Real to get cracking on fracking

Published at Oct 30, 2015, in Energy

Cooper Basin gas player Real Energy (ASX:RLE) has confirmed that it has found a drilling contractor for a long-awaited hydraulic fracturing campaign, and that the frac job will take place early next year.

Releasing its quarterly results before the market opened today, RLE said that it had completed a tender to a well stimulation services company, with it in the process of awarding the contract.

It is seeking to get cracking on a well stimulation of the Queenscliff-1 and Tamarama-1 wells, which at this stage is being designed as a five-stage frac job.

Both the wells tap the prolific Toolachee and Patchawarra formations, which have been tapped and fracced by explorers in the past.

RLE is currently studying cuttings from both wells for permeability and porosity in order to further refine the frac program.

It comes on the back of RLE announcing earlier this week that it had raised $2.6 million via a placement of 20.8 million shares.

The game plan

Both wells sit in the ATP927P permit, which is targeting the Windorah Trough in the Cooper Basin.

According the independent analysis, the contingent resource of the permit range from 77 billion cubic feet of gas on the more sure 1C category to 672Bcf on the 3C category.

On a prospective basis, the permit is thought to hold a recoverable resource of 5.4 trillion cubic feet of gas. The permit also has an in-place figure of 13.7Tcf, which was up 141% on previous estimates.

However, the estimates from DeGolyer and MacNaughton only take into account the current drilling on the permit.

A fracture stimulation of both Queenscliff-1 and Tamarama-1, and flow rates following the stimulation, would allow a firmer estimate of ultimate recoveries and flow rates.

It would also show potential gas offtake partner Incitec Pivot that gas can be reliably produced from the permit.

The chemicals giant hjas previously inked a letter of intent with the junior explorer for a deal worth a potential 110 petajoules of gas over 10 years.

The deal isn’t sealed as yet, but gives RLE something to aim for as it goes about firming up its resource.

The LOI was signed by the Incitec Pivot in a background where domestic gas supply on the east coast is expected to tighten considerably as a result of the ramp-up of LNG projects on the Queensland coast.

While those projects were expected to take gas from coal seam gas fields in Queensland, proponents have also sought to tie down separate third-party deals from the domestic market to shore up supply.

East coast gas demand profile

It has led to an environment where heavy users of gas, such as industrial players like Incitec Pivot, have sought to tie down deals with emerging oil and gas explorers in both proven and frontier basins for supply.

These deals will often be for a set price, giving the industrial player more comfort on the deal in an environment where gas prices are expected to rise despite a decline in oil prices.

For the explorer, it provides a more immediate path to commercialisation before exploration work has been done, giving it certainty.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). 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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