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Golden Gate Petroleum raising up to A$4.49m, continues drilling to unlock Permian Basin oil

Last updated: 12:20 08 Feb 2012 AEDT, First published: 11:20 08 Feb 2012 AEDT

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Golden Gate Petroleum (ASX:GGP) has launched its 1:7 entitlement issue aimed at raising up to A$4.49 million that will help fund the 10-well drilling program at its Permian Basin acreage in Reagan County, Texas.

Four of the wells have been drilled to date and the company is planning to drill at the end of February its fifth well (SRH-5) that will also be its first horizontal well.

The non-renounceable issue consists of more than 264 million shares priced at A$0.017 each and is part of a larger three-tranche program to raise about A$7 million.

The first tranche of 86.3 million shares to raise about A$1.4 million was completed on 5 January 2012 and shareholders have approved the second placement of 58.8 million to raise $1 million.

Shares under the second placement will not be issued until 16 February and will not be eligible to participate in the entitlement issue.

Separately, Golden Gate also raised A$2.1 million last month through an issue of convertible loans to sophisticated professional investors.

Golden Gate held cash of A$2.8 million and could add up to A$9 million to its cash hoard form the various raising efforts if all entitlements are taken up.

Well progress

The company has brought its SRH-2 well on stream though it plans to change the pump to increase fluid production and deal with the high gas content.

SRH-2 is currently flowing just over 100 barrels of oil and 125,000 cubic feet of gas per day along with frac fluid and formation water.

The oil is being sold at West Texas Intermediate prices – currently trading around US$97 (A$89.8) – less transportation costs – while the gas is selling for over US$7 per 1000 cubic feet.

SRH-1 is currently having a new downhole pump installed to accommodate the rich gas being produced while SRH-3 is undergoing a 7-stage fracture stimulation program.

SRH-3 is testing 2 additional intervals for their productive capabilities compared to the 2 previous wells.

Golden Gate has also completed SRH-4 and flow testing will be carried out on the Strawn bottom hole interval, which has been fracced, to determine if it is a candidate for horizontal drilling.

Of the 10 wells, 4 are planned as horizontal wells.

Golden Gate holds a 100% interest in the four Permian Basin leases, which cover 35.6 square kilometres (8806 acres).

Broad Oak Energy, a surrounding producer in Reagan County, has more than 200 wells producing over 10,000 barrels of oil per day.

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