Energy exploration and production company Eon NRG Limited (ASX: E2E) has witnessed significant progress in relation to the development of its leasehold acreage in the Powder River Basin (PRB), Crook County in the US state of Wyoming..
PRB Leases’ Overview
- Eon acquired approximately 15,000 acres of the PRB leases in September 2018;
- The leases have a 10-year term and no drilling commitments;
- PRB leases are located in historically active conventional drilling locations with hydrocarbons at depths that are economic to drill but still deep enough to ensure that they have enough energy to make production effective;
- Leases have a low 12.5% royalty interest and a lease holding fee of $2/acre for the first five years.
Till now in 2019, the company has kept its focus on exploration activities that are supported by cashflow generated by Eon’s owned and operated producing fields in Wyoming and California. During the year, the company achieved several key milestones, demonstrating its strong commitment towards identifying and developing oil & gas resources in North America.
Achievements in 2019
- Capital Raising in March 2019
- Permitting of First New well
- Commencement of Earthworks
- Completion of Well Pad
Capital Raising in March 2019
In March 2019, the company completed a placement of new shares and options through a rights issue, entailing the issue of 363.5 million shares at a price of $0.007 per share, raising a total of around $2.54 million (before costs).
The funds raised, which strengthened the company’s balance sheet, were used to advance the permitting and drilling of new well at the PRB project.
Permitting of First New well
In March 2019, the company also announced the commencement of the permitting of its first new well, the Govt Kaehne #9-29, a low risk conventional well targeting production of light sweet crude oil from the Sandstone reservoirs of the Dakota Formation (Lower Cretaceous Age) at a depth of ~6,200 feet.
Govt Kaehne #9-29 Well Merits:
- The well is located in a structurally high position in a reservoir that is oil rich with 30-40’ of pay expected in the Dakota Formation;
- Close to service town (Gillette) and good access for transportation of the oil from storage;
- Directionally drilling the well to intersect the targeted pay;
- Offset wells have good initial production rates (IPs) and estimated ultimate recovery (EUR);
- Strong water drive which results in higher recovery and lower production decline rates.
In July 2019, after securing the necessary state and federal approvals required to start drilling of the Govt Kaehne #9-29 well, Eon commenced earthworks at the well location, marking a crucial stage in the company’s development program.
Govt Kaehne #9-29 well (Source: Company reports)
Completion of Well Pad
As announced on 11 September 2019, the company has completed the construction of the well pad and access road for the Govt Kaehne #9-29 well, and is now planning to do the spudding of the well.
What’s Next for Govt Kaehne #9-29 Well?
- Capstar Drilling has been selected as the contractor that will be engaged to drill the Govt Kaehne well utilising rig #312;
- The rig is expected to reach the site by the first week of November 2019 with spudding of the well soon thereafter;
- The well is expected to be drilled to a depth of ~6,300 feet which will take around 12 days;
- After that, a drill stem testing (DST) and open hole logging will be performed to evaluate the reservoir and deliverability;
- Completion of the well for production is estimated at a further 45 days, with oil production and sales to follow soon thereafter.
Road Ahead for Eon
Eon is currently considering selling some part of its interest in the well to industry partners, which could place it in a stronger position for future development opportunities.
In a recent update provided on 26 September 2019, the company advised that its well is placed to gain from conventional oil & gas development opportunities.
The company has identified multiple other drilling targets in the PRB lease acreage. These targets are expected to build a pipeline for drilling opportunities beyond 2019.
- The company received approval from ANB Bank to renew its existing revolving line of credit loan facility for a further twelve months, giving E2E the flexibility to implement its growth plan.
- Eon provided a summary of the independent 1P reserves estimate, as per which, the gross and net reserves (as at 30 June 2019) to Eon are as follows:
Updates on Eon’s Other Fields:
- Update on Borie Oilfield: At the Borie Oilfield, the company has carried out a workover to return the well to production;
- Update on Silvertip Field: At the Silvertip Field, consulting engineer helped the company in attaining sign-off of the periodic field safety requirements with the concerned authorities;
- Update on Sheep Springs and Round Mountain Oilfields: After reviewing the water disposal procedures, the State Water Board Authorities have endorsed the monitoring and disposal systems that the company has in place with permits provided for these facilities.
The EON stock last traded at a price of $0.005 on 4 October 2019 with a market cap of $4.62 million.
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