With US oil prices in a bear market (that’s a 20% plus fall from the most recent peak), you’d think it would not be a good time to be talking up an oil field, especially in Australia.
However, that’s what Santos did yesterday with an update on the Dorado find in WA waters. Santos says the oil find, in the Dorado-1 well in 2018 could be even larger than previously thought based on early results from the Dorado-2 well.
Santos picked up an 80% interest in the find, and smaller ones nearby off Port Hedland when it bought Quadrant Energy last year.
Quadrant and its 20% partner, Carnarvon had first revealed the find and an estimated 171 million barrels of oil revealed in a series of enthusiastic comments from the smaller company.
Last week Carnarvon told the market that drilling the Dorado two well had encountered promising indicators and that wireline logs (a way of measuring hydrocarbons in a drill hole) would be run.
Carnarvon separately announced that a comprehensive seismic survey would be run over the exploration area for further detail ahead of further drilling.
There are smaller discoveries in the same area in the Buffalo and Roc wells.
Santos said initial indications from the Dorado-2 appraisal well in the Bedout Basin north of Port Hedland yielded similar results to the Dorado-1 discovery last year which suggested it could be one of the State’s biggest oil fields ever.
“This is a great result which indicates the Dorado discovery is larger than anticipated and which significantly de-risks a future development.” Santos managing director Kevin Gallagher said in a statement to the ASX.
Santos said fluid compositions were similar to the light oils and gases sampled in Dorado-1, 2 kilometers away, where condensate yields ranged from 190 to 245 barrels per million standard cubic feet in one area and from 70 to 90 barrels per million standard cubic feet in another.
The good result had increased confidence in the presence of large hydrocarbon columns in reservoirs, which should result in a significant increase in gas resources relative to pre-drill estimates, the company said.
“The well was drilled down-dip approximately two kilometres from the Dorado-1 discovery and encountered 85 metres of net reservoir in the primary Caley Formation. As expected, an oil-water contact was intersected at 4,003 metres measured depth, with 40 metres of net oil pay encountered,” yesterday’s statement read.
“An additional 11 metres of pay was encountered in the Upper Caley sands. Preliminary well site analysis indicates this upper zone is oil-bearing but is subject to further analysis to confirm the hydrocarbon phase.”
“The value of the discovery is greatly enhanced by the high-quality reservoirs and fluids and the shallow-water setting, which should facilitate a cost-competitive development,” Mr. Gallagher said.
“Dorado opens a new basin with high prospectivity in permits where Santos has a high equity position and rich exploration inventory with potential to substantially grow the resource base.”
Mr. Gallagher said acquisition of a major new seismic survey was in progress to mature additional exploration opportunities for drilling.
Carnarvon managing director Adrian Cook said Dorado-2 well had the potential to transition the company into a significant producer. “This highly successful result makes this a very tangible reality,” he said.
“Dorado has been proven to be a world-class resource, located in an ideal jurisdiction and operated by a quality partner,” Mr. Cook said.
“The joint venture can now confidently continue with its plans for a fast-tracked Caley oil development and a more substantial full field development, which is expected to incorporate the Roc discovery, on a staged basis,” Mr Cook said.
Santos shares rose 1% to $6.72 which wasn’t a bad result given the gloom about global oil demand and rising production and stockpiles in the US which have helped push the price of West Texas Intermediate down 22% since its April peak.
