Buru Energy starts side track to give Ungani oil well a second chance

Buru Energy ASX BRU Ungani well onshore Canning Basin
WA Liberal leader Mike Nahan visiting Buru Energy's Ungani oilfield in the Canning Basin.

Buru Energy (ASX: BRU) is hoping for a second chance at success with sidetrack drilling of its Ungani-4 development well in Western Australia’s onshore Canning Basin after the original well failed to live it up to the hype.

The company today announced the commencement of sidetrack operations, including the removal of the beam pump and preparations to install Drilling Industries Australia’s DDGT rig over the well.

Buru is anticipating a 14-day timeline to drill to the bottom of this new hole, which is about 60m southwest of the current bottom hole location. Completion activities are then expected to take a further 20 days.

The Ungani-4 well spudded back in October last year and was expected to boost Buru’s production rate in the Ungani oilfield by around 1000 barrels of oil per day.

However, drilling issues and wet weather conditions led to some setbacks at the Ungani oilfield and production testing from the well did not begin until this May.

Unfortunately, the oil flow rate was much lower than expected (some 350bopd), which Buru put down to either reservoir damage or mechanical issues that could potentially be restricting flow from the well.

Hence, sidetrack drilling was planned with the objective of improving the productivity of the underperforming well.

“The most likely explanation for the performance of the original well is the complex and sub-optimal completion that was run to attempt to isolate the overlying unstable Laurel shale section,” Buru stated.

“However, there remains the possibility that the well performance has been affected by the Ungani dolomite reservoir being less well developed at this location, as the reservoir quality was unable to be determined from the restricted suite of logs obtained from the well.”

According to the company, Ungani-4 has the potential to be sidetracked again if the reservoir appears underdeveloped in this new section.

In this case, the well would be sidetracked to the north towards other currently producing wells.

Roc Oil farm-in update

Buru also provided an update on a recent agreement to farm out half of its Canning Basin oil assets to Chinese-owned Roc Oil.

The companies entered into two transactions in May for Roc to acquire a 50% interest in exploration permits EP391, EP428 and EP436 by paying 80% ($20 million) of the next $25 million of exploration expenditure on the permits, including up to four wells.

The deal was conditional on the termination, by an Act of the Parliament of Western Australia, of a state agreement signed in November 2012.

The Act passed through the lower and upper houses of parliament and as of 21 August, it received royal assent and became an Act of Parliament. Consequently, this has made Roc’s farm-in agreement unconditional.

Buru shares were up 3.77% to $0.275 on today’s operations update by afternoon trade.