed for production, following which the company will start with oil production and sales.
The company is continuing with the geological and economic assessment on the acquired PRB leases (around 15000 acres), which are believed to be surrounded by developed oilfields with a proven track record of long-life production.
On the company’s Borie Oilfield, located in DJ basin, Wyoming, a workover was carried out during the June quarter, in order to return the well to production. Over the last eighteen months, the production from the Borie field as remained relatively static as depicted in the figure below. The field produces light sweet crude oil and has prospective drilling upside in several formations.
At Eon’s Silvertip Field, located in Bighorn Basin, Wyoming, the field production has been relatively stable with an overall increase in oil production since the beginning of the year.
During the June quarter, at both Silvertip and Borie field, the company progressed towards attaining sign-off of the periodic field safety requirements with the concerned authorities.
In the June quarter, the production decline for Sheep Springs and Round Mountain Oilfields in California remained low with Sheep Springs Field witnessing a slight uplift in the numbers for oil production during the last quarter as a result of a workover on the fields main producing well.
During the quarter, after carefully reviewing the water disposal procedures at these fields, the State Water Board endorsed the monitoring and disposal systems available at these fields.
Cash Flow Analysis
During the June quarter, the company spent around US$368k of cash on operating activities which is significantly higher than US$94k spent in last quarter, demonstrating company’s increased focus on its operations. The operational cash outflow included US$198k spent on development activities, US$549 sent on production costs, US$313k spent on staff costs and US$205k spent on administration and corporate costs.
At the end of June quarter, the company had cash at bank US$2.3 million. In the September quarter, the company is expecting to receive US$1.039million as receipts from customers. The total estimated net cash outflow for the September quarter is US$1.19 million which mainly includes estimated outflow of US$1.013 million for exploration and evaluation, US$516k on production activities, US$265k on staff costs, and US$307k on administration and corporate costs.
During the June quarter, the company appointed highly skilled Mr Simon Adams for the position of Executive Director. Mr Adams has more than 25 years’ experience of working with private and public companies and has strong working relationships with the Managing Director and other managers in the Company’s Denver head office.
During the quarter, the company appointed Mr. Matthew McCann as Chairman of the board as Mr. Stowell, the founder the company, retired from the Chairman post to focus on his private equity business.
At market close on 1st July 2019, E2E shares were trading at a price of AU$0.005 with a market capitalization of circa AU$3.85 million.
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