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(Sharecast News) - Prospex Energy announced on Wednesday that initial drilling of the Viura-1B development well in northern Spain had yielded better-than-expected results.
The AIM-traded firm said the well successfully reached the targeted reservoir, prompting a decision to drill deeper in order to appraise an additional section.
It said the deeper appraisal, which involved drilling an extra 200 to 300 metres, could significantly enhance revenues and create additional value at a fraction of the cost of drilling a new well.
The well was part of a three-well drilling program at the Viura gas field, operated by HEYCO Energy Iberia, where Prospex holds a 7.2365% interest.
It said the field had estimated gross remaining reserves of 90 billion cubic feet, with Prospex's share equating to 6.5 billion cubic feet.
Drilling began on 22 June, and the well encountered the Utrillas-A reservoir unit 50 metres higher than expected, showing good quality reservoir rock, confirmed by logging tools. Significant gas shows were observed during the drilling and coring processes.
The well would be connected to existing gas processing facilities, with production income expected by the end of October or early November.
Following the positive results, HEYCO and its investors had unanimously approved the deepening of the well to explore the Utrillas-B formation below Utrillas-A.
Prospex said it was fully participating in the project, and had paid its 15% share of the costs for the additional drilling, as well as the costs associated with testing and completing this section if successful.
"I am extremely pleased to be announcing the successful results from the Viura-1B development well, which were better than expected and have subsequently prompted the decision to drill deeper into the reservoir providing us with the opportunity to create further value," said chief executive officer Mark Routh.
"Prospex's participation in this project was recommended by our technical team and accordingly they deserve credit for this initial success.
"Likewise, the operator deserves a huge degree of praise for delivering an extremely successful well and close to the original budget."
Routh said the Viura field contained gas at high pressure and high temperature, so the well could have been "extremely challenging" to deliver with a total depth of 4,100m measured depth and a maximum deviation of 45 degrees.
"HEYCO Energy has utilised its significant experience and expertise to deliver a safe and competent development well, which will be connected to the existing gas processing facilities on site, thus generating revenues immediately.
"Production income is expected by the end of October or early November.
"Deepening the well to appraise the hitherto undrilled Utrillas-B formation unit is a unique opportunity to add significant value at a fraction of the cost of a standalone well."
Mark Routh added that by drilling ahead now, the operator delivered for ¬1m, or ¬2.5m in the success case, an exploration well which would otherwise have cost over ¬25m as a standalone well.
"Given the significant upside potential of this formation, it is too good an opportunity to miss."
At 1236 BST, shares in Prospex Energy were up 4.16% at 5.83p.
Reporting by Josh White for Sharecast.com.
