Gary Jeffery, managing director of Sacgasco Ltd., had every reason to savor a bottle of fine (albeit Argentinian) wine in Chico, Calif., this week to celebrate early success of its potential game-breaking Dempsey well in the Sacramento Basin.
A year ago, Jeffery described Perth, Australia-based Sangasco as “languishing, unloved and nobody wanted to know us.” He told the Good Oil Conference in Perth, “We will not be back here if we have not drilled Dempsey!”
Today Sacgasco ranks third in the share price performance of Australian Securities Exchange-listed companies in the oil and gas sector for the 12 months to August 25, according to Australian Oil and Gas Research. The top performers were: Rey Resources, which saw its share price grow 275% to 30 cents; Blue Energy, 233% to 8 cents and Sacgasco, 218% to 9 cents.
That’s some Cinderella story for a junior whose investors had “given up on us drilling a well” in 2016, until Sacgasco seized control of its own destiny.
“We had been talking about the Dempsey well for about three years. But we then decided we would change our approach and we were able to consolidate the joint venture which was ourselves, Xstate Resources and three private companies. We acquired the three private companies to take ourselves to 90% in Dempsey and 75% in Alvares (California Natural Gas Prospect) and that gave us operatorship control, the ability to negotiate farm-outs and the momentum needed to move on,” Jeffery said.
On Aug. 21, Sacgasco announced the first phase of the Dempsey well (best estimated to contain 1Tcf of recoverable gas), had confirmed four zones of interpreted gas saturated sandstones at 3,300 ft with a net gas pay estimate of 30 ft to 50 feet, enough to cover the well costs.
Jeffery said investors had warmed to Sacgasco’s strategy in the Sacramento basin, “one of least explored sub-basins in the world under and adjacent to a prolific (Sacramento) gas basin.
“Some 6,000 wells have been drilled into the known part of the Sacramento Basin and a number of those produced the 11-plus Tcf of gas out of the basin to date,” he said. “We are drilling down into the less known part of the geological sequence where we’ve got very good gas shows in multiple zones in the first series of rocks underneath.
“I told investors at the Good Oil Conference last year that as we drill through multiple zones we expected to see gas shows. We’ve seen that in the upper section, now proven by logs to be what we believe is produce able. Now we’ve seen gas shows where we expected them in the next zone down and we’ve got at least five more zones, in reality probably six or seven layers that could have sands in them. I expect anything with porosity on this structure is likely to be filled with gas to meet or exceed our advertised targets.”
Jeffery described the economics of drilling in the U.S. as “what we like, particularly in California, which imports 95% of its gas which is approximately seven times the amount consumed in Western Australia.
“I think generally it’s something like three to seven times as expensive to explore in Australia as it is in the U.S., depending on the remoteness and infrastructure,” he said. “We got our Dempsey well approved within 40 days. In WA, or Australia, it is probably going to take you 400 days if you are lucky. All of those things add up to good business in North America”
