Corallian Energy kicked off the week with the news that its well at the Colter prospect in the UK’s Wessex Basin had encountered a ‘bonus’ oil discovery. However, with the organisation having yet to assess its main target at the prospect as expected, Monday’s mixed market reaction suggests investors are holding out for more clarity.
Corallian said its Colter well has been drilled as a vertical well to a depth of 1,870m in the Sherwood Sandstone at the prospect. However, it added that it unexpectedly remained on the southern side of Colter’s bounding fault.
Regardless, the well encountered oil and gas shows over a 9.4m interval at the top of the Sherwood Sandstone reservoir. Petrophysical evaluation of drilling data has calculated a net pay of 3m, similar to a well drilled in 1983 by British Gas in the Colter South fault terrace. As such, Corallian believes that the two wells may share a share a common oil-water-contact, having both intersected the down-dip margin of the Colter South prospect.
The company’s most recent assessment of Colter South had estimated a mean recoverable volume of 15MMbbls. However, it said further work will be required to refine this assessment with the new well data.
The business has now begun preparations to side-track the well, drilling directionally to a Sherwood Sandstone target on the northern side of the bounding fault. This will enable it to assess Colter fully and is expected to take two weeks to complete.
The pay at Colter South represents a bonus in the form of an additional hydrocarbon structure at Colter. However, it is likely that investors are still waiting for an indication of licence’s full potential.
The well was designed to appraise a historic discovery that lies immediately to the south of Wytch Farm, Europe’s largest onshore oil field. This has been assessed to contain gross unrisked mean prospective resources of 23MMbbls oil recoverable and a further 1MMboe of gas.
The muted response to Monday’s news by investors in the numerous listed firms with holdings in Colter reflects this hesitancy.
For example, Andalas Energy and Power (LSE:ADL), which holds an 8pc stake in the prospect, was down 2.6pc to 0.6p in midday trading on Monday. This came despite chief executive Simon Gorringe highlight the opportunity that Colter South offers for future appraisal to increase the Colter licence area’s overall value.
‘The oil and gas shows encountered in Colter South mean that we maintain our confidence levels for the side-track into the main the main Colter Prospect target. We look forward to updating shareholders in the coming weeks,’ he added.
Meanwhile, Reabold Resources (LSE:RBD) which owns 49pc of Corallian Energy to give it a 16.1pc effective stake in Colter, was up just 0.6pc to 0.73p on the news. Reabold said it was ‘very pleased’ with the discovery before adding that it plans to invest a further £750k in Corallian through an advanced subscription agreement at a 30pc discount to its next raise. Elsewhere, 10pc Colter owner United Oil & Gas (LSE:UOG) rose 4.9pc to 4.3p on the news.
The only stakeholder to buck this trend was Baron Oil (LSE:BOIL). Indeed, the 8pc holder rose by an impressive 24.4pc to 0.28p following the news. Chairman and chief executive Malcolm Butler said:
‘The initial well bore has given valuable information on the potential of the Colter South Prospect, which will be integrated into our existing analysis of the structure in this area. We are now moving forward with the side-track into the Sherwood Sandstone reservoir in our main Colter Prospect target and look forward to updating shareholders in due course.’