The USA onshore focused energy exploration and production company, Eon NRG Limited (ASX: E2E) strives to grow through the drilling of high impact oil exploration wells, supported by its 100% owned and operated long life oil and gas production assets and associated cashflow. In addition to this, Eon has a battery minerals division with prospective leases which are at the early stages of low-cost exploration in Nevada.
Eon’s consistent efforts for obtaining drilling permits to drill the Govt Kaehne #9-29 well resulted in obtaining approval from the Wyoming Oil and Gas Conservation Commission (WYOGCC) and the Federal Authorities, Bureau of Land Management (BLM) in July FY19.
Eon NRG has made significant progress over the quarter notwithstanding the unforeseeable hindrances during the course of business operations.
Let us now walk through some significant developments in Eon’s business during the quarter.
Total Production of 42,102 BOE
Eon registered production of 42,102 barrels of oil equivalent (BOE) during the Q3 FY19 with an average BOEPD of 458.
Capstar on-board for drilling Govt Kaehne #9-29 well
Following the completion of the drill pad and access road in August, E2E put in place the infrastructure required for the drilling to begin.
Significant progress was made during the quarter in order to finalise supply contracts for various equipment and services expected to be required through the drilling phase. The company also witnessed the completion of the Master Service Agreement with the insurances being put in place.
Land drilling services provider in the US, Capstar Drilling was confirmed as the preferred contractor for drilling the Govt Kaehne #9-29 well.
Capstar’s #312 rig has an experienced crew, which has been actively engaged in completing a drilling campaign for a large Powder River Basin E&P Company throughout the summer before mobilising to the 9-29 location.
Following the end of the quarter, the conductor, which is a 60 feet length of steel pipe cemented in place, was set as it is the first phase of spudding the well.
Borie Oilfield Q3 production in line with Q2
During the quarter, the company executed a workover at the Borie Field to maintain oil production. The company witnessed slight turbulence towards the end of the quarter due to the seasonal storms, which caused some damage to surface equipment and electric infrastructure.
However, the average gross production of ~55 bopd in Q3 FY19 was noted to be in line with previous quarters. In addition to this, Eon NRG is currently in the process of reviewing the potential recovery of oil and gas from the Niobrara Formation present within the field and prolific in nearby fields in the DJ Basin.
EON Expects Increase in Gas Prices at Silvertip Field
Eon is experiencing lower gas production at the Silvertip Field in 2019 as compared to the prior year. To some extent, the decrease in the production has been influenced by the natural pressure decline and due to flows being choked back as a result of low gas prices.
However, based on the gas demand trends during the past years, Eon anticipates an increase in the prices for gas with the seasonal increase in demand for gas over the winter months.
During the quarter, Eon executed several routine maintenance tasks on wells and the gas plant to maintain smooth production.
Eon Maintains Profitability
A downward trend was witnessed in the production from the Sheep Springs Field over the quarter, following which the company executed the repairs on affected wells. The company expects to make the recovery of the lost production in future.
In addition to this, the field operating costs were noted to be persistently low for these fields, further resulting in continued profitability even at lower production rates.
The production of oil from the Sheep Springs and Round Mountain Oilfields continues the streak of a price premium over the average West Texas Intermediate (WTI).
Following the drilling and completion of a successful well at the Govt Kaehne #9-29 location, the reserves in the Proved-undeveloped (PUD) category shall move to Proved-developed-producing (PDP) category. The company further expects an increase in the PUD reserves over time as an implication of the identification of additional prospects within the currently held PRB acreage or new leases.
The E2E stock last traded at a price of $0.005 as on 29 October 2019.
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