GDN - Golden State Resources

After waiting so long, I wouldnt mind another couple of weeks ..maybe..but who can judge when the DOW has stabilised

Oil & Gas Update
• Paradox Basin #1 gas discovery well, Grand County, Utah, is undergoing
continuing completion and stimulation activities. The Company is assessing
incremental gas flows from various levels in the well.
• Three Upper Ismay gas intervals were perforated and flowed gas in a 24
hour test.
• Further flow tests will follow fracing of the intervals, scheduled for
Thursday.
PARADOX BASIN #1 OIL & GAS WELL, UTAH USA
The Directors of Golden State are pleased to announce that perforation of the Upper Ismay gas
interval was successfully completed.
Three intervals in the Upper Ismay were perforated, at 9850’–9860’, 9732’–9727’ and 9740’–9760’,
totalling 35 feet. Dry gas flowed for 60 hours. In a 24 hour test the intervals flowed gas at 300
Mcf/day through a 28/64” choke. The well has been shut in, in preparation for fracing, currently
scheduled for Thursday.
Following fracturing, the underlying Akah interval from 10,815’ and 10,850’ flowed water, and has
been abandoned.


300mcf/day is good news isn't it?

so from memory GDN is at 0.5bcf/day and now 0.3bcf/day = 0.8bcf i wonder if this brings it the well closer to commerical status???

what is interesting is "The well has been shut in, in preparation for fracing, currently scheduled for Thursday." what does this mean? are they fracing the upper ismay or another level???

note that the AKAH has been plugged and abandoned.

Hey Elcruzy...methinks you have got your units mixed up. Previous reports are .2mmcf + .3mmcf and now 300Mcf = 0.8mmcf in total or 800Mcf.

Not great, but hey the share price is now the same level it was before they found anything...

hop,
Looks like a total of .8mmcf/d whch at $5/mcf? gives an income of only $4k/day..hardly commercial I would have thought, or are my figures awry!!
Sp is holding, guess the market factored in a less than favorable result for Para 1.
I hold for Para 2

Hey Daz,

Target Energy (TEX) proceeded with a well that produced .45mmcf with 1bcf recoverable.

Now TEX, they are close to a pipeline, so it depends on the cost to GDN to connect the well up and also what the estimate is for recoverable reserves on Para 1. Gas prices are about $6.30/mcf so about $5k per day.

If reserves are sizeable and limited by the porosity of the region GDN amy drill more wells at some future point to increase the rate of recovery or try horizontal drilling.

Water in akah was dissapointing as this is a productive zone in other wells in the vicinity.
Wish they would come out with a comprehensive report on prospects for the future, not gunna happen tho.

hop,
I posted your post on HC with acknowledgment, hope you dont mind.
With the SP at 17.5c and holding I wonder what value punters are placing on oil/gas and what value on uranium.

Hi, i have just looked at the volume since start of july from when the options were able to be traded. Once options traded there were about 170-180 million shares on issue that could be traded?

In the last 27 traded days from the start of July a total of 108,071,666 shares have been bought and sold. 25 million shares were traded in the 2 days when the lower barker creek results were released which sent price from 36 cents down to 25 cents over the 2 days from a high of 44 cents 2 days before the announcement came out on small volume.

There are traders and investors holding shares in gdn, the well may not be as good as expected but for a full month to go by and still not trade a total of shares on issue on several announcements which aernt very positive compared to expectations most would think the volume would be a lot higher since why hold if the well is no good?

Before the drilling started on this well the share price was 25-30 cents. Since then they have hit a lot of gas shows on the way down for a wildcat well using 2d seismic which seems to be inaccurate. This has provided the company infomation on what intervals are best targeted on future wells, which intervals would be best reached using horizontal drilling which by some people suggest can increase flow rates by 3-5 times more than on a normal well. They also know there is a large amount of gas in leadville but on the first well contact with water caused the well to not be able to produce from that interval, but should be able to when drill to leadville on the next well.

The oil column yet to be tested is 20 feet, in the honaker trail interval. Looking at other wells this formation and upper ismay are producing oil in other wells in utah. Hopefully some good results will come from the testing of the oil column.

At the moment the 3 upper ismay intervals are flowing at 0.3mmcf before fracturing, hopefully after fracturing which starts thursday they will be able to increase the flow rate to 1-2mmcf.

Also on the ck locke report in June 2006 the top 20 shareholders held over 30% of the total shares issued at that time, dont know if those shareholders still hold since under 5% each.

Also in that report it mentions 4 people that are working for gdn on the first well. So those who think its just the director john hasleby running the well would be wrong unless all 4 of the staff that were hired and written about in the ck locke report quit but then if that was the case shareholders would of been informed. So there are people that are qualified to make all the best decissions at the well site with the director being there to oversee how everything is going. Thats my opinion on whats happening at the drill site.

They have also mentioned to people in phone calls they would have given up on the well if didnt believe it was worth continuing so they must be expecting to reach a flow rate to run to the pipeline on the first well.

Maybe they know more than they are telling us at moment since they aernt saying much in the reports?

What i have said above just my thoughts and thought to share.

nt,
good post as usual for you.
I does seem strange that they would keep flogging para1 if they didnt think it would produce.
I think you may be a little optomistic with 1-2mmcf/d but hope you are right.
Maybe the oil component is more important than we think, to bring the well up to a more commercial state.

DAZT49 said:

nt,
good post as usual for you.
I does seem strange that they would keep flogging para1 if they didnt think it would produce.
I think you may be a little optomistic with 1-2mmcf/d but hope you are right.
Maybe the oil component is more important than we think, to bring the well up to a more commercial state.

Click to expand...

