The company farmed-in to Aera’s Northwest Hills project and four others late last year, following two years of discussions.
Orchard will earn a 14.9% working interest in the project by paying about $US1.5 million of testing costs. It will also earn a 15% working interest in the neighbouring 6000 acres for future exploration potential.
The NWLH structure is estimated to contain more than 300 billion cubic feet equivalent of natural gas and condensate reserve potential.
NWLH 1-22 was drilled in August 2001 and had only reached a depth of 6400 metres in August the following year because of delays "resulting from extremely difficult drilling conditions", Orchard said in an earlier report.
The well was prepared for completion and testing, however operations were suspended in late 2002 pending further assessment by the working interest parties.
Jointly owned by affiliates of Shell and ExxonMobil, Aera began the NWLH 1-22 testing phase last Saturday, January 21. The test involved a section of open hole with slotted liner across a Lower Temblor formation.
Initial gas rates from the two-day flow test were lower than expected and the water rates were high. The well was then shut-in for a pressure build-up analysis.
A second 24-hour flow test occurred yesterday, before NWLH 1-22 was shut in again for another 24-hour pressure build up to verify the initial test results, the company said.
“Initial test results, while still being evaluated, indicate less gas production than originally expected and are not promising,” executive chairman Steve Graves said.
“A final determination of the project is expected to be made before the end of the first quarter in 2006.”
NWLH 1-22 is producing from the Lower Temblor sands, comprising a group of lower Miocene Sands, stratigraphically below the Monterey and Macdonald shales.
Exploration of these sands began in 1966 in the Lost Hills area. The Temblor is oil and gas productive in other fields, where local uplift has elevated these sands to near surface, Orchard said.
As part of the October agreement with Aera, Orchard also earned varying interests in the Belgian Anticline, Coles Levee Deep, Coalinga and Yowlumne project areas, all in the San Joaquin basin.
