Oil and gas explorer Otto Energy (ASX: OEL) is rejoicing in the discovery of hydrocarbons at an exploration well recently drilled on the Lightning oil and gas prospect on the US Gulf Coast.
The company today announced its project partner Houston-based private company Hilcorp Energy has drilled the Green-1 well in Matagorda County, Texas to its final total depth of 4,638m.
According to Otto, petrophysical evaluation of logging data has confirmed the well as a commercial discovery with a minimum of 180 feet (54.86m) of net pay.
Depending on porosity and water saturation cutoffs applied, there is potential for an additional 150 feet (45.72m) of net pay in the well, the company reported.
Gulf Coast drilling program
In late July, Otto entered a farm-in agreement with Hilcorp to earn a 37.5% working interest in the leases covering Lightning and seven other oil and gas prospects across the Gulf Coast.
The partners kicked off a planned eight-well exploration program in August with its first well drilled on the Big Tex prospect. However, after encountering an “insufficient producible reservoir”, it was plugged and abandoned as a sub-commercial well.
Hilcorp spudded the second well, Green-1, on the Lightning prospect in December. The prospect has been estimated to hold gross prospective resources of 4.6 million barrels of oil equivalent (on a best estimate basis), which equates to 360,000 barrels of oil and 25.22 billion cubic feet of gas.
Otto managing director Matthew Allen said the well delivered significantly in excess of pre-drill estimates, which will materially increase the company’s reserves base and rapidly diversify its revenue base.
The well also benefits from being close to existing pipelines, meaning any discovery can be quickly brought into production.
“With the ability to tie the well in and commence production in a very short time frame, this discovery will be a major step in our plans to expand Otto’s production base and deliver on our objective of 5,000 barrels of oil equivalent production,” Mr Allen said.
“This initial exploration well has de-risked a large amplitude [of] supported structure and plans for the further development of the field will commence once production from the first well has stabilised,” he added.
Hilcorp has begun preparations to complete and subsequently tie back the well to a nearby sales pipeline, with first production anticipated by the end of March.
The drilling rig is now expected to move to the next prospect in the exploration program, Don Julio-2, with drilling operations set to start “in the coming weeks”.
Otto has an active drilling program lined up for 2019, with eyes now set on the imminent spudding of the Winx-1 well in Alaska, where it is earning a 22.5% stake in a joint venture with fellow ASX juniors 88 Energy (ASX: 88E) and Red Emperor Resources (ASX: RMP).
By early afternoon trade, Otto shares were sitting up 50% on today’s discovery news at $0.063.