Sun Resources attracts $13.5m placement from Hancock Prospecting
Sun Resources (ASX: SUR) highly prospective interests in the Woodbine tight oil play in Texas have attracted investment from one of the biggest names in Australian mining.
Sun has made a private placement of 450 million new shares at A$0.03 to raise $13.5 million in a private placement to a wholly-owned subsidiary of Hancock Prospecting Pty Ltd.
Dr. Govert van Ek, managing director for Sun Resources, commented: “We are pleased to welcome Hancock Prospecting as a shareholder and investor in our Company. Hancock Prospecting brings valued insight and commercial expertise to Sun Resources.
"Proceeds from this placement will be used towards our previously stated strategy of de-risking and confirming profitable oil production from our acreage in the rapidly emerging Woodbine tight oil play in Texas.
Woodbine Operations
Sun has recently started flow back operations at the T.Keeling-1H horizontal well in the Amerril Oil Project, Texas, after completing an initial fracture stimulation operation.
About 20% of the frac fluid had been recovered with trace amounts of hydrocarbons as of 5 August 2013. Operator Amerril Energy estimated that about 30% to 35% of the frac fluids need to be recovered before appreciable oil rates may be recorded.
Sun has a 50% interest in the Amerril Oil Project.
The company had also formed in June a joint venture with Petro-Hunt LLC, one of the world’s largest privately held companies, to carry out oil and gas exploration and development in the Lower Woodbine interval in Leon County, Texas.
The partners will drill their first horizontal well into the Lower Woodbine in the last quarter of 2013.
Under the binding agreement, Sun will contribute 810 net acres from its northern Delta Oil Project acreage which lie within the broader 7,832 acre Area of Mutual Interest, while Petro-Hunt is contributing 2,430 net acres that it owns within the AMI.
The combined 3,240 net acres will be owned by Petro-Hunt (75%) as the operator and Sun (25%) and all costs going forward will be shared on this basis.
In the Beeler Oil Project, Sun and its partners are continuing with clean-up and flow back operations at its three horizontal Woodbine wells.
This produced gross oil production of 14,000 barrels in the June 2013 quarter.
Sun has working interests of between 13.54% to 16.67% in the Beeler project.
Interest in the Lower Woodbine play - also known variously as the “Eagle Ford”, “Dexter”, “Manness Shale”, “Lower Woodbine” or the “Woodbine C” – has increased with various oil companies (Halcon, Clayton Williams, EOG and Silver Oak) announcing oil flow results from 10 wells in recent months.
Notably, Seven of these wells, owned by Halcón Resources (NYSE: HK), are located in Brazos County southwest along strike of Sun’s Seale-1H and T.Keeling-1H wells in the Amerril Oil Project.
These wells had average cumulative production of 40,000 barrels of oil per well over the first 90 days of oil flow with Halcón’s reported type curve showing an estimated gross estimated ultimate recoveries (EUR) per well of 371,000 barrels of oil equivalent and IRRs exceeding 50% at current oil pricing.
Analysis
Attracting an investor with the kind of pedigree as Hancock Prospecting highlights the potential of Sun Resources’ Lower Woodbine projects to be profitable oil producers.
This is clear from the activities of companies such as Halcón in the area with the wells drilled producing commercial quantities of oil.
The company has also realised early oil production from the Beeler Oil Project while successful oil flow from the T.Keeling-1H horizontal well in the Amerril Oil Project could substantially increase production.
Hancock’s investment will assist the company is progressing its current wells and following up on its successes.
