A successful DST on the Intra Isongo section of the IM5 well has been completed with very commercial numbers.
The quality of Condensate rich Gas certainly bodes well for the rest of the licence block based on this section of the reservoir.
It’s worth noting that the last DST RNS was followed by a Volumetrics update a week or so later. Bowleven elude to a second volumetric update coming in the future … “With testing complete, volumetrics for the IM field will be updated”. END.
The share price reaction is typically muted and represents more about the current market climate for E&P’s rather than the value of this discovery and the commercial confirmation of the flow rates.
There’s also a few ‘shorts’ in play so those involved may want to keep a lid on any sp rises until they can unwind their positions. Probably ahead of the soon to be released Volumetrics upgrade. As the shorts get closed, the sp should start to reflect more of todays news rather than the trading positions of some hedge fund players.
At sub 100p, Bowleven looks very cheap indeed when compared to most broker targets which are at 200p+.
See Merril’s note below followed by BLVN’s RNS detail.
Merril Lynch Broker Note/comment…
“Secondary target Intra Isongo flows > 10,800 boe/d
We reiterate our BUY recommendation and PO of 215p post todays very positive and final DST (Drill Stem Test) result on the IM-5 well offshore Cameroon. The flow rate, testing a 29m perforated column of the Intra Isongo interval (c. 70m of discovered net pay), revealed an impressive flow rate of 37 mmscf/d of gas (c. 6,140boe/d) and 4,664 boe/d of 43 API condensate; a combined flow rate therefore in excess of 10,800 boe/d. Pressure drawdown on testing was restored comfortably within the planned 72 hour period, hinting at a potentially large lateral extent of the tested interval; a source of future upside optionality for Bowleven.
Combined flow rates from IM-5 testing > 17,800boe/d
Along with the previously disclosed flow rate achieved on the Middle Isongo interval, this takes maximum combined flow rates to over 17,800 boe/d, well in excess of the plateau gas volumes agreed for the proposed fertiliser plant of 70 mmsc/d of dry gas (equivalent to 80mmscf/d wet gas or c. 13,270boe/d). This would indicate that 2 wells flowing at c. 40mmscf/d each could suffice; a very material potential saving on well & infrastructure requirements that are estimated at c. US$600mn gross at this stage, based on a 6 well development concept.
Condensate yield compares favourably to wells nearby
Whilst the condensate: gas ratio (c. 133 bbl/mmscf) was in the lower half of company estimates (c. 100-285 bbl/mmscf) for the Intra Isongo layer, it is important to note that i) the test was only conducted in a relatively narrow 29m section and the ratio is likely to vary over the rest of the 41m section of net pay and ii) compared to other assets in the region (e.g. Marathon’s Alba field offshore EG), the results is still c. 2x the liquid yield achieved in those producing wells.
EEAA approval is the next catalyst; FID targeted for 2H13
The Entinde Exploitation Authorisation Application incorporating the IM-5 well result is currently with the government pending approval, anticipated imminently.
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19 April 2013, Bowleven plc
IM-5 testing update
IM-5 well, Block MLHP-7, Etinde Permit, Cameroon
Bowleven, the Africa focused oil and gas exploration group traded on AIM, is pleased to announce the results of the second test at the IM-5 appraisal/development well drilling offshore Cameroon. A drill stem test (DST) has now been performed on the Intra Isongo reservoir interval and this following the Middle Isongo DST announced on 2 April 2013 completes the successful drilling and testing programme at IM-5.
Highlights
Testing Overview
· Condensate-rich gas flowed on test from both Middle and Intra Isongo intervals confirming commercial production rates and the significant liquids content of gas.
· Combined maximum flow rates of 60 mmscfd and 7,819 bcpd (total over 17,800 boepd).
Intra Isongo update
· Average flow rate of 37 mmscfd and 4,664 bcpd (total over 10,800 boepd) achieved from 29 metres of perforated section out of 70 metres of net pay.
· High quality condensate (approximately 43 degree API) produced on test.
Testing update
The well, designed to appraise the reservoir and fluid properties of the Middle Isongo and to explore the additional potential of the Intra Isongo, was drilled to a TD of 3,430 metres MD in water depths of around 56 metres.
Further to our update on the 2 April 2013 post completion of the Middle Isongo DST, testing has now been performed on the Intra Isongo interval with the following results:
Intra Isongo update
As previously announced, the well encountered approximately 70 metres of log evaluated net hydrocarbon-bearing pay in the Intra Isongo over a gross interval of approximately 80 metres.
The well has now successfully flow tested condensate-rich gas from a perforated section of 29 metres out of a total of 70 metres of net pay. The interval flowed at an average rate of 37 mmscfd and 4,664 bcpd (total over 10,800 boepd) on a 64/64 inch choke. During the test sequence the interval also flowed at a peak gas rate in excess of 40 mmscfd. The average rate infers a CGR of 125 bbl/mmscf and measured CGRs of up to 133 bbls/mmscf were achieved on test. Further significant liquids (including LPGs) can be recovered via secondary processing. Further analysis of test data is required although it is our expectation that optimised Intra Isongo development well locations and completions are likely to lead to production rates well in excess of 40 mmscfd per well.
The Intra Isongo test result combined with the test on the Middle Isongo delivered a maximum flow rate of 60 mmscfd and 7,819 bcpd (total over 17,800 boepd).
Forward plan
The IM-5 drilling and testing programme is now complete and the well will be suspended as a future development/production well. The Atwood Aurora jack-up rig will be released by Bowleven following completion of suspension operations. With testing complete, volumetrics for the IM field will be updated.
Kevin Hart, Chief Executive, said:
“We are delighted with the overall results from the IM-5 well which have surpassed our expectations. The flow rates that have been achieved on test demonstrate substantial well deliverability from both the Middle and Intra Isongo intervals and further strengthen the foundation for the planned phased development of Etinde. Due to the high deliverability of the Intra and Middle Isongo reservoirs we are confident we will be able to reduce the number of wells required to supply the planned fertiliser plant.
The IM-5 well has not only delivered a substantial increase in estimated hydrocarbon volumes but it has also confirmed the presence of liquids rich hydrocarbons at the Isongo Marine field, a significant value driver for development plans on Etinde. In addition to proving that there are more than sufficient gas volumes present on a P90 basis to meet the 70 mmscfd dry gas requirements of the fertiliser plant, the IM-5 well has derisked considerable further prospectivity with significant volumetric upside on the block.
We are continuing to make good progress on the path to development in Cameroon. With the recently announced agreement between Bowleven, Ferrostaal and SNH of a gas sales term sheet for the proposed fertiliser plant and work already underway to update the formal EEAA to integrate the very successful IM-5 well results, the Group remains focused on delivering the planned phased Etinde development and reaching FID, targeted by the end of 2013.
Achieving the first development phase will deliver value to all stakeholders and open up the significant hydrocarbon potential of the Etinde Permit uncovered by our successful exploration activities. We look forward to the work ahead of us in 2013. “
