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Carnarvon Petroleum Set To Spud Exciting Phoenix South-1 Gas Well Within Days

Carnarvon Petroleum (ASX: CVN) is just days away from spudding the highly anticipated Phoenix South-1 well that targetsmulti-trillion cubic feet of gas in the North West Shelf off Western Australia.

Operator Apache Energy (NYSE: APA) has advised that the Atwood Eagle drilling rig is expected to be mobilised to the Phoenix South-1 well location around Thursday, 15 May 2014.

Drilling is expected to start about 5 days after the rig has commenced its mobilisation from the previous location.

Phoenix South-1

Apache and Nippon are funding the cost of drilling the Phoenix South-1 well in WA-435-P and the contingent Roc-1 well in WA-437-P to a cap of US$70 million each.

Carnarvon has a 20% interest in both permits.

Phoenix South is located on the border of WA-435-P and WA-437-P, which together cover about 28,000 square kilometres of contiguous acreage that are considered to be highly prospective for discovery of hydrocarbons.

The permits include gas discoveries made in the early 1980's by BP at Phoenix-1 and Phoenix-2 that were considered uneconomic due to low gas prices at the time they were made.

Besides their gas potential, both Phoenix South-1 and Roc-1 have the potential to contain liquids-rich gas based on Phoenix well mud logs in comparison with mudlogs from condensate-rich North West Shelf gas fields.

Given the potential scale of the resource and its proximity to existing and under construction infrastructure - including LNG, a success at Phoenix South has multiple options for development.

In addition, a number of other oil and gas leads are present in the two permits.

Analysis

Phoenix South-1 is a potential game changer for Carnarvon Petroleum given the multi-Tcf of gas that it targets.

To top it off, the exploration risk to the company is low given that it is free carried by Apache and JX Nippon for its 20% interest to a cap of US$70 million.

As such, Carnarvon's current market cap. of circa $97 million is leveraged to results from Phoenix South-1.

Proactive Investors continues to maintain a share price target of between $0.14 and $0.16 within 6-9 months.

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.