Winstar Resources Ltd., Calgary, said an external study indicates vast gas potential in the Silurian Tannezuft hot shale in the Ghadames basin in southern Tunisia as the company engaged a consultant to evaluate potential strategic alternatives to enhance shareholder value.
Since mid-August Winstar has opened data rooms in London and Calgary with corporate and Tunisian data and in Bucharest containing data on the Satu Mare concession in Romania.
Winstar said a resource evaluation by NuTech Energy Alliance, Houston, indicates that the Tannezuft on the company’s Sabria, Sanrhar, Chouech Essaida, and Ech Chouech concessions has apparent shale gas play parameters equal to or better than some established US gas shales.
The study was based on but not limited to log analysis, rock mechanics, and geochemical data from four analogous wells. The Tannezuft averages 106 ft thick at 12,655 ft with 3.8% total organic carbon and 11.5% porosity.
Gas content in the Tannezuft averages 496 scf/ton, higher than the ranges NuTech listed for the Barnett, Fayetteville, Haynesville, Woodford, Marcellus, and Eagle Ford shales in the US. For the Tannezuft, NuTech listed quartz content of 46%, clay 30%, carbonate 6%, and kerogen 6.7%.
Winstar’s working interest is 45% in the Sabria concession and 100% in the other three concessions. NuTech estimated a technically recoverable shale gas resource of 4.8 tcf net to Winstar prior to the potential 50% working interest back-in at Chouech Essaida by Tunisia’s state ETAP. Winstar noted that the NuTech concept is hypothetical because to Winstar’s knowledge the concept has not been tested in any well in Tunisia.
NuTech estimated that a well on Winstar’s four southern concessions can potentially drain the shale gas resource from 240-274 acres. The NuTech model proposes a 975-m horizontal drain or leg in the Tannezuft and multiple hydraulic fracturing.
Considering the NuTech assumptions, Winstar generated generic single-well economics based on a 4,000-m vertical well with a 975-m lateral costing $15 million and well performance less than that postulated by NuTech study. In the model, gas is sold at $ 13/Mcf and a well recovers 6-8 bcf in the concession’s current term.
These very approximate economics for a single shale gas well generate a net present value, discounted at 10% after tax, of $16-19 million and a payout period of 13-16 months.
Meanwhile, Winstar and ETAP have committed to drill a 3,800-m Ordovician test known as Sabria 12-bis on the Sabria concession. Completed well cost is estimated at $18 million, and Winstar is tendering for a rig and other services. The well is included in the 2012 joint venture budget but may be delayed until early 2013.