Norwest Energy is an ASX-listed oil and gas junior with a pure focus on exploration of the Perth Basin. Located around 250 km North of Western Australia’s capital city, the basin covers an onshore and offshore area of about 100,000 km² and is currently at the centre of an exploration renaissance after a string of high-profile recent discoveries. Norwest’s primary objective is to unlock the vast commercial potential of its portfolio in the Perth Basin. “We’re located in West Perth near the CBD and are a small team with low corporate overheads and an experienced board of three directors,” says managing director Iain Smith. “I am one of the directors, along with our chairman Ernie Myers and Dave Kennedy, who was one of the founding directors of the company 20 years ago.”
The Perth Basin has been routinely explored for petroleum resources since first gravity surveys were conducted in the Northern onshore area in the early 1950s. This sustained level of exploration has led to the discovery of 20 commercial oil and gas fields and numerous additional significant discoveries of varying size.
For at least the decade up until 2014, the Perth Basin was considered a mature play by experts in the field, with only relatively small oil and gas finds yet to be uncovered by exploration teams. However, this school of thought was emphatically dispatched by a major discovery that radically altered the industry’s understanding of the basin, and how Norwest viewed its own prospects.
A game changer
The Waitsia gas discovery was made by Perth-based explorer AWE in 2014 and is now viewed as the largest onshore gas find of the last 40 years in Australia, with estimated proved and probable reserves of about 844 billion cubic feet of gas.
The discovery was particularly significant because it disproved conventional wisdom of the time that good porosity and permeability could not be encountered at depth in the sandstone reservoirs of the basin. At Waitsia, porosity and permeability has been preserved by various clay minerals content, which has prevented diagnesis as the reservoirs were buried at depth.
“It’s really caused everyone in the basin to go back and look at their acreage position and re-evaluate it, looking at the deeper targets. This has been evidenced by Strike Energy’s recent gas discovery at West Erregulla-2.”
The latest large-scale gas discovery in the Perth Basin is a very important result for Norwest because it has a couple of prospects directly on trend to the North of West Erregulla-2, which has been described as ‘staggering’ by ASX-listed Strike.
Norwest’s prospects to the North of West Erregulla-2 are called Lockyer Deep and North Erregulla (permits EP368 and EP426). These gas prospects have been known for some time and mapped on 2D seismic data but never drilled, according to Smith.
“The recent success of Strike Energy has had two effects for our prospects. Firstly, it improves the chances of our exploration success and secondly, it increases the size of the prospects. The prospective resources within the permits are in the process of being upgraded quite significantly.”
Norwest is working with its joint venture partner and operator Energy Resources (a division of mining firm Mineral Resources) on progressing further exploration of these two targets, and they are set to make a joint decision on a commitment to exploration drilling across the prospects in the first half of next year.
“At the moment, we are looking at the prospective resources being upgraded and then later in the year we have a decision to make as to where we locate the exploration well. We also have a shallow oil prospect in EP368, so there are three potential well locations.”
The Springy Creek oil prospect, located just North of Lockyer Deep and North Erregulla, has recently been matured through the reprocessing of existing 2D seismic data. Springy Creek is a shallow prospect with a robust structure and it holds the potential for up to 61 million barrels of recoverable oil.
Moving to the next key prospect in Norwest’s portfolio, the 2017 Xanadu-1 oil discovery was made in the TP/15 permit in the offshore Northern area of the Perth Basin. The discovery was confirmed after Norwest farmed out the TP/15 permit to three partner companies, who came in to fund 100% of the exploration drilling at Xanadu-1.
“The Xanadu prospect was located less than 1.5 km from the coastline, so we were actually able to drill it with a deviated well from an onshore location, at a significant cost saving. The well was drilled and we made an oil discovery, which we are currently appraising.”
The discovery well was drilled with very little understanding of the overall structure of the field and with very limited 2D seismic data. Therefore, Norwest recently acquired a 3D transition zone seismic survey, in order to build a greater understanding of the overall structure of the prospect.
The survey covered ground from onshore and into the shallow waters over the prospect, making it a challenging programme for Norwest to undertake and complete. Nonetheless, the survey was completed and the data is currently being processed, with results expected in November.
“We expect to get a much better handle on the structure and we hope to see sufficient potential updip from the Xanadu–1 location to drill an appraisal well, which potentially could become a production well in the event of success.
Smith also highlights downdip potential from the Xanadu-1 well, although he cautions that this is probably higher risk. The results from the survey will determine how Norwest moves forward with the project and whether it will proceed with an appraisal well at Xanadu-1.
The final piece of Norwest’s portfolio in the Perth Basin is the Arrowsmith discovery in the EP413 permit. An unconventional tight gas play, the Arrowsmith-2 well was previously drilled and fracked by Norwest, proving up the gas resource in the process.
“To progress Arrowsmith further we would need to drill another well with a horizontal section and a multi-stage frack. That’s not been possible here in WA over the last couple of years because the state imposed a moratorium on hydraulic fracturing, pending an independent scientific enquiry.”
After the recent completion of the scientific enquiry, the moratorium has been lifted by the WA government for existing petroleum titles. However, the necessary legislation still needs to be passed for operators to commence fracking, a process which Smith believes could take 18 months.
This means that the Arrowsmith discovery will remain on the backburner for the foreseeable future, although the lifting of the moratorium opens potential for the eventual recommencement of the project.
By Smith’s own estimations, Norwest is incredibly well positioned for a junior explorer in the revitalised Perth Basin. “We’ve got great exposure to very significant prospective oil and gas resources. Nobody else of our size has both oil and gas prospects in their portfolio,” he claims.
“We are particularly excited about the potential within the EP368 and EP426 permits. Recent exploration in the basin has really high graded those permits. We are also hopeful of a positive result in the TP/15 permit. We know we have an oil discovery there, the question is how big is it?”
Now, the question for investors is how can they get maximum exposure in Perth Basin? The answer could lie with Norwest – a low market cap company with material interests in several very large prospects in the basin.
“We believe we are a logical place for investors to look if they want to gain additional exposure to this exciting oil and gas play,” Smith concludes.