Winx-1 failure sends oil and gas juniors sliding (88E, RMP, PANR)

Shares in oil and gas juniors associated with the Winx-1 exploration well in Alaska collapsed on Wednesday following the news that the site has been plugged and abandoned.

Early indications for the well had been promising, with operator 88 Energy (LSE:88E) announcing this month that all pre-drill targets had been successfully intersected with multiple ‘potential’ pay zones being identified. However, on Tuesday, 88 said that provisional petrophysical analysis of a wireline logging programme at the well, which was targeting 400MMboe, have indicated that it will not be commercial.

Digging deeper, the logs indicated low oil saturation in the well’s primary Nanushuk Topset. Meanwhile, testing and fluid samples have suggested the formation’s reservoir quality and mobility is insufficient to warrant production testing. 88 said the reservoir appears to have been compromised by dispersed clay, which binds much of the fluid present in place so that it cannot flow. It also occupies pore space in the Nanushuk topset, resulting in lower relative hydrocarbon saturation.

Elsewhere, zones of interest identified in the secondary Torok formation also exhibited low oil saturation and did not flow hydrocarbons during pressure testing. The company will carry out additional work to determine whether an effective trapping mechanism is present at the location.

Winx 1 will now be plugged and abandoned. However, 88 and its partners Red Emperor Resources (LSE:RMP) and Pantheon Resources (LSE:PANR) will now reprocess 3D seismic to evaluate the remaining prospectivity of their Western Leases in Alaska. This will include acreage in the Nanushuk Fairway. According to Red Emperor, Nanushuk is one of the largest conventional oil fields discovered in the US in more than 30 years.

The Winx-1 well has been subject to much coverage and excitement within the retail market, with shares soaring and diving on each update. Given the positive indicators released earlier this month then, it will come as little surprise that the share price of all firms involved dived on Tuesday following news of the well’s failure.

Red Emperor, which owns a 31.5pc stake in Winx, was hit the hardest. As at writing, it was down 83.6pc to 0.83p – its lowest price since May last year. 88, meanwhile, also suffered a significant fall. The firm, which owns a 36pc stake in the site, had fallen by more than a third to 0.8p in morning trading.

Managing director Dave Wall commented: ‘The early encouragement seen at Winx has not been confirmed by the results from the wireline logging program, despite many of the hallmarks of a successful Nanushuk play being present. Analysis of the data is ongoing; however, it is deemed unlikely to change the current view in a material fashion. We appreciate that this is disappointing for investors but, at the same time, we look to the future and continue our forward path to ultimate success at our projects in Alaska. An update will be provided on the broader Alaska project portfolio in the near term.’

Finally, Pantheon, which owns a 10pc working interest, was down 27.2pc to 20.5p.

Jay Cheatham, chief executive, said: ‘The wireline logging program at Winx-1 did not confirm the operator’s and our earlier optimism which was based on mudlog shows and LWD (logging while drilling). Data analysis is continuing and more evaluation is necessary to determine the next steps for the Western Blocks. While disappointing, this does not condemn the Western Blocks where Winx-1 is located.’

Author: Daniel Flynn

Disclaimer: The author does not own shares in either of the companies mentioned in this article

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