Elixir Energy Commences 2019 Drilling Campaign At Nomgon IX CBM PSC

Oil and gas player, Elixir Energy Limited (ASX: EXR) focuses on the exploration of gas close to the Chinese border in Mongolia. The company holds 100 per cent of a coal bed methane (CBM) production sharing contract (PSC) in Mongolia, which was signed with the Mineral Resources and Petroleum Authority of Mongolia in September 2018. Executed by the Elixir’s Mongolian subsidiary, Golden Horde Ltd, the Nomgon IX CBM PSC is located on the border of Mongolia and China.

China has a rapidly growing appetite for gas, with the country importing gas from every direction and seeking to continually diversify its sources of supply. The Chinese government has plans to increase the gas demand by 300 per cent over the next 15 years. To meet the mounting gas demand, Elixir Energy Limited is exploring large gas reserves on the Chinese border.

In a recent update on the ASX, the company notified about the spud of the BO-CH-1 chip-hole this weekend, marking the commencement of its 2019 drilling campaign over its 100 per cent owned Nomgon IX CBM PSC.

Details of Drilling Campaign 2019

Elixir signed a binding drilling services contract with Erdenedrilling LLC in August this year, which enabled it to drill two fully tested CBM wells or core-holes, with an option for another well. The company has recently informed about the expansion of its 2019 program, that will now involve two to four stratigraphic chip-holes, along with the drilling of two firm and fully evaluated wells. The company mentioned that two rigs will be employed, and the option to spud a third well remains.

The chip-holes will be used for following purposes:

  • Gain valuable data about the general geology
  • Confirm coal continuity
  • Substantiate and support the lately acquired 2D seismic program
  • De-risk locations for the next year’s drilling program

In its previous announcement, Elixir reported that US-based Coal Gas Technology Co would supply technical services and equipment related to gas content testing, and the permeability testing services would be directly sourced from Australia.

The company has updated about the arrival of international standard desorption and permeability testing tools from the US and Australia, respectively, and the conduct of initial training over the use of tools thereof with the local contractors.

The core-hole program is targeted to supply the key data required by the company to convert part of the vast prospective resources independently confirmed in its PSC into contingent resources.

Elixir’s drilling campaign is a core part of its 2019 exploration program, that majorly involves 2D seismic and core hole drilling. Let us take a closer look at its 2019 exploration program below:

2019 Exploration Program

Elixir designed its 2019 exploration program to de-risk and prove up what has already been identified as a potential giant natural gas resource proximate to the Chinese border. The exploration program is targeted to ascertain gas composition, presence and thickness of coal, permeability and gas content.

In line with its exploration program, the company commenced 2D seismic acquisition in Nomgon IX CBM PSC in August 2019, finalising it by September. Mongolian firm Micro Seismic LLC was the seismic contractor, who commenced seismic acquisition after successfully testing the acquisition parameters and its equipment in the field. The company acquired 132 km of 2D seismic over three separate CBM leads.

In its 2019 annual report, the company notified that the data obtained from the seismic program is now being processed and interpreted. The data also facilitated the selection of a first core-hole location in Nomgon IX CBM PSC in August this year.

The company’s 2019 exploration program continues on track with the completion of seismic acquisition and commencement of drilling program.

Elixir’s Forward Plans

The company plans to use the results of the seismic survey and drilling for an independently verified and updated resource estimation process that is expected to begin early 2020. The company believes that a successful drilling program and the seismic survey will lead to a booking of contingent resources, marking the first discovery of a gas accumulation in Mongolia.

The foundation of the company’s 2020 exploration program will rest on the technical results of the activities that are currently underway. The company informed that the huge area of the PSC (~30,000 square kilometres) provides multiple target areas for further exploration utilizing core-holes, seismic and stratigraphic wells.

The company plans to further develop the Nomgon IX PSC over the next 12 months.

Stock Performance: Elixir has delivered a substantial stock return of 72.75% on a YTD basis. As on 11th October 2019, EXR ended the day’s trading at $0.050, with a rise of 4.17 per cent.


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