The Strike Energy Ltd (ASX: STX) share price is in reverse during early afternoon trade. This comes after the energy producer announced a production test update at its West Erregulla 5 (WE5) well.
Strike Energy and Warrego Energy Ltd (ASX: WGO) both hold a 50% joint venture interest in EP469. The gas project is located about 230 kilometres north-east of Perth in the North Perth Basin in Western Australia.
At the time of writing, Strike Energy shares have fallen 6.45% to 29 cents apiece.
What's weighing down the Strike Energy share price?
Investors are selling Strike Energy shares following news the company has encountered some difficulty for the West Erregulla gas field.
According to the release, Strike Energy has completed interim production testing at the WE5 well. The company recorded instant rates measuring 13.1 million standard cubic feet per day from two separate perforated zones. The area was over a combined 31-metre interval in the Kingia Sandstone.
However, results showed a production barrier that the reservoir was unable to overcome through prolonged flow testing.
The company believes this is skin from filtrate of cement and mud invasion from drilling operations.
The flow rates and pressures were stable throughout the entire flow period. This includes pressure build-ups which indicated no evidence of depletion from the test.
Pleasingly, gas sample analysis revealed WE5 has a similar gas composition to the other well results from the field.
Strike Energy is planning to conduct a retest at the site within the coming weeks. Once completed, a production logging tool will confirm the gas contribution from each perforated zone.
Management commentary
Strike Energy CEO and managing director Stuart Nicholls said:
Whilst this production test has been impacted by skin and near wellbore reservoir impairment, it has answered many of the remaining questions required to progress the independent resource and reserve booking which the Joint Venture is excited to proceed with.
Strike will be back to WE5 shortly to recomplete and retest the well with an expectation that superior flow results will be achievable with the deployment of alternative completion methods. This will then allow the Joint Venture to place WE5 on inventory for the proposed Phase 1 production operations.
The Strike Energy share price is relatively flat year-to-date, but has gained 16% over the past 12 months.
