Real Energy (ASX: RLE) is another step closer to commercial gas production after it reported its Tamarama-2 well had been drilled to 1,900m of its planned 2,700m depth.
The well was spudded earlier this week as part of the company’s drilling program of two pilot development wells at its Windorah gas project in Queensland’s south-west.
Drilling at Tamarama-2 is a deviated hole to target a reservoir about 640m from the Tamarama-1 vertical well to optimise fracture stimulations of the Permian Toolachee Patchawarra gas reservoirs.
The advanced drilling at Tamarama-2 follows Tamarama-3 which was spudded last week.
Meanwhile, Tamarama-1 was spudded in 2014 and underwent a five-stage fracture stimulation program in 2016 before beginning flow testing.
By March 2018, Tamarama-1 had achieves gas flow rates between 500,000 and 2 million cubic feet per day.
Becoming a gas producer
Once Tamarama-2 and Tamarama-3 have been successfully established, Real Energy plans to begin pilot production to distribute gas to Australia’s east coast market.
Real Energy managing director Scott Brown told Small Caps earlier in the week that it was anticipated Windorah’s 13.7Tcf gas resource had the potential to supply a “big chunk of the east coast demand”.
The company secured an offtake deal with Australian gas retailer Weston Energy last year to sell 3 petajoules of gas a year for five years. This deal was a month after Real Energy clinched a memorandum of understanding with Santos to toll process its gas.
At this stage, Mr Brown said Real Energy was focused on proving production and then generating cash flow from Windorah.
Breakaway Research analyst report
Analyst Breakaway Research published an updated report on Real Energy, which has a buy recommendation based on drilling of the Tamarama-2 and Tamarama-3 wells, which is underway.
The analyst’s view is the company has the building blocks in place to deliver a commercial discovery.
Breakaway has valued Real Energy at up to A$0.45 per share, with a A$0.32 per share buy recommendation.
This is not financial advice, your personal situation has not been taken into account, see a financial expert before making any investment decision.
With Real Energy’s share price trading at 0.11c in late afternoon.