On 9 October 2018, Winchester Energy Ltd (ASX: WEL) announced that US Energy Corporation of America Inc (USEC) has re-entered the Thomas 119-1H well and started its completion operations. Before moving up hole and undertaking a hydraulic fracturing program on the unconventional Lower Penn Shale in the Wolfcamp ‘D’ Formation, USEC is planning to test the Odom Lime member of the lower Strawn Formation.
According to an assessment in November 2016 by the U.S., the Wolfcamp shales in the Midland Basin portion of Texas’ Permian Basin hold an estimated mean of 20 billion barrels of oil, 1.6 billion barrels of natural gas liquids and 16 trillion cubic feet of associated natural gas.
If there are successful oil and gas production from Thomas 119-1H, Winchester has the right to a 12.5 percent working interest (WI) back-in following the recovery by USEC of all costs associated with completion activities at Thomas 119-1H. The completion activities at Thomas 119-1H by USEC will add a significant value to Winchester’s surrounding Wolfcamp ‘D’ leasehold position. Of which, the Winchester’s acreage position consists of Lower Penn Shales and other Wolfcamp ‘D’ intervals which include productive Three Fingers Shale.
The company is currently seeking interest from a prospective farm in partners to explore and exploit its 17,402 net acre lease position. This large acreage position is improved by the 65,000 acres of 3D seismic that covers all Winchester’s acreage and significant offset acreage. A significant cost reduction programme has been executed and together with ongoing oil and gas revenues which enables the Company to chase the identified opportunities in oil-bearing formations and provide time to pursue farm in partners, assuming no major reduction in the price of oil or monthly production.
The Barnett equivalent shales overlying the Ellenburger have a high organic material and are expected to become a possible unconventional resource within the company’s acreage position. Many of these formations have already produced significant gas and oil from Nolan County and other areas within the Permian Basin. The company is currently conducting a detailed assessment of these intervals for production given oil shows during drilling across all eight wells.
In the first half of FY 2018, the company reported a revenue $0.74 million as on 30 June 2018 which was $1.29 million in the prior corresponding period. The company’s loss increased from $0.59 million as on 30 June 2017 to $14.89 million as on 30 June 2018. The basic and diluted loss per share was 5.22 cents as of 30 June 2018. The total current assets of the company decreased from $3.64 million as on 30 June 2017 to $1.97 million as on 30 June 2018. The net cash outflow from operating activities was $0.63 million as of 30 June 2018.
In the past six months, the share price of the company decreased by 34.69 percent from $0.049 to $0.032 as of 9 October 2018. WEL’s shares last traded at $0.032 with a market capitalization of $9.12 million as on 10 October 2018 (AEST 4:00 PM).
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