ASX small cap energy play Omega Oil and Gas soars as exploration exceeds expectations

Omega Oil and Gas (ASX: OMA) shares soared more than 50% as the market opened on Thursday following ‘outstanding exploration success’ at its Canyon-2 well. 

The Canyon-2 well was spudded on March 19 – which refers to the process of drilling a new well to access hydrocarbon reserves beneath the earth’s surface. The well, found in the Kianga Formation and the upper Back Creek Group, reached a total of 3,807 metres. Along the way, it intersected 293 metres of gas. 

“Our pre-drill expectations for this phase were met and exceeded. In fact, preliminary analysis of the data would indicate that we have intersected a thicker gas column than initially forecast,” said Managing Director Lauren Bennett. 

Key takeaways

• The Kianga Formation was the primary target of the exploration program, which was intersected at 3,367 metres and recorded a 221 metre interval of gas.

• Omega made the call to deepen the total depth of the well to drill through the upper Back Creek Group after signs of “encouraging gas shows”.

• Even though the depth was extended, Canyon-2 was drilled ahead of schedule 

• “The upper Back Creek is a potential additional reservoir, with significant gas peaks being recorded while drilling over an interval of 72m,” said Omega.

• The presence of gas bearing sandstones and coals through Kianga and upper Back Creek correlate with historical discoveries including Shell’s Tasmania-1

Next steps

For the uninitiated, once the well reaches its target depth, the drilling rig is removed and the next stage of the process begins. This involves processes such as running logs or measuring devices into the wellbore to evaluate the potential of the reservoir. If the well has potential, the next step is to complete the well by installing casing, cementing and perforating the reservoir to allow the gas to flow into the wellbore.

Omega said there are three logging runs planned for this well, with plans to case and cement it for future completion.

Once the casing is cemented for Canyon-2, the rig will relocate to the nearby Canyon-1 and seek to encounter the same attributes as Kianga and upper Back Creek.

“Given the forecast gas supply shortages, finding and developing new sources of unencumbered gas is critical … Omega [is] in a favourable position to build on this exploration success and the company looks forward to further de-risking a potential 3-TCF of prospective gas resource,” said Bennett.  

Omega Oil and Gas price chart (Source: Market Index)

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