Drilling of the well, which is the company's first operated horizontal well, is set to begin soon after planning and rig mobilisation is completed.
Sun expects the Jack Howe-1H lateral to take about three weeks to drill and case the primary objective Lower Woodbine Formation, which will be intersected at a target depth below 8,100 feet measured vertical depth.
The drilling program includes approximately 5,500 feet of horizontal section to be drilled and cased with 5.5 inch casing.
After the well is cased, a final hydraulic fraccing program will be prepared for execution in October 2014, subject to equipment availability.
Sun has a 50% operating interest in Jack Howe-1H and the Normangee Oil Project.
The company is raising $10 million through an equity placement of 398 million shares priced at $0.01 each to raise about $4 million and a 1 for 5 renounceable rights issue to raise up to circa $6 million that is underwritten to an amount of $5.25 million.
Major shareholder Gina Rinehart's Hancock Prospecting Pty Ltd has already committed to participating in both the placement and the rights issue to maintain its shareholding of about 19.5%.
The raising is also strongly supported by existing shareholders and a number of new domestic and international institutional investors.
Proceeds will be used for the imminent drilling, multi-stage fraccing and subsequent flow testing of Jack Howe-1H, procure further leases in the Southern Woodbine Oil Project and for working capital.
Adding to interest in Jack Howe-1H, EOG Resources (NYSE:EOG) - one of the most successful independent oil companies in the U.S. with a US$59 billion market cap - has successfully completed at least 7 horizontal Lower Woodbine oil producing wells in the immediate area in the last 12 - 24 months.
These have delivered initial 30 day production rates of between 200 and 600 barrels of oil per day.
In addition, EOG currently has 4 new wells planned at its Grove location which is 7.5 miles west of Jack Howe and has recently completed its Zeus-1H well that is only 2.8 miles east of Jack Howe.
Sun currently holds approximately 18,000 net acres in the wider Woodbine region; however the approximately 7,000 net acres in the Southern Woodbine area hold significant potential upside for the company in the event Jack Howe is successfully drilled and achieves a commercial flow test result.
With the rig contract in place, Sun Resources can now proceed with drilling the horizontal well bore for its Jack Howe-1H lateral well in Texas that targets the highly prospective Lower Woodbine Formation.
This is notable given that nearby lateral wells drilled by EOG Resources produced oil at initial 30 day rates of between 200 to 600 barrels per day.
Potential share price kickers include:
- Drilling, fraccing and testing of Jack Howe-1H;
- Drilling of 1-2 proposed wells in its new Lower Woodbine leases; and
- Drilling of a well in the Badger Project (Eagle Ford Shale) in the fourth quarter of 2014.
Sun had $2.6 million in cash as at 30 June 2014.
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