Gas Flows from Egilabria 2 Well (Australia)

Armour Energy announced that initial gas flows to surface and a flare of at least 2 feet have been observed from the Egilabria 2 well drilled in Armour’s 100% owned ATP1087, north of Mt Isa, following drilling and hydraulic stimulation of the lateral well, Egilabria 2 DW1. Continuous gas flow is being observed in conjunction with flow back of fluids injected during stimulation of the well.

Armour’s pioneer well in Queensland’s frontier South Nicholson Basin represents a landmark for the Australian oil and gas industry as the well is the first successful application of multi-stage, hydraulically stimulated, lateral well technology developed in North America to an Australian shale gas formation.

The aim of the production test at Egilabria 2 was to prove not only the hydrocarbon potential of the Lawn Shale formation, but also to confirm the suitability of horizontal well technology to achieve commercial gas flows. Results to date from this first production test in the South Nicholson Basin are in line with with the Company’s expectations and are very encouraging.

The well has now flowed back 44% of stimulation fluids and continues to flow at a rate of approximately 13 barrels per day in conjunction with initial volumes of gas. The gas flow rate has not been measured, but a sustained flare of at least 2 feet has been observed. As the well continues to unload, the flow of gas is expected to further increase as gas replaces fluids in the formation allowing increased gas flow into the well bore. The Company intends to continue this process over the coming weeks. As per the well testing program, this will be followed by a pressure build-up period. The actual timing of these activities may be dictated by the imminent onset of the northern wet season.

The Egilabria 2 well is testing the highly prospective Lawn Shale formation within the South Nicholson Basin, just 320 km to the north of Mt Isa. Eight stimulation stages were originally targeted and of these, the majority of proppant (essentially sand to open up pathways through which gas can flow) was placed in the middle four stages covering the top 66m of the organic rich 137m thick Lawn Shale formation.

Two of these stages were considered particularly successful as design quantities of various sizes of proppant were placed in the formation.

The production test results to date confirm the presence of a continuous, gas-rich section of the Lawn Shale and demonstrate that, with suitable drilling and stimulation techniques, commercial gas flows should be achievable. This is a major goal of any early shale gas play, and was achieved by Armour in Queensland less than a year after securing the tenement grant.

Egilabria 2 also intersected continuous gas shows in sediments from 700 metres down to the top of the Lawn Shale at 1640 metres. Zones above 1530 metres have not yet been hydraulicaully stimulated or flow tested. This will be included in Armour’s future work program.

On 5 July 2013, Armour reported a flare up to 5 metres long for 20 minutes after the Egilabria 2 vertical well was re-opened after shut in at a depth of 1830 metres. At that time the well had penetrated the bottom of the targeted Lawn Shale at 1810 metres. This gas charged interval below the Lawn Shale is likely to extend through the Riversleigh Shale formation. The Riversleigh Shale underlies the Lawn Shale by roughly 500 metres at this location, creating a total of around 1700 metres of gas charged sediments.

Since drilling Egilabria 2, Armour has drilled the Egilabria 4 vertical well 8km from Egilabria 2 andencountered gas shows in three separate zones of the underlying Riversleigh Shale formation and adjacent zones. Logs from Egilabria 4 indicate excellent shale gas parameters, potentially better than the Lawn Shale. Cores from Egliabria 4 are currently being analysed.

Egilabria 2 is in Armour’s 100% owned exploration licence ATP1087. The Lawn Shale in ATP 1087 has been assessed by the Company’s independent geological consultant (MBA Petroleum Consultants) to host Mean Prospective Resources of 22.5 TCF of gas. The Riversleigh Shale will potentially add significant upside to the prospectivity of ATP 1087. Drilling results from Egilabria 4, combined with airborne geophysical survey results and the gas shows at the 1990’s Comalco Argyle Creek 1 and Desert Creek 1 wells in the Riversleigh Shale, will amass a data set targeting a Prospective Resource Area up to 18 TCF of contained gas, based on the Company’s previously announced in-house review of ATP 1087.

The Company has entered into a Heads of Agreement with APA to work towards transportation of up to 330 Petajoules a year of gas in existing, upgraded and future APA pipeline network to undersupplied coastal Queensland and New South Wales markets.

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LNG World News Staff, November 06, 2013; Image: Armour