An onshore oil and gas exploration and production company, Eon NRG Limited (ASX: E2E) is focused on identifying and profitably developing resources in North America. The company currently has a mixed bag of exploration and producing assets, which provide strong growth potential as well as carry positive cash flow to support the development operations.
The company’s stock shot up by 50% today, settling the day’s trade at A$0.006 on 8th August 2019.
First PRB Well
The company is soon going to drill its first well in the PRB (Powder River Basin) acreage. Located in the oil and gas friendly state, Wyoming, PRB area has numerous oilfield contractors for drilling and other related services, making this a suitable area for the exploration.
The first PRB well, the Govt Kaehne #9-29, is a low risk conventional well, which will target high quality, oil saturated reservoir in a structurally high position relative to offset wells. The company believes that the production from this well can significantly supplement the company’s existing 530 boepd production.
The company conducted substantial environmental, wildlife and archaeological assessments before the filing the permitting application for the Govt Kaehne #9-29 well. Eon has negotiated with over 30 surface owners to allow surface access for this process. Recently, in July 2019, the company received approvals from concerned authorities to drill the Govt Kaehne 9-29, which is a significant milestone in the company’s journey of developing the PRB Project.
The approval has already been granted to the earthmoving contractor to commence work. After prudently reviewing quotes for all major services involved in the drilling of the well, the company chose Capstar as the drilling rig contractor for the Govt Kaehne 9-29 well. The well ground has been broken for the building of the well pad and road, which has marked the commencement of a crucial stage in the company’s development program.
The detailed geological review at the company’s PRB leases helped the company in identifying multiple drilling prospects in the region. It is expected that two of these prospects will be drilled in the year 2020.
Journey of Powder River Basin Exploration Leases, Wyoming
In September 2018, the company acquired around 15,000 acres of leases in the Powder River Basin (PRB), an area known for a long history of oil and gas production from multi-stacked pay zones. The leases were acquired from the United States Department of Interior with 10-year lease term and a net revenue interest of 87.5% (12.5% royalty rate). A further 640 acres were purchased from the Wyoming State Land Board in Converse County, which has a five-year lease term. Last year, the company was occupied with identifying potential drill prospects in its PRB acreage, targeting oil from multiple formations. The company acquired several leases surrounded by the developed oilfields with prolific production rates and long production history.
Battery Minerals Opportunity
The company recently diversified its business by acquiring 840 acres of battery mineral exploration claims in Nevada, that provide a secondary exploration opportunity. The company has been conducting low cost exploration work on these claims. Last year, the company established a battery minerals division and secured rights over 42 lode claims, which is spanning around 840 acres of land in the Stillwater Range, Nevada.
The company is of the view that the global energy demand will require a whole host of new technologies and energy supply and storage solutions in the future. The company is therefore preparing itself to cater to that future demand. The acquired area in Nevada is believed to have the potential to explore several battery minerals, including copper and cobalt.
At the Borie Oilfield, the company recently carried out a workover to return the well to production. During the June quarter, a consultancy firm helped the company to sign-off with the state authorities in order to fulfil field safety requirements associated with safety issues, including spill prevention and control procedures.
At the Silvertip Field, the consulting engineer helped the company in attaining sign-off of the periodic field safety requirements with the concerned authorities. Since the beginning of 2019, the overall oil production has increased at the field and the gas production has been constrained due to low commodity prices.
Sheep Springs and Round Mountain Oilfields
After reviewing the water disposal procedures, the State Water Board Authorities have endorsed the monitoring and disposal systems, which the company has in place with permits provided for these facilities. Production decline for these two fields remains low with Sheep Springs Field having a small increase in oil production during the last quarter.
Production and Sales in June Quarter
During the June quarter, Eon was able to produce 43,471 barrels of oil equivalent (BOE), which includes 17,318 barrels of oil production, 22,352 BOE of gas production and 3,801 barrels of NGL production. For the June quarter, the company reported oil revenues of US$796,833, which is higher than the oil revenue of US$722,950 in the previous quarter, driven by an increase in the oil sales volume.
June Quarter Cash Flow
During 2019 June quarter, the company spent around US$368,000 of cash on operating activities, which is significantly higher than US$94,000 spent in the last quarter, demonstrating the company’s increased focus on its operations. The cash outflow of US$368,000 included US$198,000 spent on development activities, US$549,000 spent on production costs, US$313,000 spent on staff costs and US$205,000 spent on administration and corporate costs.
At the end of June quarter, the company had cash and cash equivalents of around US$2,291,000. In the September quarter, the company expects to receive around US$1,039,000 in the form of receipts from customers. The company is projecting to incur a net cash outflow US$1.19 million, which includes estimated outflow of US$516k on the production activities, US$265k on staff costs and US$307k on administration and corporate costs.
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