Armour Energy Updates on Egilabria 2 Well, Australia

Armour Energy Updates on Egilabria 2 Well, Australia

Armour Energy provided an update of progress with drilling of the Egilabria 2 vertical well in the Company’s 100% owned tenement (ATP 1087) in Queensland.

As previously reported on 24th May, the first well stage was drilled to a depth of 322m and a 13‐3/8” casing was then set and successfully cemented at the base of the Mesozoic sediments of the Carpentaria Basin. The well is located as shown in Figure 1.

Drilling of the well is currently progressing at a depth of 545m and progressing through the South Nicholson Group of the Isa Super basin to a planned depth of 785m where an intermediate casing is planned to be set and cemented.

Difficult drilling conditions and slow penetration rates have been experienced due to the very hard and abrasive nature of the indurated sandstones of the South Nicholson Group. Extremelly high wear rates on air hammers have necessitated the introduction of diamond impregnated hammer bits into the upper section of the well to efficiently penetrate these rocks.

First gas was detected in the well at 425m whilst tripping into the well and again at 502m with peaks of 900 units of trip gas. This indicates that the South Nicholson Group has capacity to store hydrocarbons in tight sandstone reservoirs that are likely fractured however the sands also have water associated with the gas at this location. This water will be cased off as planned.

An average background gas level of 25 units has been detected while drilling on mud from 502mto 545m.

Hydrocarbons in remnant bitumen impregnated drill chips have also been recovered from the South Nicholson Group sediments and this suggests that oil has been previously generated in the South Nicholson Group.

Armour is now preparing to recommence air drilling operations with improved air hammers and diamond impregnated bits to accelerate drilling to the next casing point at 785m where the South Nicholson group will be isolated behind 9‐5/8” intermediate casing as planned.

From 785m air drilling will then continue to the targeted total depth of 1850m to evaluate the strong gas shows of up to 8% gas in drilling mud from the 125m thick Lawn Hill Formation during drilling of the Egilabria 1 well by Comalco in 1992.

The Egilabria 2 DW1 lateral well will then be drilled from the Egilabria 2 vertical well to a measured depth of 2200 mat 1750m total vertical depth. This will establish a sub horizontal lateral section targeting 504m of interval within the Lawn Hill Formation (see Figure 2). This lateral section will then be completed with casing and swelling packers to establish six isolated stimulation zones.

Halliburton Energy Services has been contracted to carry out a six stage hydraulic stimulation of the Egilabria 2 DW1 well in July 2013 to test the shale gas production potential of the Lawn Hill Formation. Halliburton is a proven service provider in other Australian shale plays. The planned hydraulic stimulation of the Egilabria 2 DW1 lateral well is designed to prove commercial gas flows and will be a key milestone in the Company’s plansto define proven and probable reserves in ATP 1087.

Armour Energy and its independent expert consultants believe the Lawn Hill Formation contains a prospective recoverable resource of 22 TCF (Trillion Cubic Feet) of gas. The Company believes this provides potential to define up to 9 TCF of resources and reserves over the next three years. 9 TCF is sufficient gas resource, subject to reserves definition, to support 6 million tonne per annum of LNG production for more than 20 years.

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LNG World News Staff, June 06, 2013; Image: Armour Energy