Apr 23, 20235 min
Grand Gulf Energy's share price fell by over 30% following the results of the Jesse-2 appraisal well in SE Utah, which was a 1.5 mile step-out from the Jesse-1A well. Although helium concentrations of 0.7-0.9% were encountered, the well only flowed at a maximum rate of 30mcf/d, given low reservoir porosity. The well only encountered 23ft of net pay over a 192ft gas column compared to 101ft of net pay in the Jesse-1A exploration well. The Company is now preparing for the Jesse-3 well and assessing options for stimulation and remediation of Jesse-1A and Jesse-2 for future production.
Press Release:
Grand Gulf Energy Ltd is pleased to advise that current drilling operations at the Jesse-2 well in SE Utah have successfully concluded.
Managing Director Dane Lance Commented:
“We’re pleased to announce the Jesse-2 well results confirm the Jesse discovery, returning helium to surface during the testing and drilling phase. The Company is particularly encouraged by the extension of the proven helium play fairway that has demonstrated a consistent gas column at Jesse-2 which is a significant 1.5 mile step-out from the maiden Jesse-1A exploration well.
With the Jesse-1A well the Company demonstrated a large gross gas column, commercial helium grade above pre-drill expectation, and potentially commercial reservoir within the gas column. With Jesse-2 the Company confirmed the extension of the Jesse discovery and its ability to methodically execute a successful drilling program. The underbalanced drilling program gave crucial gas inflow information while drilling, at a modest expense of only 2% of the well cost, and will be instrumental in future Red Helium project drilling operations.
Given the sheer size and scale of the Red Helium project, both spatially and in terms of helium resource, Jesse-1A and Jesse-2 both provide crucial delineation information on structure and reservoir development to optimise future well locations. As with most carbonate reservoirs our understanding of the heterogeneity of the reservoir increases dramatically with data and we have improved our interpretation and high graded a third location.
The Company also has a range of future inexpensive opportunities across the Red Helium project, independent of the Jesse-2 well results, with demonstrated well engineering and the drilling team to successfully deliver.
We look forward to the next phase of our program to deliver Jesse-3 and commence preparations to tie in the wells as future producers.”
Jesse-2 Confirms Helium Discovery
The Jesse-2 well has successfully flowed helium gas to surface and confirmed a helium discovery in the Jesse Field and extended the proven helium play fairway following a significant 1.5 mile step -out from the Jesse-1A well.
Jesse-2 Results
The top of the target Leadville Formation at Jesse-2 was intersected at 8,082 feet measured depth in line with geologic prognosis. As per the drilling plan, Jesse-2 was drilled underbalanced to approximately 50 feet above the Jesse-1A observed gas water contact at 8,215 feet measured depth whilst simultaneously monitoring geologic gas inflow. Maximum gas flow rates were observed were approximately 30,000 cubic feet of dry gas per day, with average observed helium concentrations of 0.7%, and up to 0.9%1, with no water production observed.
The well was successfully deepened and wireline logs were acquired over the entire 192 foot gas column (23 foot net pay based on conventional porosity/saturation cut-offs over the logged zone) with the exception of a 44 foot section at the base of the gas column with gas shows due to tool clearance. Wireline porosities were indicative of primary matrix dolomite porosity, but with limited evidence of vugular secondary porosity, potentially leading to limited reservoir deliverability at this location pre-stimulation.
The well has been suspended and the rig demobilised whilst the Company:
1. Commences preparations for the new already-permitted Jesse-3 well
2. Evaluation of stimulation/remediation and full flow testing options for Jesse-2
3. Assessment and planning for a workover of the Jesse-1A well to enable future production tie-in.
Jesse-2 Underbalanced Drilling Programme
The drilling of the Jesse-2 well was successfully executed with a technique specifically designed for expected subsurface conditions in the Mississippian Leadville carbonate reservoir target. Jesse-2 employed underbalanced drilling using an air/foam/mist system providing a bottom hole pressure of approximately 550 pounds per square inch (psi). This bottom hole pressure provides an approximate 2,000 psi sand-face drawdown allowing for real time flow testing of the reservoir whilst drilling.
