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Sun Resources Expands Woodbine Assets In Texas With Highly Prospective Well To Spud Soon

Sun Resources (ASX: SUR) is further expanding its Woodbine Play acreage in Texas, this time taking a stake in a project immediately adjacent to one of the best performing horizontal oil wells in Leon County.

Work on the 1360 acre Richland Oil Project will start immediately following the transaction, with Sun and its partners drilling the Beeler-1H horizontal well on or about 17 August.

Success at Beeler-1H will add substantial value to Sun's asset base and possibly provide cash flow.

This well targets the same productive Woodbine Formation interval as that in the PMO Oil Field, which Halcón Resources Corporation paid Petromax Operating Company US$378 million (A$370.7 million) for a 75% stake in.

Sun is paying 25% if the costs of the Beeler-1H well, or about US$1.9 million, to earn a 20.3125% working interest in the project. Its partners include Richland Resources Corporation (40.625%) and Amerril Energy (20.3125%).

"Sun is pleased to have entered into this farm-in with Richland and Amerril," managing director Matthew Battrick said.

He said that besides the location next to the PMO field, the presence of Richland as the operator was also a strong positive.

The acquisition adds to Sun's 100% working interest in 8347 acres in the Delta Oil Project as well as the 50% working interest in 12,293 acres owned by Amerril Energy.

Experienced operator

Richland, which is taking the lead role in the project, is along with Petromax, the most knowledgeable operator of Woodbine horizontal wells having a proven track record in drilling and fraccing such wells in Madison County, Texas.

The operator will first drill and log the interval from the top of the Austin Chalk Formation to the base of the Georgetown Formation for the purpose of identifying and assessing all potential oil zones in that interval.

While this adds about US$400,000 to the cost of the well, this could increase the number of stacked laterals the well can produce from, increasing the ultimate recovery at the well. The average estimated ultimate recovery for horizontal Woodbine wells is 467,000 barrels of oil equivalent per zone or horizontal drain hole.

Close proximity to strong oil producer

Beeler-1H is located about 6.76 kilometres from the Gresham A-1H well that is the second best well of the 15 horizontal Woodbine wells that make up the PMO oil field.

Gresham A-1H currently produces about 600 barrels per day of oil and has produced 105,070 barrels since it came on stream 166 days ago.

Amerril still owns a 25% working interest in the PMO field, though this will soon be sold to Halcón.

Sun has interpreted the Beelier-1H well location as having a similar log profile as and could be regarded as a step-out or offs-set development of Gresham A-1H.

Battrick added there are six wells nearby whose well logs have been interpreted by Sun to indicate the presence of hydrocarbons through the Woodbine, leading to high expectations for a successful horizontal well at this location.

Woodbine

The Woodbine is a multi-zone tight oil play, sourced from the Eagle Ford shale, with the reservoir having a high percentage of silica and clastics (sandstone).

It has been identified by former Petrohawk Energy chief and present head of Halcón, Floyd Wilson, as one of the top developing tight oil plays in the U.S.

Sun had noted previously that operators in Leon and Madison counties had the most success with horizontal well bores of up between 6000 and 7000 feet (1829 to 2133 metres) that are completed with multi-stage fracture stimulations.

These produce oil at initial rates of 1000 barrels per day or more with lower than expected decline rates, adding to the commercial potential of the Eaglebine/Woodbine play.

Average cost of drilling, fraccing and bringing these wells into production is about US$5 million (A$4.8 million) to US$6 million each.

Majors such as Gastar Exploration (NYSE: GST), Encana Corporation (NYSE: ECA) and Chesapeake Energy (NYSE: CHJK) have also acquired leases in the play.

Analysis

The Richland Oil Project's proximity to the PMO Oil Field as well as existing wells that indicate hydrocarbons through the Woodbine serve to considerably de-risk the area.

A success at Beeler-1H likely provide cash flow for the company and served to enhance the prospectivity of Sun's other Woodbine leases.

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