Austin Exploration takes destiny into its own hands
Austin Exploration (ASX:AKK) will no longer be constrained by drilling contractors, signing a 12 month leasing option for key equipment which it says leaves its destiny in its own hands.
The US-focused oil explorer told the market today that it had tied up a 12 month rental contract with a key US driller for a rig “at a rate that is significantly under market”.
The rig will be used at AKKs Pathfinder project in Colorado, and gives AKK flexibility in drilling.
Instead of wondering whether a drill rig will be available in a certain window, for the next 12 months the rig will be available to AKK for exclusive use.
“Lower oil prices call for cost-effective programs to be implemented for ongoing development to be economical,” AKK CEO Guy Goudy told investors.
“We now have a complete solution for the development of our Colorado property and for the first time the company is not constrained by external contractors.”
However, it’s not just a rig AKK is getting with the deal with Math Energy Drilling including a swathe of equipment which will allow AKK to construct its own drilling pads, build access roads, trench its own flow lines, and perform workovers of existing wells.
Normally this would need to be contracted out, and with AKKs non-executive chairman Mark Hunt holding a stake in Math Energy Drilling, the contract is at a discount to market prices. However, it said the deal was done on an arm’s length basis.
The first well to be spud under the new arrangement is the C18-2 well at its Pathfinder project, going after a target it has labelled a “high impact oil target”.
In October it identified oil targets within the Pierre Shale formation on 3D seismic, with the well due to be drilled in December to tap the shale.
If the well is a success, it could unlock a larger play for AKK as its holdings in the area could accommodate more than 350 wells.
Interestingly, fellow ASX-listed explorer Comet Ridge Energy (ASX:COI) drilled 25 wells between 2008 to 2012 in the directly adjoining landholding.
Of the 25 wells drilled, 22 were considered commercial with the average production in that time being 35,000 barrels of oil per well.
The best well had an initial production rate of 523 barrels of oil per day, has produced over 190,000 barrels of oil and is still producing.
About Austin Exploration (ASX:AKK)
Austin Exploration is a US-focused oil producer, with projects in five states.
It has recently switched up its strategy in a low-price oil environment to drill low-cost vertical wells targeting conventional targets in oil-producing regions.
However, it still has a major presence in the higher-stake unconventional basins in the US, holding 11,000 acres (4450 hectares) in the Niobrara Shale in Colorado and Eagle Ford and Austin Chalk in Texas.