Challenger drilling success in Texas

Interviews

Transcription of Finance News Network Interview with Challenger Energy Limited (ASX:SEY) Managing Director, Paul Bilston

Joining me today from gas explorer and developer Challenger Energy is Managing Director, Paul Bilston. Paul welcome to FNN.


Paul Bilston: Thank you.

Could you start by introducing Challenger Energy and the Company’s strategy?

Paul Bilston: Challenger Energy is an Australian company; we’re listed here on the Australian Stock Exchange. And our focus is to look for projects in places where we think we can acquire a majority and an operated interest in a project, and where the project has significant size to it. So that if we’re doing an exploration project, we’re not trying to take a million dollars and turn it into one and a half, we’re trying to take a few million dollars and turn it into hundreds. So we’ve got projects in South Africa, we’re waiting on an application there and we’ve got a project that we’re currently drilling on in the US, both of which fit into that criteria.

So what is your experience and that of the Board’s?

Paul Bilston: I’m an engineer by training and I’ve been involved in most aspects of the oil and gas industry here in Australia. The last seven or
eight years, I’ve been very focused on the unconventional space, being the coal seam gas space here and the shale gas space we’re working in overseas. On the Board I have an Operations Director who’s got 30 years’ experience in all aspects of oil and gas in the US. And he looks after our US operations and acts as the operator there. David Woodley who’s my COO (Chief Operating Officer), again 15 years of experience across operations both here, internationally - both operationally and also commercially.

Let’s look at your US projects in more detail, starting with the Mercury Stetson prospect in Texas. What does it contain?

Paul Bilston: Okay the Mercury Stetson prospect that we talk about is a prospect that’s about 55,000 acres in size. We currently have a joint venture; we’re earning 50 per cent in that joint venture and the joint venture controls 26,000 acres. So our net interest currently is about 13,000 acres. We’re currently leasing and looking to expand our position, and the target of the joint venture is to control 35,000 acres across the prospect area.

What has the latest drilling revealed?

Paul Bilston: The latest drilling has confirmed for us one of the core unknowns, which is the presence of gas in the system. We’ve had fantastic gas shows during drilling. The thickness of the Barnett section was 200 feet thicker than what we thought in the prospect area, and we’re very pleased with the properties of the shales that we can see on the logs.

And what is planned for the rest of the year?

Paul Bilston: We’re continuing drilling at the moment; we’re deepening the well to drill down through into the Woodford shale. Once we’ve finished that we’ll be running new log suite, casing the well and setting it aside ahead of a fracture stimulation program, probably in the next couple of months.

You mentioned the Barnett and Woodford shale formations, how much drilling has occurred?

Paul Bilston: These formations have been extensively drilled regionally in both Texas and Oklahoma. In the immediate area adjacent to our prospect, there’s only been one well that was drilled through the two shales, and that’s the one that we’ve side-tracked from in this formation. We see these shales having about 360 BCF (billion cubic feet) per square mile, which potentially gives a gross 100 per cent interest of
threeTCF (trillion cubic feet) within the prospect area that we’re targeting. And we’re looking to earn 50 per cent of that.

Now Challenger also has other projects including one in the Karoo Basin of South Africa. What is your footprint?

Paul Bilston: We have 800,000 acres in the Karoo. Our acreage surrounds the only well in the Basin that’s actually produced gas to surface. The US Energy Information Agency did a report that suggests that there’s 485 TCF of technically recoverable resource in the Karoo. And if we look at our share of that, it’s around seven TCF.

And what’s planned for 2012?

Paul Bilston: At the moment the government in South Africa has a moratorium against any applications because of a technical study they’re doing, looking at fracking in South Africa. That’s due to report to the minister at the end of March and we hope that that will lead to the award of that licence. And following that, we can begin our work program.

Now to your financials. Are you funded for the remainder of the year?

Paul Bilston:Currently we’ve just completed a raising, earlier this week. And that’ll see us funded through to do the completion of the drilling and that fracture stimulation program, and production testing at Mercury Stetsonthat we’re currently working on.

To your stock. What is the price now and what’s your market cap?

Paul Bilston:Currently it’s trading at about 7.5 cents that gives a market capitalisation of about $20 million.

Last question Paul. Where would you like to see Challenger Energy by year’s end?

Paul Bilston: That’s always a big question. I’d like to see Challenger Energy successfully complete the testing program we’ve got at Mercury Stetson and have drilled another well there, to step out from where we are. And I’d like to see us awarded our South African permit and begun some of our early stage field work there.

Paul Bilston, thanks for the introduction to Challenger Energy and all the best in 2012.

Paul Bilston: Thank you.

Ends
 

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