EXR update on its drill program later this year

Published 03-AUG-2023 11:00 A.M.

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Our energy Investment Elixir Energy (ASX: EXR) is gearing up to drill what it's calling the “highest impact well in the company’s history”.

EXR has set an October spud date for its Grandis gas project where the company will be drilling the ‘Daydream-2’ appraisal well.

EXR’s well will be drilled down to ~4,200m and target the same reservoir units that was proven at Daydream-1 which was drilled ~5 kilometres and now in the hands of $300BN oil and gas major Shell.

Just yesterday EXR put out a video which tells the full story pretty well, check out that video below:

(Source)

What is EXR drilling and what is the goal?

EXR’s project already has a “contingent resource estimate” showing 395 billion cubic feet (Bcf) of potentially recoverable gas.

Having a contingent resource means that EXR is drilling an appraisal well - Appraisal wells are relatively lower risk where a company is targeting an already discovered hydrocarbon system to try and book a maiden reserve number.

A reserve is typically the last step before a discovery can be commercialised.

🎓 To see the stages of an oil and gas resource check out the following: How to Read Oil & Gas Resources

EXR’s appraisal well will be aiming to:

Prove commercially viable flow rates
Increase EXR’s already large 395 bcf contingent resource.
Book the project’s first gas reserves (converting contingent resources into reserves).

If successful, EXR will have proved out a commercially viable project bordering neighbours like Santos and Shell.

The project is also in a position whereby, if commercial, it could be put into production to supply the gas hungry Australian east coast as well as the international markets through Queensland’s existing Liquefied Natural Gas (LNG) plants.

We suspect that any successful outcome would make EXR’s project interesting to the majors surrounding it especially given the comments made by Santos’ CEO Kevin Gallagher back in November 2018 where he said - “If the play works then we believe there is multi-TCF potential”.

Above is a great map which shows the various players in the Taroom Trough, which includes Shell, Santos, Omega and importantly, EXR.

In terms of funding, EXR has to date locked in 43.5% of the funding for the well via the Federal Government’s R&D Tax Incentive program. As things stand, total well costs aren't fully clear and there is always a chance EXR looks to raise some more capital going into the drill program.

As of 30 June 2023 EXR had ~$9.55M in cash.

We are backing EXR’s team to deliver a successful drill program given the previous experience they have had drilling out large scale gas discoveries:

Managing Director Neil Young is ex-Santos management.
Director Stephen Kelemen ran Santos’ Coal Seam gas portfolio, AND
EXR’s chairman Richard Cottee is seen as “the Godfather” of Coal Seam gas in QLD - he famously took Queensland Gas Company from a $20M junior into a $5.8B takeover target.