WINCHESTER ENERGY LIMITED WEL CAP STRUCTURE | ASX: WEL |
Shares: ~1B
Share Price: 1.3c
Market Cap: ~$13M
Cash: $4.46M
Debt: Nil
ACN 168 586 445
QUARTERLY REPORT
For the period ending 30 June 2022
HIGHLIGHTS
- Positive cash flow of AUD$718,8401 (~84% increase from the March 2022 quarter)
- Working Interest quarterly revenue of AUD$2,628,4191
-
Production during the June 2022 quarter averaged 196 barrels of oil equivalent per day2
(boepd) net to Winchester's Working Interest (WI) - Contributions from newly acquired Varn Oil Field and Group Prospect forecast to lift production by between 44% (base) and 100% (high) by end CY20223
-
Outstanding oil price exposure- Winchester fully leveraged to strong oil and gas prices
Operations - Consistent news-flow over next three months with four shallow workovers, one deep-test recompletion and three new wells planned at the Group Prospect
- Oil successfully recovered from the first Group Prospect workover well - second workover well currently underway
- Full permitting and approvals received for development of the Varn Oil Field (Proven and Probable Reserves (2P) of 1.068 mmboe2) with 75% of above-ground infrastructure now in place and drilling to commence in August 2022
Figure 1: Winchester Gross Oil Production Forecast - Base Case and High Case (excludes gas production)3
- Using exchange rate 1 AUD = 0.69 USD.
- boe (barrels of oil equivalent) - gas quantities are converted to boe using 6,000 cubic feet of gas to one barrel of oil. Conversion ratio is based on energy equivalency and does not represent value equivalency. Rounded to the nearest boe.
- See 'Forecast Explanation' in ASX announcement dated 18 July 2022
PRODUCTION SUMMARY
Winchester Energy Limited's (ASX:WEL) ("Winchester", "the Company") gross and net Working Interest (WI) oil and gas production for the quarter ended 30 June 2022 is shown below:
Oil Production | June | March | December | September | June | |||||||||
(boe) | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||
2022 | 2022 | 2021 | 2021 | 2021 | ||||||||||
Gross Oil | 19,090 | 31,043 | 46,911 | 22,245 | 15,933 | |||||||||
Production | ||||||||||||||
WEL WI Share* | 17,873 | 28,313 | 42,713 | 18,784 | 11,857 | |||||||||
*Winchester is entitled to its WI share of revenue after royalty payments to the oil and gas mineral rights owners.
Winchester's average daily WI production in the June 2022 quarter was 196 barrels of oil equivalent per day (boepd)4, comprising 93% liquids (oil).
Figure 2: Location of Winchester Operations in Texas, USA
4 boe (barrels of oil equivalent) - gas quantities are converted to boe using 6,000 cubic feet of gas to one barrel of oil. The 6:1 conversion ratio is based on an energy equivalency conversion method and does not represent value equivalency. Estimates are rounded to the nearest boe.
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REVENUE SUMMARY
Total WI oil and gas sales revenue for the June 2022 quarter was A$2,628,4195 (US$1,813,609). The average sale price per barrel of oil was US$106.37, a 13.8% increase from the March 2022 quarter.
June 2022 quarterly revenue resulted in positive cash flow of AUD$718,84065 (US$496,000) for the quarter, an ~84% increase from the March 2022 quarter.
OIL PRODUCTION FORECAST
Winchester is delivering on its strategy to build sustainable high-margin oil and gas production over the coming months and years. In 2H 2022 the Winchester team will oversee a busy schedule of field activity and increasing production across Winchester's portfolio.
All of Winchester's existing and forecast production is derived from conventional reservoirs which can be immediately brought online to deliver oil and gas sales at decade-high oil prices. Production forecasts on a project basis using conservative base case projections are provided in Figure 3.
Figure 3: Winchester Net Oil Production Forecast by Project - Base Case (excludes gas production)6
- Using exchange rate 1 AUD = 0.69 USD.
- See 'Forecast Explanation' in ASX announcement dated 18 July 2022
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The Group Prospect and Varn Oil Field acquisitions are expected to add significantly to Winchester's production volumes in Nolan County in the near and medium term. Crucially, both Varn and the Group Prospect include several historically oil-rich 'bonus' formations that represent significant additional upside and can be tested for minimal additional cost.
In addition, Winchester continues to leverage its large seismic database and regional experience to review and assess further low-risk opportunities in the region that can add barrels of oil at low cost.
ACQUISITION OF GROUP PROSPECT
On 29 June 2022, Winchester announced it had executed an agreement with private US-based oil company Westex Resources Inc (Westex) that allows Winchester to farm-in to the Group Prospect which is contiguous with its 100%-owned Whiteside Prospect in Nolan County, Texas.
The Group Prospect farm-in provides Winchester with an entry into an oil play contiguous to its existing land holding and will deliver an immediate incremental increase in the Company's oil production for minimal operational outlay.
One of the Group Prospect wells, Chapman 1, was a former Ellenburger Formation producer meaning it is a deep well providing access to all the oil-bearing formations prevalent in the area, including the Strawn and Cisco Sands. The Chapman 1 workover will enable Winchester to cheaply assess the stratigraphy and potential of the area that includes the Company's critical Whiteside acreage.
An Area of Mutual Interest (AMI), incorporating all areas within one mile of the Group Prospect has been agreed between Winchester and Westex. The AMI stipulates where either party acquires leases within the AMI, that party must offer to the other party (within 30 days) the leases on a 75% Winchester / 25% Westex basis.
Table 1: Winchester work commitments under the Group Prospect farm-in
Activity | Commencement Date | Approx Cost | Westex Back-in after | |||||||
Payout* | ||||||||||
Workover 1 | 29 June 2022 (complete) | US$75,000 | 50% | |||||||
Workover 2 | 10 days after completion of | US$75,000 | 50% | |||||||
Workover 1 (commenced) | ||||||||||
Workover 3 | 10 days after completion of | |||||||||
(Chapman 1 | US$250,000 | 50% | ||||||||
Workover 2 | ||||||||||
deep test) | ||||||||||
Workover 4 | 10 days after completion of | US$75,000 | 50% | |||||||
Workover 3 | ||||||||||
Workover 5 | 10 days after completion of | US$75,000 | 50% | |||||||
Workover 4 | ||||||||||
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New well 1 | 19 August 2022 | US$600,000 | 25% |
New well 2 | 14 days after completion of | US$600,000 | 25% |
New well 1 | |||
New well 3 | 14 days after completion of | US$600,000 | 25% |
New well 2 | |||
Additional workovers or | To be determined by | To be | No back-in. Heads up at |
WI of 75% Winchester / | |||
new wells | Winchester | determined | |
25% Westex | |||
- Westex to assume stipulated percentage of WI revenue (back-in)afterWinchester recovers 100% of individual workover/new well cost from revenue (payout)
On top of the farm-in work commitments, Winchester can conduct further workovers and drill additional wells across the Group Prospect on a 75% (Winchester) / 25% (Westex) 'heads up' basis. This represents significant upside for Winchester should initial work prove successful.
Winchester has taken ownership of 75% of the Group Prospect (1,320 net acres to Winchester). Details of the work commitment under the farm-in agreement are provided in Table 1.
Figure 4: Location of WEL assets in Nolan and Taylor Counties, Texas
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Winchester Energy Ltd. published this content on 29 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2022 02:03:08 UTC.
