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Norwest Energy And AWE Encouraged By Oil And Gas Flow To Surface From Arrowsmith 2

Norwest Energy (ASX: NWE) is pleased at the flow of both oil and gas from the final stage of its Arrowsmith-2 well in the Perth Basin, marking successes at every stage of the well's fracture hydraulic stimulation program.

Fracture stimulation of the Kockatea Shale, a well known source rock in the Perth Basin and the shallowest interval to be tested at 2,639 metres to 2,681 metres, was completed on 1 September 2012 with a strong gas flare igniting almost immediately after flow back started.

During the same night, it also became evident that oil was being produced from the Kockatea, necessitating that the well be shut-in after just 10 hours of flow back as the location did not have sufficient capacity to flow back and store the quantities of oil that could potentially be produced.

"Norwest is extremely encouraged by the presence of both oil and gas in the Kockatea Shale," chief executive officer Peter Munachen said.

"Further work is now required to establish the ultimate potential of this zone and whether there is the possibility to produce oil in commercial quantities along with the shale gas.

"As a proof of concept well, Arrowsmith-2 has delivered success in all zones from the bottom of hole up. Gas flows from the tight sands in the High Cliff, from the Irwin River Coal Measures, and the lower and middle Carynginia shales, culminating with both oil and gas in the Kockatea Shale.

"This highlights success in five out of five zones for Norwest - quite a remarkable achievement in just one well."

Norwest is now sourcing the mobile equipment to resume flow back and testing of the Stage 5 operation.

An extended period of testing is likely to be required on the Kockatea Zone before any considerations are made to re-enter the lower zones for further analysis.

Norwest will continue to provide Thursday weekly updates whilst flow back and testing of the Kockatea continues.

Arrowsmith-2

Fracture stimulation of the other four intervals in the Perth Basin unconventional well have met the technical objectives set by Norwest Energy.

The first and deepest interval to be tested, the secondary target High Cliff Sandstone tight gas zone flowed back gas at a stabilised maximum rate of 777,000 cubic feet of gas.

An extended production test would be required to fully evaluate the commercial potential of this interval.

Likewise Stage 2 over the Irwin River Coal Measures and Stage 3 and 4 over the Lower Carynginia Formation (between 2890 metres and 2940 metres) and Middle Carynginia Formation (between 2824 metres and 2875 metres), resulted in the gas flow and injected fluids to surface at good rates.

These have also demonstrated the necessary indicators for ongoing evaluation.

Analysis

While still at an early stage, the flow of oil at levels that require additional equipment to be brought in, is encouraging for Norwest and its partners AWE Limited (ASX: AWE) and Bharat PetroResources.

Besides the potential for early cash flow, it also bodes well for regional exploration of the Kockatea, which like the High Cliff Sandstone, extends across much of the Perth Basin.

That said, the discovery of oil should not overshadow the results achieved in the other stages.

Given that fractured shales can take weeks to clean up enough for maximum gas to flow, the early flow of gas in every stage to date is an outstanding result.

The results, and those from AWE's Woodada Deep-1 and Senecio-2 tight gas well, lend credence to comparisons of the Perth Basin with the highly prolific and liquids rich Eagle Ford shale in Texas.

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