Drilling at Myra well could face failure

Information obtained by "Globes" indicates no major signs of gas have yet been found at the Myra 1 well, belying initial expectations.

Information obtained by "Globes" indicates that no major signs of natural gas have yet been found at the Myra 1 well, belying initial expectations. The borehole has reportedly reached a depth of over 4,600 meters (including 1,500 meters of water), the target strata where geologists has expected to find substantial quantities of gas. The well's final target strata are at a depth of 5,200 meters.

The disappointing findings put the licensees - Modiin Energy LP (TASE:MDIN.L), Israel Land Development Company Energy Ltd. (TASE: IE), IPC Oil and Gas Holdings Ltd. (IPC) (TASE: IPC), and GeoGlobal Resources Inc. (AMEX: GGR) - at a real risk of reporting the first failure of an Israeli offshore gas well, after a string of successes, beginning with the Yam Tethys discovery, followed by the Tamar discovery in 2009.

Modiin Energy controlling shareholder Tzahi Sultan has said in the past that failure of the Myra well would have serious repercussions on Israel's oil and gas exploration industry, and its ability to raise capital.

The Myra license has been marked as a possible competitor to the discoveries by Noble Energy Inc. (NYSE: NBL) and Delek Group Ltd. (TASE: DLEKG), which give them complete dominance of the industry, as they own all major discoveries to date, including Yam Tethys, Tamar, and Leviathan.

It is still premature to declare the Myra 1 well a failure. Gas may be found in deeper strata than the well has reached, and it is also possible that the electrical logs will indicate commercial quantities of gas.

Earlier this week, Myra's partners announced a breakdown at the well. The drilling pipe in the borehole is stuck, preventing further drilling according to the original plan, and requiring sidetrack drilling to reach the target strata. The partners agreed to invest an additional $4 million in the well, and to extend the drilling by seven days.

Netherland Sewell & Associates' (NSAI) best estimate of the two licenses is 6.5 trillion cubic feet of natural gas with a geologic probability of success of 54% for Myra and 18% for Sarah. ILDC Energy owns 43.6% of Myra and Sarah through subsidiaries Emanuel Energy Ltd. and Emanuel Energy Oil and Gas Exploration LP, Modiin Energy owns 29.2%, IPC owns 13.6%, and GGR owns 5%.

Modiin Energy's share price fell 8.3% today to NIS 0.286, giving a market cap of NIS 748 million, and ILDC Energy's share price fell 8.6% to NIS 0.628, giving a market cap of NIS 680 million.

Published by Globes [online], Israel business news - www.globes-online.com - on August 9, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018