After much speculation in the press and city, BOR have delivered the news to the market and it’s huge in the context of the Falkland Islands. The Darwin well established a new hydrocarbon basin in south which when combined with RKH’s finds in the north – really does light up the region.
As with any first drill, there are still many questions that need answers. In terms of headlines, GAS never gets greeted with open arms like the word ‘OIL’. But today’s news is not your normal GAS – it’s a combination of dry and wet Gas or ‘condensate’. The latter can sell for the same value as high quality light oil.
BOR has taken Fluid samples which after testing via lab analysis in the UK should confirm the liquid content of the reservoir. This is the key news that the market needs before fully pricing in the Darwin success. If the ratio is more ‘dry gas than wet gas’, then the market is likely to discount out some of the value already priced in. If it’s a high ration of condensate – then the market should upgrade further.
As per Gramacho’s note here, Darwin has a ‘twin’. BOR were very precise with naming Darwin EAST in their press release today – the potential for Darwin West to reflect or even better Darwin East results is high.
The sp has risen strongly in anticipation of great results and it is no surprise to see the sp sell off today due to the timeframes involved on gaining the fluid sample analysis. Short term investors will move on to the next stock until it’s time to return back to BOR. Longer term investors will wait patiently knowing that regardless of the fluid sample data – BOR have a long long way to go before fully exploring their portfolio. With the next well due to spud soon (Stebbing) the whole exploration process starts all over again. And after that, FOGL kick off with two wells of their own. Hence – it’s likely that the FI’s will be in strong focus for much of 2012 and with this Darwin discovery under the belt – the future looks bright.
Thesharehub’s price target of 120p was a pre-drill estimate set in Sept 2011 (see here). Based on today’s results thesharehub is maintaining 120p target and will review after the company confirms the fluid sample data.
23 April 2012, Borders & Southern Petroleum plc
61/17-1 (Darwin East) Well Results
Borders & Southern (AIM: BOR) is pleased to announce a significant gas condensate discovery.
Well 61/17-1 was drilled to a total depth of 4876m and came in very close to prognosis. As predicted, the strong AVO anomaly represented a porous sandstone reservoir containing hydrocarbons.
Whilst drilling, the well encountered good hydrocarbon shows from 4633m down to 4810m. The main reservoir interval, comprising good quality massive sandstone, was found to be 84.5m thick with net pay of 67.8m. Average porosity for this interval is 22%, with maximum values reaching 30%.
Fluid samples from the reservoir have been recovered and will be brought back to the UK for analysis. Once the lab analysis is complete and the results integrated with other data collected from the well, the Company will be able to comment on the liquid content of the reservoir.
It is too early to give an accurate resource estimate, but this large simple structure, with a seismic amplitude anomaly measuring 26 square kilometres, is likely to contain significant volumes.
The well has successfully proven a working source rock, good quality reservoir and competent seals in the South Falkland Basin. The Company has an extensive prospect inventory to exploit this success.
The Company now intends to complete wireline logging operations, plug and abandon the well in line with regulatory requirements and move to the Stebbing prospect, the second well in the current drilling programme. An announcement will be made once this well has spudded.
Chief Executive, Howard Obee, commented:
“We’re delighted to have made a discovery with the Company’s first exploration well and to have opened up a new hydrocarbon basin. There is clearly a lot of work ahead of us to understand the size and value of the discovery, but it is a great start and the potential of the basin is exciting. I’d like to thank all the many people that have contributed to this project for their fantastic efforts.”