Winchester Energy sees production and sales revenue growth after Mustang oil success

Onshore oil producer Winchester Energy (ASX: WEL) has posted a significant jump in production and sales revenue for the June quarter following new oil discoveries at its Permian Basin properties in Texas, with more drilling ahead.

In its latest quarterly update, the US-focused company reported its working interest share of oil and gas production increasing by almost 2.5 times from the March average of 54 barrels of oil per day to a June quarter average of 133bopd.

Total working interest sales revenue also grew 154% to US$488,020 (A$697,171) from the March quarterly total of US$192,198 (A$274,566).

Winchester attributed this turnaround in production to new oil discovery results at the Mustang prospect within its White Hat Ranch lease.

Mustang oil discovery

In late May, the company commenced oil sales from its newly fracked White Hat 20#3 well, which began pumping oil at an initial production rate of 306bopd.

Gross oil production over the first 30 days (recorded close to the end of the June quarter) measured at a rate of 259bopd.

According to Winchester, the well has maintained its strong production rate and has now produced about 16,660 gross barrels of oil.

Gas was also hooked up to the sales pipeline and began flowing at 180,000 cubic feet per day in mid-July.

According to the company, gas is currently flowing at a rate of 100,000-140,000cfd (equivalent to a further 17-23boepd).

The success of White Hat 20#3 builds on the previously drilled White Hat 20#2 well, which started with an initial production of 200bopd and is still producing an average of 30-40bopd with 45,000bbls recovered to-date.

Winchester also pointed out that oil sales from the well only began in the last half of the June quarter, with the current September quarter expected to reflect a full quarter of sales.

Lightning discovery

After the end of the June quarter, Winchester drilled the Arledge 16#2 well targeting the Cisco sands in the Lightning prospect.

In mid-July, wireline logs confirmed 25 feet of calculated net pay in the upper Cisco sand plus 20ft in the lower Cisco sand.

Production casing has been run and cemented at a total depth of 5,500ft in preparation for completion and testing.

Depending on the success of the planned completion work, Winchester said this well could open “another development opportunity” to add to the recent Mustang oil discoveries.

Drilling plans

Winchester has entered the new financial year with a busy schedule as it plans to unlock more value from its Mustang prospect.

The company has lined up nine new wells to be drilled on the Mustang central lobe over the next 12 months.

First up are two development wells, White Hat 20#4 and White Hat 20#5, with drilling scheduled to start in mid-August.

The company also has an ongoing exploration and development drilling program planned for its Lightning, Spitfire and El Dorado prospects.

Combined with Mustang, the four prospects have a total cumulative gross prospective resource ranging from 4.26-22.7 million boe, with a best estimate of 9.74MMboe.

Thomas Ranch shale oil potential

The Thomas 119-H well, in which Winchester has the right to a 12.5% working interest, commenced production in June following a successful frack within the vertical section of the well.

According to well operator and private partner US Energy Corporation of America, the well has been producing oil and gas over the last week at an average of 29bopd, 450mcfd and 65bpd of water.

Winchester believes the success at Thomas 119-H has the potential to have a positive impact on the value of the company’s acreage with future successful horizontal drilling and fracking given the targeted Wolfcamp D (Three Fingers shale) extends across Winchester’s entire 17,000-acre lease position.