Baraka Energy and Resources (ASX: BKP) has entered into an exciting phase of drilling at its oil and gas permits in the Southern Georgina Basin, Northern Territory, with operator Statoil spudding the OzBeta-1 test well.
This is particularly exciting for Baraka given that it holds a 25% interest in the two permits - EP 127 and EP 128. We would expect it to be share price accretive today and during the drill phase.
Importantly, OzBeta-1 is the first of three vertical test wells that the Norwegian major is drilling as part of the 2014 Work Plan and Budget at EP 127 and EP 128 (BKP: 25%).
In addition to the current activity on Baraka's permits, French supermajor Total and Central Petroleum (ASX: CTP) are preparing to commence drilling on their three permits to the immediate south east of EP127.
The three wells to be drilled in EP 127 and EP 128 are part of a broader program of drilling five wells and the completion of testing of up to three wells.
OzBeta-1 is a vertical test well close to the border of EP 104 and drilling is anticipated to take approximately 28 days, to an approximate depth of 1300 metres.
It will test three potential pay zones within the structures and formations in that area and particularly targeting a 40-50 metres section expected within the Thorntonian Limestone formation.
This same formation produced the 32 metre intersection in the previous Owen 3 on EP104 that seeped oil and showed extensive florescence throughout.
This area of EP127 is close to or incorporated in the Toko Syncline on the South Eastern border of EP127 and the permit stops on the Queensland border.
Subject to results of the initial drilling it is expected that OZBeta-1 will be cased for future hydraulic fracture stimulation and production testing.
The earlier OzAlpha-1 well was cased by Statoil after all planned open hole well evaluation activities - including the recovery of 196 metres of core from the Lower Arthur Creek and Thorntonia formations - were completed.
The other two wells will be drilled in EP 128.
OzDelta-1 is the second vertical test well and is proposed to be drilled in July 2014 close to the border of EP 103 (Statoil: 80%, PetroFrontier: 20%).
This test well will be drilled down to approximately 900 metres and is not considered to have any potential for the Thorntonian formation, but possibly in an oil window.
A well of similar status is to be drilled by the Operator and PFC close to and over the southern boundary of EP128 into EP103 that targets the Arthur Creek Hot Shale and possibly a section above the shale.
OzEpsilon-1 will be the third well and will be drilled in August 2014 to a depth of 800 metres in the northeast section of EP 128, closer to EP(NYSE:A) 132.
This well will examine the target formation to the North of the licences and possibly define the basin to the North and any oil window, as well as test for maturity.
Subject to the success of OzBeta-1, Statoil proposes to return to that well and carry out a completion and test in September 2014.
Separately, Baraka is continuing its discussions with Statoil and PetroFrontier and is hopeful of resolving the outstanding issues with them for the 2014 period.
Exploration in the Southern Georgina Basin is heating up.
Besides Statoil and its joint operating agreement for EP 127 and EP 128 as well as the other PetroFrontier permits, Total is also carrying out operations to the south across the Queensland border.
It had recently completed processing seismic with interpretation identifying multiple locations across ATP's 909, 911 and 912.
These have been scouted in preparation for drilling, scheduled to commence from May/June 2014.
Activity in the Southern Georgina Basin is heating up and with leading companies such as Statoil and Total leading the charge, it is clear that its oil and gas potential is potentially vast.
That Statoil is drilling three wells on - EP 127 and EP 128 - is particularly exciting for Baraka Energy and Resources given that it holds a 25% interest in the two permits.
While the company is responsible for its share of costs, Statoil brings its considerable financial and technical expertise to the table, ensuring that any commercial discovery can be followed up on.
Share price catalysts ahead are focused squarely on the results from the drilling of the three wells and potentially Statoil's decision to complete and test OzBeta-1. We would expect the Baraka share price to gain investors with drilling now underway after a hiatus.
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