Oil and gas explorers Byron Energy (ASX: BYE) and Otto Energy (ASX: OEL) have cheered first oil production from their South Marshall Island Block 71 (SM71) development in the Gulf of Mexico.
The North America-focused companies own the project in a 50/50 joint venture with Byron’s wholly-owned subsidiary Byron Energy Inc as the operator.
Byron had been moving to kick off oil production from three appraisal wells drilled in the shallow-water block over the past few months.
The first well, F1, was opened to the production system on the SM71 F platform last Friday. Within five hours, the well was producing at rates of nearly 2000 barrels of oil per day with little or no water.
This well has been on continuous production ever since at a controlled rate, with last test data measuring 2118 bpd of light crude oil.
On Sunday, the second well, F2, was opened to the system and is slowly being stepped up to a controlled rate. Five hours after commencement, test data indicated a rate of 1944 bpd of light crude oil.
“The observed rates are toward the upper range of our expectations for each well,” Byron chief executive Maynard Smith said.
“Both wells have come into production easily, which is the sign of both a high-quality reservoir and a very good completion,” he added.
Operations to complete the third well, including the removal of stuck completion tools, were ongoing.
Once the completion is finalised, this well will be placed into production with the other two wells.
Byron noted that neither the F1 or F2 wells are currently producing at their maximum capacity due to facility commissioning issues, and are currently being restricted to a combined rate of 4000 bpd.
“We expect the facility issues to be easily resolved this week and then we can establish appropriate rates prior to bringing on the F3 well when it is ready,” Smith said.
Smith described the start of production as a “watershed event” for Byron, repositioning the company as an oil producer.
“SM71 is expected to generate significant cash flow and to broaden Byron’s investor appeal,” he said.
Otto managing director Matthew Allen also believed the SM71 development would be “the platform for Otto’s growth in the Gulf of Mexico”.
Byron shares were up 10% on the news, trading at $0.44 by Monday afternoon, while Otto shares rose 5.26% to $0.06.