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Andes Energia (LON:AEN) said it had made a “meaningful advance” in unlocking the potential of its Vaca Muerta shale acreage in Argentina.
This upbeat assessment assessment followed a successful intervention operation on the VG x-1 well on the Vega Grande oilfield in the country’s Neuquén basin.
Originally drilled in 1984, it produced on re-entry 80 barrels of oil a day from a 66 metre layer of shale.
Crucially, the oil made its way to surface without fracture stimulation. Chief executive Alejandro Jotayan pointed out the potential to lift oil without the need for fracking will reduce costs and enhance the economics of these wells.
But he went on to reveal: “It de-risks 30% of Andes' net acreage in Vaca Muerta, more than doubling our already de-risked acreage; and is the first Andes operated intervention and production test in Vaca Muerta.
“We look forward to continuing to develop our acreage in this world class play.”
It owns 100% of Vega Grande, which is next to the firm’s La Brea licence and in total the two cover 105,000 acres.
The company said it will now perform an extended test installing a sucker rod pump, using existing.
The shares rose 3% to 39.5p, though broker Westhouse reckons Andes is worth 85p a share.
In a note to clients, it said: “The fact that the Vaca Muerta formation in this well is flowing even without hydraulic fracturing stimulation is encouraging and indicates that if natural fractures are present Vaca Muerta may produce at economic rates without the cost of fracking.”
Specialist resources boutique SP Angel was more guarded in its analysis.
“While this is excellent news, what is unclear at the moment is to what extent the mud weight used in the original drilling of the well in 1984 induced fracturing in the rock, or whether this is indeed a natural unstimulated porosity and permeability driven flow rate,” it explained.
“Whichever way you look at it, this is a positive result for Andes energy, and a significant step forwards for the company as it seeks to commercialise its interests in the Vaca Muerta.”