The onshore Perth Basin continues to be one of the most sought-after oil and gas exploration and production addresses in Australia.
Warrego is fortunate to have a 50% interest in EP469 (having been the permit holder of the block since 2007) and a 100% interest in EPA-0127, potentially the largest onshore block in the basin.
Our approach remains to first understand the science, and then share the story. This allows us to be straight forward and transparent to our stakeholders so that customers, partners, suppliers, regulators, the community, and investors can be confident working with and investing in Warrego. We have built a strong technical team in Perth and will continue to grow our capabilities in line with our commitments and aspirations.
"YOUR BOARD REMAINS FOCUSED ON CREATING LONG TERM VALUE FOR SHAREHOLDERS, AND NO DOUBT FY22 WILL BE AS EVENTFUL AS THE PREVIOUS FINANCIAL YEAR WITH A BACKDROP OF RISING GAS PRICES LOCALLY AND INTERNATIONALLY."
FY21 was also a landmark year for investor expectations, particularly Environment, Social and Governance (ESG) issues.
While the safety and health of our people has always been paramount, respect for the environment has also been a cornerstone of our culture. The additional emphasis on carbon management and decarbonisation comes at an opportune time for Warrego, helping us shape our evolving strategy as an explorer and gas producer.
Warrego's current emissions are negligible. Nevertheless, we are evaluating a range of carbon initiatives that will help Warrego minimise and offset emissions for any future developments and provide a timeframe and mechanism to achieve carbon neutrality.
"WHILE THE SAFETY AND HEALTH OF OUR PEOPLE HAS ALWAYS BEEN PARAMOUNT, RESPECT FOR THE ENVIRONMENT HAS ALSO BEEN A CORNERSTONE OF OUR CULTURE"
Your Board remains focused on creating long term value for shareholders, and no doubt FY22 will be as eventful as the previous financial year with a backdrop of rising gas prices locally and internationally.
There remains a number of challenges before us, not least the COVID-19 pandemic, but with the ongoing support of our shareholders we will deliver our objectives and lay a foundation for future growth.
I would also like to thank my fellow Directors, our management team, staff and contractors for their hard work and perseverance. Finally, a sincere thank you to all our shareholders who are supporting this exciting journey and I look
forward to further success in the year ahead.
LOST TIME INCIDENTS
WE-2 MAX FLOW RATE
WE-4 MAX FLOW RATE
INTEREST AND OPERATOR
EPA-0127 PERMIT AREA
WEST ERREGULLA APPRAISAL CAMPAIGN
The EP469 Joint Venture (JV) (Warrego 50% interest) commenced a three-well appraisal drilling campaign in September 2020 with West Erregulla-3 (WE-3) in the northern area of the field.
WE-3 experienced a number of operational difficulties before encountering abnormally overpressured gas at 4,294m MDRT. The well was temporarily suspended in January 2021 and the rig moved to the WE-4 location. The JV will complete further analysis and engineering prior to returning to re-enter the well in FY22.
Warrego worked closely with the Operator to improve well design and drilling performance on WE-4 and WE-5. Experienced Perth Basin drilling consultants were added to the team for WE-4, a step-out well in the Central Area, and the well reached TD at 5,069m MDRT in April 2021. Kingia gross thickness was 155m, net pay was 28m with average porosity of 11%. Flow test results were consistent with the high rates achieved at WE-2, with a maximum rate of 35 MMscf/d achieved from a 75m interval in the Kingia Porous formation in July 2021. This is an excellent result for a flank well.
"WARREGO WORKED CLOSELY WITH THE OPERATOR TO IMPROVE WELL DESIGN AND DRILLING PERFORMANCE ON WE-4 AND WE-5"
WE-5, located towards the northern extent of the Central Area, incorporated a standard three-stage well design proposed by Warrego and TD was achieved at 5,015m MDRT ahead of time and under budget in June 2021. Kingia gross thickness was 183m and net pay was 32m with average porosity of 10%. In August 2021, flow rates were hampered by a possible well skin barrier formed as a result of the drilling mud and a compromised cement job. These factors could not be overcome by prolonged testing and the well was suspended pending re-testing.
