TMK Energy Selects Preferred Drilling Contractor for 2024 Drilling Program
TMK (TMK) Share Update July 2024 Monday 22nd
TMK Energy Selects Preferred Drilling Contractor for 2024
TMK Energy Limited (ASX: TMK) has announced the selection of a preferred drilling contractor for its upcoming three-well drilling program, set to commence in August 2024. The decision follows a detailed tendering process and promises significant cost savings and operational efficiencies for the company.
Instant Summary:
- Preferred drilling contractor selected for 2024 program.
- 28% reduction in drilling and completion costs compared to 2023.
- Majority of long lead items already paid for and being delivered.
- Limited additional surface facilities required for new wells.
- Drilling contract to be finalized in the coming weeks.
Drilling Program Details
TMK Energy Limited has successfully selected a preferred drilling contractor for its upcoming three-well drilling program. The program is expected to commence in August 2024, with the contractor offering a fixed price drilling and completion package. This package is approximately 28% lower than the costs incurred during the 2023 pilot well program.
The majority of long lead items required for the drilling campaign have already been paid for and are in the process of being delivered to the Nariin Sukhait pilot well site within the Gurvantes XXXV Project. With existing production wells fully operational, only limited additional surface facilities are required for the new wells (Lucky Fox 4, 5, and 6).
Operational Efficiencies
The selected drilling contractor has a strong background in the company’s existing Pilot Well Project and has provided a turnkey solution that ensures both safety and efficiency. The new wells are strategically located to accelerate the reservoir depressurization process, potentially leading to faster achievement of critical desorption pressure.
The company is also exploring additional downhole data gathering technologies to better understand the reservoir characteristics. The drilling contract is expected to be finalized within the coming weeks, with drilling operations commencing shortly thereafter.
Strategic Partnerships
TMK Energy received multiple tenders for the 2024 drilling program, including proposals from two Chinese drilling contractors with close ties to potential future strategic partners. This increased interest in the coal bed methane industry in Mongolia is a positive indicator for the company's future projects.
Mr. Dougal Ferguson, TMK Energy’s Chief Executive Officer, expressed satisfaction with the competitive and high-quality tenders received, highlighting the cost efficiencies and fixed price solutions offered by the contractors.
The selection of a preferred drilling contractor and the significant cost savings are likely to positively impact TMK Energy's stock. The 28% reduction in drilling and completion costs compared to 2023 is a substantial improvement, which should enhance the company's capital efficiency and project economics.
The strategic location of the new wells and the potential for faster reservoir depressurization could lead to increased production rates, further boosting investor confidence. The involvement of Chinese contractors with ties to potential strategic partners also opens up opportunities for future collaborations and investments.
Investor Reaction:
Investors and analysts have reacted positively to the announcement, noting the significant cost savings and operational efficiencies. The fixed price, turnkey solution provides greater certainty on project costs, which is seen as a major advantage in the current market environment.
Analysts have also highlighted the potential benefits of the strategic partnerships with Chinese contractors, which could lead to further cost reductions and improved project outcomes in the future.
Conclusion:
TMK Energy's selection of a preferred drilling contractor for its 2024 program marks a significant milestone for the company. The cost savings and operational efficiencies achieved through this selection are expected to positively impact the company's financial performance and stock price.
Investors should keep an eye on the finalization of the drilling contract and the commencement of drilling operations in August 2024. The company's strategic partnerships and ongoing efforts to improve project economics make it a compelling investment opportunity in the coal bed methane industry.