Gas inflow rates were monitored by measuring differential gas flow rates (gas in versus gas out), with compositional analysis assessed using real time mass spectrometry with an onsite calibrated mass spectrometer.
Red Helium Project Reservoir Development
In comparison to the 23 feet net pay (influenced by the porosity cut-off) and lower porosities observed in Jesse-2, Jesse-1A had 101 feet of net pay and included multiple zones of high porosity and evidence of open vugular secondary porosity in the wireline image log. Similarly, historic wells drilled in the western section of the Red Helium project all have evidence of high levels of secondary porosity. The Jesse-2 result is consistent with the nearby analogue Doe Canyon Helium Field where a limited number of wells (3 out of more than 20 over the life of the field) encounter limited secondary porosity development due to carbonate diagenetic heterogeneity.
The observed reservoir development at the Redd-1 and Jesse-1A wells, and the southern upthrown fault block hosting the Earp prospect which has the historic Texas-Coal-1 and Gulf-2 wells, define a potential reservoir play fairway for the western extent of the Red Helium project independent of the Jesse-2 results.
Proximity to southern faulting also has the potential for improved reservoir quality through secondary geothermal vugular porosity development. The permitted Jesse-3 location is located optimally within the secondary porosity play fairway as defined by these wells, along with 3 other mature locations proximal to the pipeline that could be quickly matured to drill ready status.
Following discussions with independent resource evaluator Sproule, the results and the learnings of the drilling of the Jesse-1A and Jesse-2 wells have shown a) the petrophysical parameters are within the original range considered for the resource estimate and b) the Prospective Resource volumes are still considered representative of a success case for the Red Helium Project. As with most carbonate reservoirs, understanding of the heterogeneity of the reservoir increases dramatically with data and the Company has consequently improved and high-graded a location for the Jesse-3 well.
Red Helium Project Workplan
The Company is currently reviewing and recalibrating seismic based on the Jesse-2 results, and evaluating future opportunities on the Red Helium project including:
Jesse-3 Well: The recently permitted Jesse-3 location is optimally located within the potential reservoir play fairway, independent of the Jesse-2 results. A further three mature locations proximal to the pipeline exist that could be quickly moved to drill ready status.
Jesse-1A/2 Workover: Following completion of Jesse-3 a stimulation/workover programme(s) at Jesse-1A and/or Jesse-2 will be undertaken followed by preparations to tie-in to commence production. An extensive technical review by recently appointed GGE drilling superintendent Todd Gentles and his drilling team has identified the potential for a cost-effective remediation of the Jesse-1A wellbore for less than US$1M. The Company is also currently evaluating potential remediation/stimulation options for the Jesse-2 well.
Earp Prospect: The Company has a permit to drill the upthrown Earp prospect which is independent to the Jesse discovery. Earp is structurally 500 feet high to Jesse and has a spatial footprint similar in size to Doe Canyon with proven helium from two historic wells in the range of 0.4 – 1.1% helium, with evidence of secondary porosity development. Earp is considered an undrilled prospective resource due to the vintage and quality/uncertainty of log and sample data.
Deeper Potential: The Devonian McCracken sandstone is a proven producing helium formation regionally, and the Company is evaluating the potential for deepening both Jesse-2 and Jesse-1A to test the McCracken Sandstone for a modest cost, and as a secondary target for future Red Helium project wells. Proximity to the pre-Cambrian granite helium source provides helium concentration upside.
Red Helium Project Working Interest Increased Under the terms of the operating agreement the Company has satisfied the earn-in requirements for the second well thereby increased its working interest from 70% to 77.5% in its majority-owned incorporated JV company Valence Resources LLC (“Valence”) which operates the Red Helium project.