Gas production through the new gas pipeline is currently 200,000 cubic feet per day while the most recent oil cut is about 35%, up from the 25% reported last week with total fluid production of about 135 barrels per day while flow rates are adjusted for gas production.
The company is currently evaluating a replacement of the bottom hole pump as pump rates based on fluid levels and other factors suggest that a different pump, such as a jet pump, may provide better performance.
In addition, an emulsion reducing additive is now being used to chemically treat the oil and frac fluid emulsion that is making up part of the produced fluids stream.
Golden Gate added that it continues to monitor the well and will adjust equipment and flow rates as conditions warrant.
SRH-5H and the Permian Project
The company once again stated the current hydrocarbon production is not considered a measure of initial production levels at which the well will establish its long term producing base.
It said the early start to oil and gas production in SRH-5H, rather than occurring after 40% to 50% of the fracture stimulation fluids had been recovered, is testimony to every well being different.
Based on other wells that experienced early breakouts, it could be several weeks before oil production reaches initial production levels.
Based on other horizontal well estimates by other major operators in the area, the SRH-5H well could hold an estimated ultimate resource potential of about 400,000 barrels of oil equivalent, primarily of oil and gas liquids.
An independent Reserve Report had attributed over 5 million barrels of oil equivalent (MMboe) in Proved and Probable (2P) reserves to the Permian leasehold assets currently held by Golden Gate in Reagan and Irion Counties, Texas.
These reserves have been identified as part of the Spraberry-Dean formation in the areas where GGP holds the rights to this formation.
In addition, MHA Petroleum Consultants also identified Contingent Resources of 10.8MMboe from just one of three identified intervals/benches in the Wolfcamp formation with each considered by the company to have similar potential plus one interval in the Cline formation.
The report also included projected income of US$69.1 million for the 2P Reserves on a 10% discounted net cash flow basis and US$127.1 million from the Contingent Resources.
This used NYMEX oil and gas price projections plus cost estimates confirmed to be realistic by MHA.
The reserves report was based on production performance analysis within the general area of the Company's holding and used a 40 acre spacing for vertical wells in the Spraberry-Dean reservoir.
Further Reserves upside could result from the use of 20 acre spacing that some regional operators have started using while the use of horizontal wells could increase productivity.
In the current leasehold area, a vertical well exploitation program, using 40 acre spacing, was assumed for the Spraberry-Dean reservoir.
The start-up of gas sales from SRH-5H gives Golden Gate a measure of early cash flow from the horizontal well, adding to the revenue it generates from the vertical wells in the Permian Project.
This will receive a further boost once enough fracture stimulation fluid has flowed out of the well to allow initial oil production to be accurately measured.
Ongoing evaluation could also result in changes - such as the replacement of the bottom hole pump with a jet pump - that would increase production.
Golden Gate is well capitalised for further drilling activity in the Permian, having recently secured A$7.5 million in funding from U.S asset management firm Lind Partners.
The company also previously raised $3.2 million through an entitlement offer and successfully sold its 10% working interest in the Cutlass project in Texas for US$1.7 million.
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