Texas-based ConocoPhillips (COP - Free Report) and Australian explorer New Standard Energy — its partner in the Goldwyer shale project in Western Australia — have commenced spudding the second exploration well as part of a three-well drilling program.
According to the Australian company, the second well — Gibb Maitland-1 — was drilled in exploration permit EP 450. Currently, a 17.5-inch hole directed at the first casing point in the upper part of the well is being drilled.
The first exploration well – Nicolay-1 – spud in August and discovered as bearing more shale than primarily anticipated, is likely to be the base on which the results of the second well will develop.
Located on the northern slope of the Kidson sub-basin – Gibb Maitland-1 – is expected to assess a different and more encouraging geological environment compared to Nicolay-1. The second well is aimed at finding oil and gas in-situ within the mature rock shale source of the Goldwyer formation. This region is considered the starting area of the migrated oil and gas finds in wells north of the permit.
New Standard, the operator of the Goldwyer project, estimates the total duration for drilling, logging and suspension activities at about 65 days. New Standard has a 25% stake in the project.
ConocoPhillips holds the remaining 75% stake. The four-year exploration program has received financial support of about $119 million from ConocoPhillips. The company is entitled to assume operatorship upon conclusion of the current phase one drilling program.
Recently, ConocoPhillips set a budget of $15.8 billion for capital projects in 2013, almost same as the expected capital spending in 2012. The company is expected to allot its capital towards maintenance of high-quality legacy base portfolio, highly profitable exploitation programs in its legacy asset base, approved major projects and its worldwide exploration and appraisal program. The proportion of its spending on these activities is 10%, 40%, 35% and 15%, respectively.
ConocoPhillips, the midstream business of which now operates as Phillips 66 (PSX - Free Report) , holds a Zacks #3 Rank that is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.