Otto Energy shareholders had reason to celebrate yesterday after the ASX-listed exploration and production company announced a ‘Lightning strike’ in the Gulf that spiked its share price 69 per cent, to $0.071, before closing at $0.060 yesterday.
The West Perth-headquartered company, which is already producing shallow oil from its SM 71 well, Louisiana, revealed that exploration well Green 1, which is testing the Lightning prospect in Matagorda County, Texas, had reached total depth of 15,218 feet.
Otto, which has a 37.5% interest in the leases covering this prospect, said a quad combo wireline logging suite, including dipole sonic, had been acquired over the target Frio-Tex Miss sand intervals which are Oligocene in age.
‘Petrophysical evaluation of the logging data indicates the presence of a total net hydrocarbon filled sand interval of 180 feet. This petrophysical evaluation has been undertaken using historical parameters for production performance in the play trend. Dependent upon porosity and water saturation cut offs applied, there is potential for an additional 150 feet of net pay in the well,’ Otto said.
Estimates of reserves will take some months to calculate and will be further refined with production data. Otto said it would update the market as soon as these numbers are available.
The company added: ‘Further evidence supporting the presence of movable hydrocarbons occurred during drilling where strong gas shows, including C5+, were recovered at surface. Indications during drilling showed several sand intervals have the potential for liquids yields significantly higher than the pre-drill estimates. Fluid composition and liquids yield will be determined during well clean-up operations and ultimately production.’
The Operator has run a 5½” production liner in the well and is commencing preparations for completion and subsequent tie back to a nearby sales pipeline. The drilling rig will be released and mobilized to the drilling location for the next prospect in the Gulf Coast program with Hilcorp, Don Julio 2, in the coming week. A completion rig will be used to install production equipment and bring the well into operation.
Otto’s development plans to bring its wares to market using one of two nearby multi-phase sales pipelines via a 4” export line to be laid from the well. Otto expects these operations to take approximately 45 days with first production from the well by the end of March 2019.
Otto’s Managing Director, Matthew Allen, commented: “The result of the Lightning well is an outstanding outcome for Otto shareholders. The well has delivered significantly in excess of our pre-drill estimates which will materially increase Otto’s reserves base and rapidly diversify our revenue base.
“It is expected that production from the Lightning field will deliver steady cashflow for Otto for a significant period of time.
“With the ability to tie the well in and commence production in a very short time frame, this discovery will be a major step in our plans to expand Otto’s production base and deliver on our objective of 5,000 boepd production.
“This initial exploration well has de-risked a large amplitude supported structure and plans for the further development of the field will commence once production from the first well has stabilised.
“This will include the potential for future additional wells to deliver the full field potential of this significant new discovery.
“Otto congratulates Hilcorp, the operator of the Lightning well, for the safe and efficient performance by their drilling team and the quality of the geoscience work that has led to this discovery. Otto is proud to be partnering with a successful operator of Hilcorp’s calibre.
“This discovery is testament to the application of new seismic technologies and evaluations, and bodes well for the remainder of the Gulf Coast drilling program with Hilcorp.
“Otto has a highly active drilling program during 2019 and this result kicks off that program with a material new discovery. The drilling rig will now move to the Don Julio 2 well location and commence drilling operations in the coming weeks.
“Otto’s Winx-1 well in Alaska is also scheduled to commence drilling during mid-February. This is a very exciting time for Otto’s shareholders.”