The air was festive at the annual “Friends of ARC” dinner held just before Christmas last year. Fuelling the goodwill was not just the liquid refreshments but the heartening reality that ARC shares had just come off an all time low thanks to some very timely exploration successes.
Most of all, the "friends" were there to say thanks to managing director Eric Streitberg for his hard work during the year. Streitberg is no Johnny-come-lately to the energy game. In fact, he gathers his support from the fact he has made backers good money in his previous corporate incarnation at Discovery Petroleum.
This area became the bedrock of Discovery which he then led into Indonesian production – the Kakap field - and which eventually fell, after a struggle, to a takeover by UK producers, Premier Oil plc. So it was natural that when he resurfaced in the corporate world leading the re-badged Austin Oil (now ARC) he went back to the Perth Basin to find new opportunities.
The Dongara gas field was the initial main play, with the strategy of lifting the production from this declining gas field. It was a strategy which met with a modicum of success in that their cash flows were maintained but there had not been the level of incremental reserves upgrades ARC hoped would come from the ageing field.
Streitberg and his team then remapped what was then the Hovea prospect and Origin Energy liked what they saw and farmed into the ARC permit. Origin recently tasted success nearby with the Beharra Spings North gas discovery and clearly saw a pattern emerging that they wanted to be a part of. Origin funded the costs of the first two wells and an extensive 3D seismic program as part of the farm in agreement.
This year ARC vindicated the trust of the shareholders. Hovea-1 intersected an oil leg and the follow up Hovea-2 well intersected a deep gas zone that has exciting implications for the onshore deep gas prospectivity of the Basin. This zone flowed at a substantial rate of 16.5 million cubic feet per day of gas on a drill stem test and has now been suspended for future production from this zone or to assist in the recovery of the oil discovery.
While the oil leg has the most immediate commercial value to ARC, the gas discovery has uncovered some interesting geological developments in relation to future developments.
“What that has done is open up a new play in the Basin particularly up in the area where the reservoir quality is well developed and the offshore discovery was also in the same section High Cliff Sandstone,” Streitberg said. “There is no structural connection to Cliff Head but it’s stratigraphically in the same horizon. It’s a section that hasn’t been seen as prospective from onshore and basically people haven’t drilled for it so this is a pretty significant step forward as far as the onshore goes to get such good gas flows out of that section.
“We’re either going to link it up to Dongara and put it on production or potentially use it to assist in a recovery from the Hovea oil pool. We’ll make that decision within a couple of months once we get the results of Hovea 3, which is testing the oil zone.”
Continued Part 2
