Interactive Investor

President Energy deserves a salute

20th October 2014 11:07

Lee Wild from interactive investor

President Energy has proved the doubters wrong and struck oil at its Lapacho well, confirming the first ever oil discovery in the Paraguayan Chaco region. There's also evidence of oil at the company's J x-1 Jacaranda well. President's share price has doubled in response, and the future looks bright.

Two conventional oil bearing pay zones have been discovered in the Devonian Icla Formation at the PY-PE- L x-1 (Lapacho) well, said President Energy Monday. This was not the original target, however, and these finds will only add to the last resource estimate.

In June, President said the Lapacho prospect is estimated to have gross mean unrisked Prospective Resources of 5.2 trillion cubic feet (Tcf) of gas and 157 million barrels of condensate, in total over 1 billion barrels of oil equivalent (boe), of which 3.3 Tcf and 99 MMbbls condensate is President’s share.

"Given the good matrix porosity and abundant natural fractures, hydrocarbon flow rates from the Icla pay zones are expected to be commercial on a stand-alone basis," said President. "The size of the Icla discovery is still to be determined but can be seen to extend over at least the crest of the large underlying Santa Rosa structure, which has a closure of 25 km2 in the discrete fault block being tested by the Lx-1 Lapacho well."

The well is expected to reach final target depth around mid-November, with production flow testing due at the end of the month. If tests go well, first phase of production should begin during 2015.

"This discovery represents a significant milestone for both President Energy and for the country of Paraguay," says chairman Peter Levine. "President has demonstrated beyond doubt that movable conventional oil does exist in the Paraguayan Chaco."

"Whilst we are most satisfied with this discovery, President is now focused on drilling down to the original target which still lies in front of us."

Once the Lx-1 Lapacho well is complete, President will re-enter the suspended J x-1 Jacaranda well to test the Icla Sand pay zones below current target depth. It's already identified a continuous liquid hydrocarbon saturation of 250 metres within the shales which "much increases the chance of success to discover liquid hydrocarbons (light oil/condensate) in conventional sandstone reservoirs below 4,000 metres."

The share price surge recaptures all the ground lost following a plunge in August sparked by initial disappointment at Jacaranda, where President failed to announce a commercial discovery.

"There will be many ups and downs to come for President not least finding out how well the oil will flow, it has low-ish porosity like Bolivia but the discovery does take a lot of the risk off the table and the ride from here will be an exciting one," says oil industry expert Malcolm Graham-Wood.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.