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First Continuous Post-Stimulation Gas Flows at Egilabria 2 Well in ATP1087

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Armour Energy reported Monday that initial gas flows to surface and a flare of at least 2 feet have been observed from the Egilabria 2 well drilled in Armour’s 100 percent owned ATP1087, north of Mt Isa in Queensland, Australia following drilling and hydraulic stimulation of the lateral well, Egilabria 2 DW1. Continuous gas flow is being observed in conjunction with flow back of fluids injected during stimulation of the well.

Armour’s pioneer well in Queensland’s frontier South Nicholson Basin represents a landmark for the Australian oil and gas industry as the well is the first successful application of multi-stage, hydraulically stimulated, lateral well technology developed in North America to an Australian shale gas formation.

The aim of the production test at Egilabria 2 was to prove not only the hydrocarbon potential of the Lawn Shale formation, but also to confirm the suitability of horizontal well technology to achieve commercial gas flows. Results to date from this first production test in the South Nicholson Basin are in line with with the Company’s expectations and are very encouraging. The well has now flowed back 44 percent of stimulation fluids and continues to flow at a rate of approximately 13 barrels per day in conjunction with initial volumes of gas at open choke and zero pounds per square inch (psi) pressure observed at the surface separator. The gas flow rate has not been measured, but a sustained flare of at least 2 feet has been observed. As the well continues to unload, the flow of gas is expected to further increase as gas replaces fluids in the formation allowing increased gas flow into the well bore. The Company intends to continue this process over the coming weeks. As per the well testing program, this will be followed by a pressure build-up period. The actual timing of these activities may be dictated by the imminent onset of the northern wet season.

The Egilabria 2 well is testing the highly prospective Lawn Shale formation within the South Nicholson Basin, just 199 miles (320 kilometers) to the north of Mt Isa. Eight stimulation stages were originally targeted and of these, the majority of proppant (essentially sand to open up pathways through which gas can flow) was placed in the middle four stages covering the top 216 feet (66 meters) of the organic rich 449 feet (137 meters) thick Lawn Shale formation.

Two of these stages were considered particularly successful as design quantities of various sizes of proppant were placed in the formation.

The production test results to date confirm the presence of a continuous, gas-rich section of the Lawn Shale and demonstrate that, with suitable drilling and stimulation techniques, commercial gas flows should be achievable. This is a major goal of any early shale gas play, and was achieved by Armour in Queensland less than a year after securing the tenement grant.

Egilabria 2 also intersected continuous gas shows in sediments from 2,296 feet (700 meters) down to the top of the Lawn Shale at 5,380 feet (1,640 meters). Zones above 5,019 feet (1,530 meters) have not yet been hydraulicaully stimulated or flow tested. This will be included in Armour’s future work program.


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