The first Ellis County well, Kelln Trust 5-1, in Section 5 is operated by Mewbourne and Antares has a working interest of 35%, said managing director Howard McLaughlin.

“In line with stated strategy, Antares has farmed down its interest in this section from 70% to around 35% in order to test the western edge of its acreage position with reduced financial exposure,” McLaughlin said.

“In a success case this would increase the value of the surrounding acreage held by Antares. The well is targeted to reach the Morrow formation and will also log the overlying Tonkawa, Des Moines and Cleveland formations.”

The second well, in section 12, is operated by Unit Drilling. Antares only holds around 1% working interest (6 acres) in this well.

“The interest is deliberately minimal, but entitles Antares to all data from the well which is important in determining the value of Antares Ellis acreage,” McLaughlin said.

“In general we’re now Iexploring for high-impact plays greater than the Morrow can deliver but believe there still is potential in the Morrow play in Ellis County. The value of the Des Moines oil play in Ellis is still to be determined and the results of the next two wells will help our understanding of the extent of a potential oil field.

“The cost of operations like hydraulic fracturing have dramatically increased in cost so much so that from a capital allocation perspective it’s better to direct funds for the time being to higher impact drilling.”

Antares’ decision to look for high-impact projects led it to sell its Turkish producing assets for US$40.4m and allocate the proceeds to US exploration.

Production from its Turkish fields was declining and the assets needed a lot of continued exploration and development expenditure in order to maintain production levels as they were nearing the end of their lives, the company said. In addition, US gas prices are higher and more predictable than Turkish prices.

“Compared to the US, we saw insufficient upside in the Turkish acreage to meet our growth targets,” McLaughlin said.

“On the other hand we see a lot of high potential opportunities in the US that could replace our entire Turkey production and reserves very quickly.”

The company now has more than A$40 million in the bank and plans to drill between 8-10 high impact gas wells next year. It is estimating an annual exploration budget of up to $US 15 million next year.

The company is aiming to ensure all its prospects are large enough to add reserves to Antares of 5 to 20 billion cubic feet per well. It is reducing the technical risk by using 3D seismic and drilling in areas where discoveries have already been made.

The higher impact targets are generally deeper than 12,000 feet. Below this depth has not been extensively explored in the past and field size and production rates can be substantially higher, according to McLaughlin.

Antares recent southern Texan acquisitions – the New Taiton prospect and the Kenedy Ranch – are both potentially high-impact for the company, McLaughlin recently told a corporatefile.com.au Open Briefing.

“We have agreements in place to drill seven more wells [in these two prospects] with a combined net impact to Antares if successful of greater than 100 billion cubic feet,” he said.

The New Taiton prospect is a moderate risk, large Wilcox prospect with up to 100 BCF Potential, according to Antares.

“This prospect has high quality 3D seismic coverage and clearly shows the gas related amplitudes and attributes,” McLaughlin said.

“We believe success with this well would lead to several more development wells each capable of producing 5-10 million cubic feet per day. This project alone could quickly replace the production previously generated from Turkey.”

The Kenedy ranch opportunity is a six-well program with several hundred BCF potential. Antares is participating in the first three wells at 5% and the second three wells at up to 50%. The first prospect is deemed to be the most risky, so the company has chosen to take a reduced equity.

“If this initial large prospect is successful our share will be very material,” McLaughlin said.

“If, however, the well fails our financial exposure will be minimal. This is a good example of how we chose to adjust equity levels to balance the risk and cost of a prospect.

McLaughlin said Antares was very excited about the following five well program and believed the potential for making a large gas discovery was reasonably high.

“Both these deals represent the style of the opportunity we’re planning to acquire in greater numbers,” he said.

“The upside for the company is significant and revenue can be generated quickly.”