Norwest Energy NL : Oil Barrel

January 23, 2012

Norwest Energy Awaits Ministerial Decision To End Six Month Hiatus At Promising Arrowsmith-2 Well

These are frustrating times for investors in ASX-quoted Norwest Energy. The small cap, which raised A$4 million through a placing and rights issue in December after the underwriters, Patersons Securities, took up the shortfall, successfully drilled its much- anticipated Arrowsmith-2 well in June. This well is a key test of the shale gas potential of its acreage in the North Perth Basin, for which Norwest has high hopes.
Initial results from the Arrowsmith well were certainly encouraging, with mud logs and cores finding 450 metres of Kockatea Shale, 250 metres of Carynginia Shale, 330 metres of the Irwin River Coal Measures and 22 metres of the High Cliff sandstones. Gas analysis indicates all the shale targets are within the optimum maturation and generation window and core results suggest analogues with known US shale gas basins. Formations are likely to be brittle and suitable for fraccing and the Total Organic Content results are high.
However, before the company could undertake hydraulic stimulation and flow testing there was an environmental challenge from an unnamed third party. The work programme was referred to the Environmental Protection Authority, but its decision and that of the Department of Mines & Petroleum, which approved the work, was referred on appeal to the Minister For Environment. With the company still waiting the Minister's decision, this has meant a six month hiatus in activity.
Once the decision is announced, Norwest will lock in oil service giant Halliburton's frac equipment and mobilise it to the EP413 permit to begin the hydraulic fracture stimulation programme. Each zone will be perforated and stimulated. The results will provide information on the target intervals for development, predict production rates for horizontal wells and estimate a contingent resource. Norwest operates the project with a 27.945 per cent interest alongside ASX-quoted AWE with 44.252 per cent and India's Bharat PetroResources with 27.803 per cent. Farm-in partner Bharat is carrying the bulk of Norwest's costs, which, despite the resulting cost increases, are still expected to come in under A$500,000.
Norwest is also active in the UK, where it recently added to its portfolio in the second tranche of awards in the UK's 26th licensing round. The company has been awarded five blocks in the English Channel adjacent to its existing onshore licenses PEDL 238 and PEDL 239 in the Wessex Basin. The new acreage lies east/southeast of the former BP-owned giant Wytch Farm oil field, the largest onshore oil field in Western Europe with original oil in place volumes of 500 million barrels and peak production of 110,000 bpd (it now pumps around
15,000 bpd). Norwest has already identified six structural leads on the new acreage, which it hopes to work up into drillable prospects. Norwest will operate the new blocks with a 65 per cent interest alongside Wessex Exploration with 35 per cent. This is a longer term project, however, and for now the focus will remain on the Northern Perth Basin and the resumption of activities at Arrowsmith-2.