MCF Energy, ADX’s joint venture partner in the Welchau Investment Area in in Upper Austria, has agreed to pay half of the now €5.1 million (AU$8.3 million) cost of drilling the Welchau-1 exploration well.
The amended deal will earn MCF a 25 per cent interest in the area that contains the massive 807 billion cubic feet Welchau gas prospect, which is set for imminent testing by the drill bit.
The Welchau-1 well work had previously been budgeted at €3.8 million (AU$6.19 million), but ADX says additional permitting costs to secure an environmental clearance and additional pre-drill costs, including the drilling of a shallow geotechnical and water well, has resulted in the increased cost estimate.
In January last year, MCF agreed to pay half of the Welchau-1 well costs and that promise will stand despite the increased costs. In return, MCF will now earn the 25 per cent interest, rather than the previously agreed 20 per cent.
With a 75 per cent interest still in its grasp, ADX will remains the operator of the Welchau Investment Area. Management says if the well cost estimate is exceeded, it will pay 75 per cent of the ongoing costs and MCF will pick up the remaining 25 per cent.
The Welchau exploration project is an exceptional domestic energy supply and economic opportunity for the State of Austria. ADX and our partner MCF are committed to pursuing responsible gas exploration at a time when energy security is of critical importance in Europe. ADX Energy executive chairman Ian Tchacos.
At present, the well pad at the Welchau-1 surface location is being prepared for the arrival of the RED Drilling & Services GmbH’s “E-202” drilling rig, which is expected to begin drilling operations at the end of this month. The prospect is just 18km from the Austrian national gas pipeline network and ADX is hoping to make a gas discovery within the Steinalm-fractured carbonate reservoir that was drilled down-dip by OMV back in 1989 and flowed gas at 3.5 million standard cubic feet per day.
ADX says the Molln-1 well hit a 400m column of gas, but downhole reservoir pressure measurements suggest it may be up to 900m. The maximum Welchau closure at the top Steinalm carbonate level is about 100 square kilometres, corresponding to a high-case prospective resource estimate for the structure of 1.631 trillion cubic feet. The top of the reservoir is expected at just 1120m below the surface.
The market will now be looking out for regular drilling updates from the company as Welchau-1 tests the massive closure.
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