Austin raises $1.65 million to advance Pathfinder project

Published at Sep 26, 2016, in Energy

Austin Exploration (ASX: AKK) announced on Monday that it had raised $1.65 million to advance the development of its flagship oil and gas program at the company’s 100% owned Pathfinder project located in Colorado.

As highlighted by Finfeed last week, the Pathfinder project has attractive economics in an environment where many oilfields in North America are no longer commercially viable.

As management explained, this is mainly due to the high costs associated with exploration where oil formations are trapped in tight rocks that require long horizontal wellbores to be drilled and hydraulically fractured.

By comparison the Pathfinder acreage sits on naturally fractured shale that doesn’t require horizontal drilling or hydraulic fracking. Importantly, oil is typically located in depths of between 2000 feet and 4000 feet.

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Consequently, it is an ideal time for AKK to ramp up its operations while other onshore players are effectively out of business.

The company doesn’t even have to sell a barrel of oil to gain upside from upcoming drilling and the acquisition of 3-D seismic data. Given the large acreage, positive flow testing could potentially have the impact of driving up the implied value of its assets.

However, AKK is still in its early stages and there is no guarantee that it can drive its assets higher, so if looking at this stock for your portfolio seek professional financial advice for further information.

Upcoming drilling should expand the company’s 3-D seismic program by 2 square miles and upon completion this should provide AKK with 3-D seismic coverage across 3 square miles, significantly increasing the value of its property.

Management highlighted that the company’s current 15,773 acre position is large enough to accommodate 390 wells in what is known as the Pierre formation alone. AKK has developed a drilling program that could see the Pierre wells drilled for US$500,000, making the project economically viable at prices above US$40 per barrel, which is below the current spot price.

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The company has recently had success with the Magellan 1 Well and the Marco Polo 1 Well with both intersecting hydrocarbons during drilling.

The final phase of drilling at the Columbus 1 Well will commence this week and this will include the drilling of a deviated well bore that has been designed to intersect multiple oil bearing fracture networks identified through high definition 3-D seismic data.

Information stemming from the upcoming flow testing of wells should be monitored closely given it could provide the basis for a rerating.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Longhou Capital Markets Pty Ltd (AFSL No. 292464). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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