Adds broker comments...
UK focused hydrocarbons explorer EnCore Oil (LON: EO.) says it will need to conduct further appraisal drilling in order to understand the potential of the two Channel systems it has found at its Cladhan discovery now that it has completed its initial four-well drill programme.
Broker Arbuthnot described the final operation update released by the company this morning as “a positive result” that will help mitigate some of the disappointing news from the last two appraisal wells. “We feel the market will respond positively to today’s news and we continue coverage with a buy recommendation with a target price of 156 pence,” said Arbuthnot.
The Cladhan appraisal well 210/30a-4x, the final well of this programme – which was drilled as a side-track to evaluate a channel to the south of the original Cladham discovery – encountered an Upper Jurassic reservoir with a gross true vertical thickness (TVT) of 171 feet and 105 feet of net sand.
EnCore said that reservoir quality is “excellent” with porosities of up to 25 percent.
Log and pressure data indicates that a sandstone unit here of five feet TVT is hydrocarbon bearing. The firm said that there is also potential for a new accumulation, separate from Cladhan.
“Although the well results to date have been somewhat mixed, we have accomplished our main aim of identifying and delimiting the areal extent of the Cladhan field,” said EnCore’s CEO, Alan Booth.
“A significant amount of work still lies ahead in integrating and calibrating the extensive well and core information into the seismic data, although initial analysis appears to suggest that the original Cladhan discovery is confined to the Northern Channel Belt immediately North of this current well.
"In the Northern Channel Belt, we have now established a hydrocarbon column of greater than 1,200 feet where reservoir quality, rather than an actual Oil Water Contact may well delimit producibility from the deeper, down dip 'fan area' of the discovery.”
The Central Channel area, drilled by the 210/30a-4y and 210/30a-4x wells, is in a separate pressure regime, according to Booth. “The latest well appears to have intersected the edge of an oil column and a potential oil-water contact some way down dip from the crest in a separate channel system,” he said, adding that he was encouraged that “the Central Channel may well also contain oil trapped up dip”.
Booth added that “further appraisal drilling, likely in the first half of 2012, will now be required to understand the up dip potential in both these two new channels systems”.
Elsewhere, EnCore is continuing with development studies and planning on its Catcher, Varadero and Burgman discoveries on the UK Central North Sea Block 28/9. Further seismic data will be acquired here over the summer. Meanwhile, the next well to be drilled will be on the EnCore-operated Tudor Rose discover on UK Central North Sea Block 14/30a.
EnCore holds a 16.6 percent stake in the Cladhan joint venture partnership.
At 9:55am shares in the company were trading marginally higher than they started the day at 59.875 pence each.