Emerging energy player Eon NRG Limited (ASX: E2E) has finally commenced the drilling operations on its first Powder River Basin (PRB) well.
In an update provided on 20 November 2019, Eon confirmed that it has spudded its first PRB well - Govt Kaehne #9-29, at 8:30 hours US MST on Tuesday, November 19. The well is being drilled as a directional well to an intended ~ 6,400 feet total depth.
Mr John Whisler, Eon’s Managing Director Commented:
“The spudding of the #9-29 is a significant milestone as we begin drilling the prospective exploration wells within the Company’s leasehold acreage”.
Growth Story of the First PRB Well
Eon has come a long way over last fourteen months, from acquiring the 15,000 acres of leasehold in October 2018 to finally commencing the drilling of the first PRB well. Over the period, the company completed various key tasks to prepare for the successful drilling operations, as summarized below:
- Capital Raising – In March, Eon raised a total of $2.54 million via a placement of new shares and options through a rights issue, to advance the permitting and drilling of the new well at the PRB project;
- Permitting of its First new well- In the month of March, the company also commenced the permitting of its first new well, the Govt Kaehne #9-29;
- Commencement of Earthworks- In July 2019, after getting all the necessary state and federal approvals, the company started the earthworks at the well location in order to build the well pad and access road for the Govt Kaehne #9-29 well;
- Completion of Well Pad – In September 2019, Eon completed the construction of the well pad and access road for the well, and installed the conductor pipe and cellar ring at the well.
Eon sold minority interest in Govt Kaehne well
Recently, Eon sold a portion of its working interest in the Govt Kaehne well to industry partners to put itself in a stronger position for future development opportunities. Eon now has 61% working interest (WI) and a 53.4% net revenue interest in the well.
By selling a portion of its working interest to Joint venture participants, as reported on 8 November 2019, Eon has taken care of the capital resources which are required to drill and complete the first Powder River Basin well.
Among the eight parties who agreed to acquire the minority interest in the Govt Kaehne #9-29 well, two are from Eon’s management including, Matt McCann (Chairman) and John Whisle (Managing Director) who have agreed to acquire a 10% and 3% working interest, respectively in the well. This validates their belief in the long-term potential for the first PRB well.
What makes the Govt Kaehne well so important for Eon?
- 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;
- Strong water drive which results in higher recovery and lower production decline rates;
- Offset wells have good initial production rates (IP’s) and estimated ultimate recovery (EUR);
- The well is located in the North Donkey Creek Field approximately 22 miles east of Gillette, Wyoming, a major service center for the oil and gas industry in PRB;
- Eon believes that this new well could add significantly to its existing production capacity.
- Now that the company has finally started the drilling operations using the CapStar #311 drill rig that was mobilized to site on Monday, it expects to take ~ 12 days to reach total depth where it will meet the primary target in the Dakota Formation.
- The company also intends to pass the well bore at ~ 6,000’ through a potential secondary pay formation (Muddy).
- Once the well is drilled to its total depth, Eon will perform suite of geological logging and several drill stem testing to determine the hydrocarbons deliverability.
In its earlier announcements, the company had informed that it intends to commence the permitting of 2-5 additional wells in 2019 for future drilling in 2020 and beyond. With joint venture participants contributing to the ongoing costs of the PRB project, the development of the 15,000-acre PRB leasehold for Eon has become much easier in terms of expenses.
At market close on 20 November 2019, the stock of Eon was trading at $0.005 with a market cap of around $3.85 million and outstanding shares of 769.89 million.
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