Energy Company, Eon NRG Ltd (ASX: E2E) has taken a major step forward in expanding its existing oil production by starting the permitting process of its first Powder River Basin (PRB) well, the Govt Kaehne #9-29.
In an announcement made on 6 March 2019, the company informed that it has commenced the permitting of the Govt Kaehne #9-29 well, making it the first well to be drilled within Eon’s 15,000-acre Powder River Basin (PRB) lease holding which was acquired in September 2018. Eon fully owns all the PRB leases with a 12.5% mineral interest royalty burden delivering an 87.5% net revenue interest to Eon.
The Govt Kaehne #9-29 is targeting production of light sweet crude oil from the Sandstone reservoirs of the Dakota Formation at a depth of ~6,200’. It is expected that this new well will add significantly to the Company’s existing 530 barrels of oil equivalent per day (boepd) production. Further, the well is positioned to penetrate between 30’ and 40’ of Dakota pay. Moreover, the strong water-drive of the Dakota formation will provide pressure support with minimal pressure drop at the wellbore resulting in consistent oil production. The location of the well is the added advantage to the company as it is located close to a major oil service center for the PRB and it has good access to transportation.
As per the company’s announcement, the estimated dry hole cost of the well is around $1.2 million. While the development of this well is still in process, the company’s management is continuing with further engineering and detailed planning for the well, which includes well design, equipment selection, infrastructure planning and costing.
As per detailed geological review of part of the 15,000 acres of EON’s PRB leases, there is a presence of multiple drilling prospects at the PRB leases. The company is expecting two of these prospects to be drilled in 2020, targeting the Minnelusa, a Permian Age eolian dune reservoir capable of high production rates from a conventional vertical well drilled to depths of ~5,800 feet. EON is planning to start the permitting process of 2-5 additional wells in 2019 for future drilling in 2020 and beyond.
The company recently completed its pro-rata renounceable entitlement offer which was announced on 6 February 2019 to raise up to ~A$2.8 million before costs. The offer was well supported by Eon’s shareholders and new investors and is now closed having raised a total of around $2.544 million before costs. As per the prospectus of the Entitlement Offer, the Funds raised through this offer will be used for working capital including the permitting and drilling in the Powder River Basin Project.
On 1 March 2019, the company published its Preliminary Final Report for the year ended 31 December 2018 (FY 2018). For FY 2018, the company reported revenue of US$4.982 million which is 21% higher than the previous corresponding period, driven by the increase in oil production and higher average oil prices. As at 31 December 2018, the company had Cash and cash equivalents of US$ 497,179.Meanwhile, in the last six months, the share price of the company increased by 12.50% as on 5 March 2019. E2E’s shares are trading at $0.007 with a market capitalization of circa $5.69 million as on 6 March 2019 (AEST 12:58 PM).
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