In our last installments we reported that, realistically, the risk that InterOil wouldn’t have enough gas for an LNG facility had all but disappeared. But the news is getting better. A lot better…
Initial results of logs indicate, well, to sum it up, that Antelope is massive. Absolutely massive. Some key results:
- A reef structure has now been confirmed. This is very important, because reefs typically have the highest porosity of any source rock
- Indeed, the average porosity was 8.4%, while at some intervals it exceeded 20%. That’s much higher than at any previous InterOil well, two of which already showed record gas flows even with considerably lower porosity
- If anything, these figures are likely to be an underestimation of real porosity, cleaning up the skin (the drilling itself often leads to clogging up the surface, reducing porosity) could very well increase it, as we experienced at Elk4
- InterOil is not even at total depth, but the hight of the structure exceeds expectations, especially on a net basis. Over 90% of it is productive, which is not only a massive 1800 feet, but a rare achievement for a reefal structure.
- To put that in perspective, the pay structure is ten times that of Elk4..
Summing up, on all dimensions (horizontally, but especially vertically and porosity wise), the Antelope structure exceeds expectations, even ours.
In terms of size and deliverability, this really looks to be shaping up as a world class find. This cannot remain unnoticed (and in fact, the stock price has already doubled from the December lows), it really puts InterOil on the map.
With size and deliverability ever increasing, it’s hard to imagine how, in a world in dire need of cleaner energy sources, this will not be developed. Deliverability massively enhanced, IOC’s competitive position is considerably enhanced (if these early data pan out, but there is no reason to expect differently) from what we argued a couple of months ago (which you can read here).
An LNG facility can be supplied with just a handfull of wells, and there can be no reasonable doubt that there is not enough gas even to supply a two train facility.
Surely, the odds must now be heavily in favour of the Japanese signing the deal that apparently has been in the making, especially as parties have gotten quite nervous from the spectacle of Russia’s halt of LNG supplies.
Asians, especially the big LNG importers like Korea and Japan, now have a massive, very cheap resource at their doorstep.
We can hardly wait for the next drilling update, not only are they produced with unprecedented speed, they are breathtakingly good.
The upward potential can only be very significant, and we know that there is big money waiting in the wings, ready to jump in when the things we now expect to happen, will happen.
And we also heared that there might be a second rig underway, with many more promising drilling structures and (dramatically) increased drilling speeds, things could only just have begun.
Also, the world economy will finally recover, and this will take enery prices higher, much higher, as the fall-off in demand was only temporary, but the credit crisis and lower energy prices did damage supply considerably more, setting us up for an almost inevitable rally later on.
IOC looks to be a prime candidate to profit from that also, but in the meantime, even in the present low energy prices, things already seem very promising.