WE-4 and WE-5 have been completed for future production, and it is anticipated that WE-3 will be completed for production in the first half of 2022 making a total of four production wells. The EP469 JV is also evaluating the benefits of an additional well, WE-6, possibly to be drilled in late FY22 or FY23.
The independent Reserves certification of West Erregulla by NSAI in October 20211 strongly correlates with the initial Resources certification that RISC Advisory completed for Warrego in May 20202, further enhancing our confidence in the production potential of the asset.
OF GAS (GROSS) - CERTIFIED
OF GAS (GROSS) - CERTIFIED
2C CONTINGENT RESOURCES
OF GAS (GROSS) - CERTIFIED
2U PROSPECTIVE RESOURCES
1 Announced via the ASX on 11 October 2021, "West Erregulla Independent Reserves Certification"
2 Announced via the ASX on 18 May 2020, "Certification confirms West Erregulla 2C of 513 Bscf gross"
EXCITING EXPLORATION POTENTIAL
Warrego holds a 100% interest and is the Operator of the largest onshore Perth Basin exploration permit application. At 2.2 million acres (8,700 km2), EPA-0127 extends across the Coolcalalaya sub-basin that links the Perth and Carnarvon basins and is relatively unexplored.
Extensive Permian ("Waitsia" sequence and equivalent) sediments are predominant over the eastern portion of the permit area and structures have been identified that are potential analogues to Waitsia and West Erregulla. Available data suggests the potential for gas and liquid hydrocarbons.
Warrego has submitted a work program and budget for review by the WA Department of Mines, Industry, Regulation and Safety and Native Title negotiations are at an advanced stage. EPA-0127 is the most likely source of future growth for Warrego and we are targeting permit approval in the first half of 2022 once all requirements have been fulfilled.
"THE EXCITING EXPLORATION POTENTIAL AT EPA-0127 HAS GENERATED FARM-IN INQUIRIES FROM A RANGE OF INTERNATIONAL AND DOMESTIC COMPANIES."
The exciting exploration potential at EPA-0127 has generated farm-in inquiries from a range of international and domestic companies. Data room access has been provided to a number of interested parties on a confidential basis and Warrego may accelerate the farm-in process should meaningful offers be received.
In addition, the discovery at nearby Lockyer Deep-1 by Norwest Energy in September 2021 is extremely encouraging for the future exploration potential of multiple leads in the remaining two-thirds of the block to the north and east of West Erregulla, which will be covered by a planned 3D seismic survey in FY22.
AN ESG PLATFORM FOR THE FUTURE
The push to decarbonise the global economy in the face of climate change is gaining support among governments, investors and customers around the globe. Warrego recognises this trend and acknowledges the key role natural gas will play as economies transition energy supply from traditional sources to renewables.
Warrego's evolution from explorer to producer will require us to develop systems to effectively manage carbon emissions (currently negligible). The Company is ensuring it is prepared for a rapid growth phase by developing a flexible and scalable carbon strategy that can be adapted to exploration, appraisal and production activities. In line with our role as the Operator of EPA-0127, we are currently evaluating a range of carbon initiatives that will help Warrego minimise and offset future emissions.
Warrego is taking a considered approach to its ESG program and as we progress our strategy we will ensure that any ESG initiative adds value.
UNLOCKING VALUE FROM SPAIN
Consistent with our aim of shifting the Company's focus to onshore Australia, we are pursuing opportunities to unlock value from our Spanish exploration and energy assets in order to enhance our development and exploration activities in the Perth Basin.
Warrego is in advanced discussions with various UK and European entities interested in acquiring all or part of our Spanish asset portfolio and we anticipate an outcome before the end of calendar year 2021.
A POSITIVE OUTLOOK
With the commercialisation of natural gas from West Erregulla imminent, and the exciting exploration potential within EPA-0127 and EP469, Warrego's growth prospects are gaining traction.
Our focused strategy is built around creating value for shareholders through the delivery of high value, low risk onshore gas projects with complementary ESG outcomes and these assets meet that requirement.
We anticipate activity levels to remain high over FY22 and our small, flexible and dedicated team of staff and contractors will be fully engaged with the exciting work program ahead. I would like to thank them, our Board and our shareholders for their support and commitment throughout FY21 and look forward to further success in FY22 and beyond.
GROUP CEO & MANAGING DIRECTOR