Proactive Investors - Falcon Oil & Gas Ltd. (LON:FOG) shares dropped by nearly a third in Thursday’s early deals after a new production test update informed investors that the Amungee NW-2H well, drilled in December and fracked in March, has yet to establish an ‘uninhibited production rate’.
The company, in a technical update via RNS, said that independent analysis has found “a potential skin” that’s inhibiting the flow of gas from the stimulated shale – nevertheless, the well has been flowing gas, at a rate of around 0.83 million cubic feet per day plus 50 barrels per day of water.
It noted that this is the sixth well to be drilled and stimulated in the Beetaloo, in Australia’s Northern Territory, and, that the joint venture partners believe the test results to date “are not indicative of the underlying production potential” of the Amungee NW-1H well.
Analysis is continuing with the partners assessing how they can potentially clean-up potential skin along with any potential learnings for future operations, Falcon added. Any possible clean up work would be carried out in the third quarter, it noted.
Two further wells are currently under consideration in the project for the remainder of this year, though these plans have yet to be formally approved among the partners.
Chief executive Philip O’Quigley meanwhile highlighted Falcon’s financial position which he described as “very strong”, with the company holding US$16mln of cash whilst its costs are also currently carried by its partners.
“Initial flow rates demonstrated from the A2H well to date do not reflect the true deliverability of the shale in the Amungee region … we continue to learn from how the shale is stimulated and performs under varying conditions,” O’Quigley said in a statement.
“Further analysis of all available data together with any clean-up work will hopefully yield more positive interpretation of the results obtained to date.”
In London, Falcon shares were down 3.2p or 32% changing hands at 6.8p on Thursday.