Falcon Oil & Gas’s (LON:FOG) hotly anticipated Australian shale exploration programme has now kicked off.
The company, which has a 30% stake in 4.6mln acres within the Northern Territory, today revealed that operations have begun at the first well location.
It is expected that the Kalala S-1 exploration well will now spud before the end of June, and the drilling will last between 35 and 50 days.
Kalala S-1 will be drilled to a depth of around 2,800 metres and it will target the Middle Velkerri formation to assess hydrocarbon saturation and reservoir quality. This will be the first of three wells in the programme.
“We are delighted to announce the commencement of drilling operations and the expected spudding of the first of our three well fully funded drilling campaign by the end of June 2015, in this highly attractive basin,” said chief executive Philip O’Quigley.
“We look forward to exploring the potential of the Beetaloo Basin in Australia with our partners and updating the market with further details in due course.”
The project is operated by Australian firm Origin Energy, which has a 35% stake, and Falcon is also partnered with South African energy major Sasol, which also has 35%.
The partners, as a result of a deal last year, are carrying the full A$63mln cost of the first five wells, which are part of a larger nine-well campaign.
Partnering with Origin and Sasol has effectively funded Falcon’s participation in the exciting exploration phase and, importantly, has underlined the attractiveness of the acreage the AIM firm secured as an early mover.
The resource potential of the Beetaloo could be very significant if exploration work backs up assumptions made about the shale play modelled by current estimates.
A 2013 report by industry consultants RPS estimated its gross recoverable resource potential to be 162 trillion cubic feet of gas and 21.3bn barrels of oil.
Before investors get too carried away, however, the three initial wells planned for this year are unlikely to deliver the sort of information on which meaningful economic modelling can be based.
They are designed to assess the carbon content of the Velkerri and to identify the thickest shale of sequence.
This is part of the sweet spot hunting that will direct next year’s two big wells – one vertical, the other horizontal.
Kalala S-1 aims to provide crucial information that will enable future horizontal drilling, stimulation, completion and production testing.
Investor attentions are now expected to zero-in on Falcon in the coming weeks as the drill-bit begins to turn.