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3Legs Lublewo well result significant for whole Polish shale industry - broker

Rising interest in the Polish shale industry was bolstered again today (Friday) by a positive operational update from junior oil and gas explorer 3Legs Resources.


Rising interest in the Polish shale industry was bolstered again today (Friday) by a positive operational update from junior oil and gas explorer 3Legs Resources (LON:3LEG).

Its Lublewo well in the Baltic basin in the north of the country has been successfully cleaned up and is now on long term flow test to assess the level of hydrocarbons present.

The well continues to flow back frack fluid and hydrocarbons, and as of Thursday (August 14) around 12% of the frac fluid originally injected had been recovered, the company said.

3Legs said the operations to bring the well into test production have gone very smoothly and it was delighted to see the well has flowed from the beginning without assistance.

It comes after the largest multi-stage fracking programme in Poland to date, which saw the firm, working alongside Conoco Philips, sink eight wells and frack six of them.

Today's news is positive for other shale firms in the area, such as San Leon Energy (LON:SLE), something highlighted by SLE's house broker finnCap today, as the company is targeting the same geology.

"Good results for 3legs should therefore be viewed as positive for SLE and vice versa," said analyst Dougie Youngson, who has a price target of 15p.

San Leon is a significant player in the polish market, with 50 licences in the Baltic basin - considered to be the one with the most potential - alone.

Shares flew last month when it unveiled a joint venture agreement in Poland that will see the oil and gas junior receive US$20mln in upfront payments and be carried for a work programme at two fields.

Under the deal, Palomar Natural Resources, founded by John Buggenhagen, former exploration director of San Leon, and Robert Price, will take 65% stakes in the Siekierki and Rawicz gas fields.

The explorer will also be carried “for a defined initial work programme” aimed at bringing these two fields, in the country’s southern and northern Permian basins, into production as soon as possible.

Broker Northland said today's 3Legs announcement was highly significant.

"Whilst far from conclusive there are some encouraging noises in this announcement.

"The well, believed to be the largest horizontal test completed in Poland to date, is important not only to ConocoPhillips and 3Legs, as a vital indicator of the commercial potential of the basin, but to the Polish shale industry as a whole."

The broker highlighted that the "all-important" flow rate over the next month or so will help determine the potential of the concession.

"A commercial flow rate could be anything above 1.5mmcfd," he said, given further optimisation work and data expected to results from this well.

Northland reckons for the investor the company offers a "uniquely low risk" entry into a possibly game changing and late-stage opportunity and repeats a 'buy' rating and 79p price target.

3Legs shares were unchanged today at 22.75p.

More to follow....

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