LNG

Hancock Energy, the oil and gas company run by entrepreneur Gina Rinehart, has increased its bid for the Perth Basin natural gas company Warrego Energy by almost 30 percent and has now outbid mining company Mineral Resources for the prize of a gas field stake with LNG feed-gas potential.

Warrego Energy Ltd, the Australian oil and gas explorer with natural gas assets in the onshore Perth Basin, said its board's recommendation of a takeover by a subsidiary of Hancock Prospecting Ltd. was no longer unanimous following a revised proposal from Australia’s Strike Energy amid an intense Australian company bid battle.

The Australian emerging natural gas producer Warrego Energy said the appraisal campaign near the West Erregulla gas discovery in the onshore Perth Basin was continuing with initial positive reports from drilling.

Warrego has already signed a deal with Alcoa of Australia, operator of one of the world's largest integrated bauxite mining operation, for volumes from the West Erregulla gas field discovery made in 2019.

Alcoa operates three alumina refineries, the Kwinana, Pinjarra and Wagerup plants in Western Australia, along with two bauxite mines.

Warrego has a 50-50 joint venture partner in Strike Energy.

The Warrego and Strike Energy West Erregulla concession forms part of a triangle between Mitsui’s & Co.’s Waitsia wells and Beach Energy’s Beharra Springs Deep.

The Waitsia well’s owners, Mitsui and Beach Energy, have already signed a liquefaction tolling agreement for LNG with partners at the Woodside-operated North West Shelf export plant.

The Warrego-Strike joint venture’s main discovery, the West Erregulla-2 well, had been drilled to a total depth of 5,100 metres, the deepest well drilled in onshore Australia, and flow tests achieved a world-class maximum flow rate of 69 million standard cubic feet of gas per day.

Strike Energy, as operator, provided a drilling update on May 17 on the current West Erregulla appraisal campaign.

“The WE-4 well flow testing continued with the well cleaning up and with favourable pressures measured,” said the Strike report provided to the Australian Securities Exchange by Warrego.

The report said the production testing was now in the clean-up phase and pressure conditions on initial flows at WE-4 are similar to the successful WE-2 well.

The result has been labelled “favourable” and the report said the high reservoir quality at WE-4 has been confirmed by core results.

“These results show permeability up to 430 metres in the depth of the well and porosity of up to 19.9 percent in the Kingia Sandstones,” the report explained.

Along with the WE-4 update, the joint venture said it had landed and cemented the surface casing string at WE-5, with drilling now at 2,785 metres measured depth (MD).

Warrego previously noted that any increase in West Erregulla’s certified resources would be welcomed by the market, and further success would add considerably to the current gross contingent resources. 

The Western Australia emerging natural gas producer Warrego Energy has guaranteed its way forward by signing a long-term supply agreement with a foundation customer.

Warrego said it signed its deal with Alcoa of Australia, operator of one of the world's largest integrated bauxite mining operation for its West Erregulla gas field in the onshore Perth Basin.

The deal covers 155 petajoules of gas, with supply to begin in January 2024. The length of the agreement has not been disclosed.

Additionally, the binding gas sales deal is subject to a final investment decision on West Erregulla, which is expected in the first half of 2021.

Nevertheless, Warrego said it intended to expand its gas sales portfolio and is continuing to negotiate with other potential customers.

Alcoa operates three alumina refineries, the Kwinana, Pinjarra and Wagerup plants in Western Australia, along with two bauxite mines.

Warrego Group Chief Executive Dennis Donald said the company was delighted with the agreement to supply Western Australia’s largest and most experienced gas buyer.

“Securing such a large-scale and long-term agreement with a top-tier customer like Alcoa is testament to the quality of the West Erregulla gas field and the commercialisation strategy adopted by Warrego and will send a positive signal to other potential gas buyers,” Donald explained.

Donald added that Warrego was well advanced in progressing gas processing options, which include third-party processing and shared infrastructure.

At present, the company is drilling its WE-3 well in the northern area of the West Erregulla field.

At least one further well (WE-4) is scheduled to be drilled in the next 12 months, along with the possibility of a fifth one (WE-5).

Warrego noted that any increase in West Erregulla’s certified resources will be welcomed by the market, and a success at WE-3 could add considerably to the current 513 billion standard cubic feet of gross contingent resources

Warrego has a 50-50 joint venture partner in Strike Energy and recently announced the spudding of its second well in the West Erregulla concession.

The field forms part of a triangle between Mitsui’s & Co.’s Waitsia wells and Beach Energy’s Beharra Springs Deep, which has been claimed to have the potential to hold a world-class hydrocarbon deposit.

West Erregulla-2 was spudded in June 2019 and drilled to a total depth of 5,100 metres, the deepest well drilled in onshore Australia, and flow tests achieved a world-class maximum flow rate of 69 million standard cubic feet of gas per day.

The appraisal drilling campaign was one of a string of positive announcements for Warrego, which was formed in late 2007 by Scottish oil and gas workers Dennis Donald and Duncan MacNiven.

“The major discoveries of the West Erregulla-2 well helped consolidate our position as a key player in the Perth Basin and has laid the foundation for exploration and appraisal success through our current campaign,” stated Donald.