Victoria Petroleum managing director John Kopcheff said Eagle could turn the company's fortunes around.
If the Eagle project pays off, it has been tipped to double the company’s market capitalisation to $100 million. This would be a company-maker, says Kopcheff.
He described the Eagle well, which contains a potential 13 million mean barrels of oil with an upside of as much as 34 million barrels and 58 billion cubic feet of gas, as a 'low-risk engineering exercise.'
"With our 20% near-free-carried interest in the drilling of the Eagle North-1 appraisal well, a successful result will have a significant impact on Victoria Petroleum NL's position as a oil and gas producer in the USA," Kopcheff said.
The other partners were also positive but no quite so bullish.
“We know the oil’s there,” said First Australian Resources executive chairman Michael Evans, whose company holds a 15% interest in the project.
“And the prevailing oil price means the pool doesn’t have to be that big.”
The Eagle North-1 appraisal well is due to spud in mid-November, and the partners are hoping it will be a case of third time lucky. Production at the Eagle prospect was twice halted – once in 1986 and again in 2001 – for different reasons.
In 1986 the well was producing 220 barrels per day, but production stopped because the oil price dipped too low. Fifteen years later in 2001, the Eagle-1 horizontal well was successfully drilled into the Gatchell Sandstone oil reservoir. But technical difficulties meant the operator was unable to production test the 90 metres of interpreted oil-pay drilled.
“Success at Eagle would be a great relief for all of us,” Evans told EnergyReview.net.
“We’ve been there since the very beginning when the oil price was extremely low and believe that without doubt it’s a project worth pursuing.
“Our technical team was so impressed they recommended we increased our interest in it if it became available.”
Evans’ words reflected the sentiments of the other Australian junior joint venture partners – operator Lakes Oil (15%) and Sun Resources (10%). The remaning partners are US private interests and UK-based Empyrean Energy, which this week farmed into the project with a 38.5% working interest, taking equity in the project from VicPet and the US partners.
Lakes Oil executive chairman Robert Annells told EnergyReview.net his company was also optimistic.
“It’s an updip from a known well (Mary Bellocchi-1) so unless something major happens, we’re expecting a discovery,” he said.
“Technically, it is still an exploration well, but you could almost classify it as a step-out well.”
Unlike VicPet however, Annells said success at Eagle did not have company-maker potential for Lakes Oil, although it would certainly take pressure off the shareholders.
“Success at Eagle would provide sufficient cash flow to underpin our involvement in the project,” said Annells.
“It’s not enough to make millions for our shareholders, but it will take the drain off them.”
Lakes Oil changed strategic direction in recent years to leave the US and focus instead on funding 100% of its well programs in the Gippsland Basin in Queensland.
“Taking small parts in projects like this was a strategy we used to have,” said Annells.
“It’s not a major investment, but we’ve got a lot to recoup in the project after 15-years of stopping and starting.”
Sun Resources joined the project for the 2001 drilling and managing director Brad Farrell is also excited about a potential success.
“A commercial discovery will be very significant in these times of high oil and gas prices, as the pool can be developed very rapidly because of excellent infrastructure in the immediate environs,” he told EnergyReview.net.
“The resulting cashflow to Sun Resources should impact significantly on the company’s share price as its share on issue (at 116 million shares) are modest against its peers.”
But even if Eagle fails to live up to expectations, each junior partner has other irons in the fire.
VicPet has a busy activity schedule in the Cooper Basin. Lakes Oil still has another seven wells lined up for drilling this year in Victoria. Sun Resources is busy in other parts of the US, as well as the Carnarvon Basin and Malta. And FAR has ongoing work in onshore Louisiana.
Kopcheff said the partners wanted to prove it was possible to drill a horizontal well that produced 1000 barrels per day.
“If it’s successful, a nine-well development program will follow,” he said.
Participants in the Eagle Oil Pool Development Project and Eagle North-1 are: Empyrean Energy PLC (38.5%); Victoria Petroleum NL (20%); First Australian Resources NL (15%); Lakes Oil NL (15%); Sun Resources NL (10%); and US private interests 1.5%.
