Ethereal no monster yet

TESTING of the Ethereal-1 well in the Allunga Trough has disappointed, with Senex Energy revealing this morning that operator Origin Energy has been underwhelmed by early results.

Early results from the well have been below expectations.

The operator, which successfully found unconventional gas in its first fracced well in the Northern Territory's Beetaloo Sub-basin last month, believes Ethereal-1 still has a ghost of a chance, and Origin is planning to undertake a nitrogen lift test to increase gas production.

Ethereal-1 was the second well drilled within PEL 637 (Senex 60%, Origin 40% and operator), but was the first fracced. It is on an extended production test.

Data from Ethereal-1 is supposed to refine the frac design for the earlier Efficient-1.

The partners will also be hoping for a better result out of the box for the next well, Silver Star-1.

The well is expected to start drilling for basin-centred gas in the Permian sandstones of the Patchawarra Trough before the end of the year.

It will be drilled to a total depth of 3600m and, subject to technical success, will then be deviated with a 1500m lateral for fraccing and testing.

Senex is carried for the total costs of the well to $15 million by Origin.

In the meantime, a geomechanical study is underway to incorporate the results of the fracture stimulation and EPT into the regional model.

Production

This morning Senex became the first Australian oil producer to report for the September quarter.

It posted a familiar story of falling income and declining production, but Senex said optimism was in the air, and it was not all down to its emerging Western Surat gas project.

The Western Surat CSG production is expected to kick in in the new year and will start generating a second much-needed revenue stream.

Senex says there is an improving macro outlook for global energy markets, and it is hopeful the days of reporting results, such as a 36% drop in income from its Cooper Basin oil fields, may soon be at an end.

Production was off 5% last quarter, largely due to natural decline, some weather issues and a routine workover of the Growler-3 well, for 210,000 barrels delivered.

All its major oil fields continued to perform in line with, or ahead of expectations, Senex said.

The fields generated $10 million, down more than a third from the previous quarter, but that was more than enough to cover capital expenditure for the September quarter of $6.8 million, primarily on the Western Surat project.

The company has completed hedging for the back half of 2017 giving it downside protection under $US55 per barrel and upside participation above $60/bbl.

Capital expenditure will increase during 2016-17 as work continues on the appraisal program in the Surat Basin, and drilling recommences in the Cooper Basin.

Western Surat

In the Western Surat, the first appraisal wells should start flowing at the Glenora pilot, where surface facilities are being installed and five wells are being completed by Schlumberger.

The completion of the Glenora pilot wells marks the first EPT by Senex in the area of Queensland and is an important step in the project to help inform full field development planning.

Senex expects production from the Glenora pilots to conform to the typical profile of CSG wells, with a period of dewatering to precede a gradual increase in gas production rates, but it has not said when it expects to see the first gas sales to the Gladstone LNG project.

Drilling

In the Cooper Basin, the company is participating in a multi-well oil exploration campaign on PEL 182 Senex 60% and operator, with first of two Namur oil prospects to spud by end 2016 with Beach Energy (40%).

The Spartan-1 and Hoplite-1 wells will be drilled on the results of the Jasmine 3D seismic survey, located on acreage surrounding Coongie Lakes, over which there has been minimal prior exploration.

Senex intends to drill a minimum of six wells in the Cooper Basin in 2016-17, primarily targeting reserves replacement.

Around Snatcher (Senex 60% and operator) the company is seeking to define the unmapped northern extent of the field.

Senex has a cash balance of $93.5 million and additional undrawn bank facilities of $77 million.

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