EXR - Regional neighbour flow test results are in…
This morning, Omega Oil and Gas released results from its flow test in the Taroom Trough in Queensland, Australia.
We were waiting for this news, given that Omega is working in the targeting the same play type as our Investment Elixir Energy (ASX: EXR).
Omega flowed oil and gas from with peak flow rates of 452 barrels of oil per day and 0.6 million standard cubic feet of gas.
The ultra high liquids content was somewhat of a surprise. However, Omega’s share price was down ~20% on the open so clearly the results fell short of the market’s pre flow test expectations.
Omega’s Chairman Trevor Brown held a webinar at 11:00am AEDT today to discuss the results in more detail, which we listened to.
Here were our key takeaways:
1. Reservoir conditions were way better than Omega expected. Trevor was specific to say that the results were ‘much better than expected’.
The thing that stood out to us the most from the announcement was the comments from Omega’s Specialist US-based, Well Testing Advisors ‘Rivo Testing Technologies’.
They compared the technical parameters of the project to the big projects in the US which is a good vote of confidence from the Americans, who have a lot of experience unlocking unconventional plays like the Taroom Trough.
(Source)
2. On the unexpected oil find.
Today’s flow test result now gives Omega optionality to pursue two different commercialisation pathways - one for gas and the other for oil/liquids.
Trevor also mentioned that Omega’s well wasn’t optimised to flow oil/liquids, so there was room to improve oil/liquids flow rates with a better prepared well design.
The 24-hour sustained flow rate of 321 barrels of oil per day and 0.472 Million Standard Cubic Feet of gas per day is a pretty good start considering that upside.
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We have been Investing in the oil & gas space for decades now and in some cases, companies fail to bring anything up to surface…
So bringing oil/liquids to surface is a good starting point for Omega and all the other players in the Taroom Trough - like our very own EXR.
We also liked that the type of oil brought to surface was “light crude oil” which is typically easier to process.
3. Trevor was asked why the flow test ended after 24 hours, which is something that we were initially thinking about reading the announcement.
The reality is that the horizontal well was a first for Omega.
He said that the flow test met all of the company’s objectives (flow, deliverability etc) and that Omega now had the technical data to go back and prepare for its next wells.
This makes a lot of sense, especially when we consider Omega’s well was only a nine stage frac over ~650m.
In the US, production wells where companies are going after absolute peak flow rates, can be 5-6-7x that size.
Meanwhile closer to EXR in the Beetaloo Basin in the Northern Territory - Tamboran Resource’s latest wells were >3,000m long horizontal wells.
Interestingly, those bigger horizontal wells started being drilled once the American oil billionaires (who understand unconventional plays really well) came onto the Tamboran register.
4. Speaking of Americans, Trevor was asked about Omega’s interest in partnering with anyone for its project.
Trevor answered the question by mentioning that Omega was in discussions with several parties.
AND that the news today de-risks the project from a technical perspective to the point where these bigger parties may start to get more comfortable with the Taroom Trough.
We mentioned above that the US oil and gas industry is a lot more familiar with unconventional oil and gas and how their involvement in Tamboran triggered bigger horizontal wells with bigger fracking programs.
Trevor specifically mentioned that the US parties would now have a lot of data to work with and that he expected a lot more interest to come in for this region from the US.
We saw speculation earlier this month that the $210BN US major ConnocoPhillips had been looking at assets in the Taroom Trough, so it will be interesting to see how it all plays out now.
Any corporate interest will be good news for our Investment in the region Elixir Energy (ASX: EXR).
(Source)
What does all of this mean for our Investment EXR?
EXR is the biggest landholder in the Taroom Trough, and it has almost double Omega’s current contingent resources.
EXR will now be able to model the oil/liquids potential of its own blocks without having to drill any new wells.
The oil/liquids is essentially free, completely unexpected upside for EXR now.
We also think EXR is in a good position to benefit from any external interest that might come into the region after today’s news from Omega.
Omega will be showing interested parties all of the data from its well, which those parties can then extrapolate onto EXR’s ground…
Overall, despite the Omega share price response today (which we think is just a failure to meet market expectations) we think that the Taroom Trough in QLD will have a lot more newsflow coming out of it in 2025.
What’s next for EXR?
🔄 More news from EXR’s neighbour Omega
We expect to see Omega put out more detailed results in the coming weeks and to outline its forward plan.
We will be looking out for that news over the coming weeks.
Objective #3: Regional progress
This objective is less specific to things EXR can control, but we think it is important for the EXR story overall. We want to see EXR’s regional peers progress their projects and prove up commercially viable flow rates across the region.
Milestones:
🔄 News from EXR’s peer Omega Oil and Gas
🔄 News from Shell
🔲 News from Santos
🔲 BONUS - New entrants into the region
Source: “What do we expect EXR to deliver?” - EXR Investment Memo 24 Feb 2025
🔄 Share Purchase Plan to raise up to $2M
EXR is currently running a Share Purchase Plan (SPP) to raise up to $2M at 3.5c.
The SPP also comes with 1:2 free listed option exercisable at 12c, with a 17 October 2026 expiry.
The offer is expected to close on the 15th of April.
