Central Petroleum (ASX: CTP) holds an extensive package of prospective acreage of over 270,000 km2 in central Australia, which is predominately in the Pedirka Basin, along with 25,000 km2 in the Southern Georgina Basin.
Apart from conventional gas potential, the company has had independent estimates of over 10,000 trillion cubic feet in UCG "syngas" prospective recoverable resources.
Patersons Securities places 16 cents share price target on Central Petroleum
Patersons Securities has conducted an analysis of Central Petroleum (ASX: CTP), recommending the NT explorer as a speculative buy with a price target of $0.16/sh.
Central Petroleum Ltd ( CTP ): $0.06
Recommendation: SPECULATIVE BUY
Price target: $0.16/sh
CTP has advised that the Johnstone West-1 well, being drilled in EP 115 (CTP 90%), has encountered significant oil shows over a gross 22m interval from 1387-1409m.
The Johnstone West-1 well is the second well in the 2010 program, testing a high estimate of up to 400mmbbls of UOIIP (P10 basis) in multiple target zones and additional shale zones of interest.
The oil shows were observed in a interbedded siltstone/sandstone sequence, sealed by what was described as as a 70m thick competent silty shale unit.
The sandstones have exhibited 20 to 40% dull to bright green-yellow fluorescence with a blooming blue white fluorescent cut and thick residual ring - an encouraging observation for the presence of live vs. residual oil.
Well control is not fully established, due to the 80km distance to the nearest Mt Winter-1 well, so it is not clear at this stage whether the sandstones are in fact the Upper Stairway sandstones or the Pacoota Sandstone units.
The report noted that the sandstones were likely of low porosity and interbedded with siltstones (approx 50% sandstone).
The information provided is based only on observation of cuttings to date. More will be known with logging/coring following the completion of the drilling.
However the observations are certainly encouraging for the potential of this observed zone, further intervals below, for regional prospectivity and for the decision to drill the adjacent proposed Surprise-1 exploration well (8km down-dip).
The information provided highlights an active oil system with the shale suggested to provide a good seal. Assuming a competent structure, the key risk is the quality of the reservoir, which CTP suggests is questionable based on initial visual observations.
If subsequent testing shows the reservoir to be tight then this is not necessarily the end of the prospect - if a significant oil accumulation were to be defined, horizontal drilling/fraccing could potentially allow for development of such a tight formation.
However at this stage, little is known and the broker eagerly awaits further drilling results and the subsequent testing of this promising zone and potentially others.
While the broker's valuation is notionally based on a previous transaction value it said there is substantial upside potential should CTP successfully delineate a commercially recoverable discovery of oil, gas, helium or coal and on this basis Patersons maintains its speculative BUY recommendation.