I also hope that the gas flow from this interval is much higher after the fraccing. Is it normal to do a full flow test prior to fraccing?

I know that the well is close to a gas transmission line. How far is the nearest oil pipeline? I can't remember this being mentioned in any previous announcement.

hi all

i am just a casual observer of GDN, and not a very good one as i posted at around 35c mark thinking/saying that it had found its bottom in the downward slide of the SP,

however now that the SP is so low, in fact last time it hit 17c mark was March 2006, I am thinking that surely it is oversold, but then again not knowing GDN inside out, if this well was to fail, then would 17c be a correct valuation? Even if it is then it couldnt go that much lower even if the well was a total failure, so it would seem that there is a much smaller downside now compared to a potential upside,

but Im sure you all know this,

ok bye

toc,
I think the fact that the Sp held ok after yesterdays ann, means the market has already factored in that Para 1 is not as we would all had hoped.
Hopefully the SP is somewhere near the bottom, seems to be that way, 18c at 10.13am.
If they can get Para 2 up and moving quickly (Oct) maybe by xmas we can smile again
Also the immenent u spinoff entitlement/ prospectus/listing should help the SP, tho the unknown is wether punters will dump there GDN stock once they have picked up the U entitlements.
I am hanging in for Para 2 and xmas pudding.

hi ben_q,

The oil interval once tested i dont think was going to be linked to an oil pipeline but instead was just going to truck the oil straight from the well to the market i think. So only real costs would be the trucks to transport the oil. Just its not going to be earning as much as the gas can earn daily but can still produce significant amount to the company over a period of time. Without expenses of the trucks gdn need to produce 86 barrels of oil to equal 1mmcf of gas.

Still producing oil would be good for gdn just gas is what would produce better daily cashflow for the company.

I just read an announcement by avd, todays results from a flow test produced 75mcf or 0.075mmcf so about 4 times less than what the upper barker creek interval flowed at. They also say in the announcement the other 60mcf that was tested prior will also be brought back online so cash will be from 150mcf or 0.15mmcf for a return of $160 000 a year for the well. The well was a lot cheaper since only was 4000 feet deep but does show that even really small flow rates 1/4 of what gdn has from upper barker creek is still good enough to be productive for the company and the flow rates were after fracturing.

nt,
I guess there would be trucking contractors who pick up the small quantities of oil that similar wells in the area produce.
Can you put your post on HC?

Hi dazt49,

They would have trucks in place when they test the oil interval i would of thought. I have read other companies when have done flow tests they sold the oil that has flowed in the test straight away which has provided a small amount of cash to the company. Would think same happens with gdn since the pipeline would take several weeks to connect and they wouldnt waste time missing out on money when can use trucks to get the oil to the market. But if the flow rate wasnt much like 50-100 barrels dont think they would worry about setting up a pipeline for the oil when can just truck the oil and save some money.

Thats what i was thinking, but just have to see what happens when they test the oil interval.

nt,
I am sure they would jump at the chance to get some cash flow via the oil.
SP has held again today. Maybe this is the base...for the time being.
Unless they come out with a better outcome for Para 1 than the market has assumed..which is not much.

Hi dazt49,

Do you think with the amount of time they spent on this well, between flow tests of lower barker creek and to the time they finish flow testing all the intervals would they have an independent person working out an estimate on how many bcf is likely to be produced based on flow results so far from the producing intervals?

If they have been working them out and announce that at the end of flow tests that could see a jump in share price. They wouldnt calculate the intervals that had water even if it was likely to be productive in future wells but they could calculate and estimate on the 5 intervals that are productive in this well. As long as they can say they have 50bcf to be produced from the intervals with successful flow results that should see share price back over $1 i would have thought. Only difference is that the daily revenue would be lower then expected since rate of flow of the gas but this can be increased in future cheaper wells.

They wouldnt of been able to produce any more than 20bcf at most from one well, normally around 10bcf per well i think i have read. So even if they do have 440bcf of gas they would still need over 40 wells to get all that gas.

Hopefully they can the 2nd well drilling soon with better results.

nt,
Think I have posted this before but its worth looking at..
The ann of 12/6/07...
The Pennsylvanian-age Barker Creek was one of the primary targets for Paradox Basin #1.
The well location was chosen as an optimal place to test this deep target due to good seismic
control at this point and coincidence with a large flexure throughout the Pennsylvanian
section. The oil and gas shows encountered at this level are very encouraging and indicate a
further potential accumulation east and up-dip from the well.
This provides a priority target to be tested in the second well location, Paradox Basin #2,
currently being permitted.
A review of the well results in the Pennsylvanian section above the Barker Creek interval,
conducted by an independent consultant, announced on 12 October 2006, concluded:
“This remains one of the most significant wells to be drilled in this region if not in the US
this year.”
From GDN website and from origional Prospectus and part of the above review..
Independent consultants estimate a mid-case reserve target of 440 BCFE of gas, with upside to 3 TCFE (3,000 BCFE) for the maximum 2,000 ha case.

So in answer.Para 1 is the test well so they should be able to extrapolate the size or the reserve.
Cheers
daz

Thanks dazt49,

Will be good if they do tell us how much bcf is likely to be productive, but i dont think they will add leadville to the estimate until they drill with flow results on the next well and same for the akah, pinkerton trail and cane creek intervals. They currently have 108 feet of gas pay that has flowed successfully so an estimate of somewhere between 108-216 and possibly to 300bcf can be announced hopefully.

then with the second well they can increase that estimate once reach and successfully flow gas at other intervals that didnt flow on this well.

The estimate above is just from using 1-3bcf per foot of gas pay, hopefully it will be somewhere around that amount and they tell shareholders at the end of the first well which hopefully might see a decent price move in the share price.