The anticipated October spudding of the Magnolia well is now looking more like mid-November, as the joint venture waits for the Ocean Bounty drilling rig to complete its current well, Norwest said.

Current estimates suggest the Magnolia prospect has the potential to hold 80 to 100 million barrels of recoverable oil and is ranked very highly, according to Norwest.

The company claimed the prospect was well defined by 3D seismic, there are positive seismic indicators and it lies within a productive petroleum system on trend with producing fields.

Norwest will pay less than 1% of well costs (to a cap of US$8 million) while retaining a 19.6% interest.

Meanwhile, in Tennessee after being recently brought into production, the five wells are delivering gas under an existing sales contract at US$12 per thousand cubic feet, said Norwest.

“While the initial results are not up to expectation, the high gas prices make the project commercial,” said Norwest CEO Joe Salomon.

“The project is still in its initial stages and we are learning as we go. At this early stage, we regard this as an exploration effort as we look for the sweet spots.”

He added that new exploration work incorporating the data from these wells suggested that these 'sweet spots' could be east of the current well locations.

The five wells each intersected thick sections of the target Devonian shale and initially flowed open hole flow rates of 130,000 cubic feet per day per well. They are currently flowing 135,000 cubic feet per day into the flow lines and are still stabilising, said Salomon.

“At this time, three of the wells are producing at satisfactory rates, while the other two may require some further work,” he said.

“One independent shale zone remains to be fracced in one of the wells, and is expected to provide additional gas flow.”

He added that the final results were not yet known, but the five wells were being closely monitored.

Salomon said the wells were providing valuable information for this and the company’s other Appalachian projects.

Norwest will next week meet with the project operator, Millers, to discuss the results and forward-looking plans. Salomon said the review teams were considering re-perforating and/or re-fraccing options to increase production rates.

The company also expects to start up drilling operations at its Kentucky and West Virginia projects once drill rigs become available.

Norwest has a 37.5% interest (about 29% net revenue interest) in the Miller project.