VLE: Update on 2nd flow test

The good news from VLE keeps flowing, like the gas from their first test well. VLE announced the 2nd flow test from their test well. The results from the 2nd flow test were as good, and likely better, than the first test.

Over the final 24 hours of the test the well was produced at an average restricted rate of approximately 0.8 million cubic feet per day (“MMcf/d“) of natural gas. A similar final 24-hour natural gas rate was achieved in Test #1.

The initial production rate for several hours from Test #2 was higher than the initial rate measured in Test #1. However, surface pressure measurements suggest that several hours into Test #2, there was a failure of downhole equipment that appears to have obstructed production for the remainder of the test period, including the final 24-hour test rate noted above.  Condensate production in the range of 30 to 40 barrels per MMcf was observed in this test. The condensate measurement is subject to considerable uncertainty given the nature of the testing protocol and the short duration of the testing.

Although the average rate is similar to Test #1, the key is the results were actually much higher than Test #1. There was an equipment failure (the plug for Test #1 came off) that obstructed the production.

The other important aspect is the condensate production. This is a huge surprise as it was never expected to find condensate. This is a nice upside and, again, the flow rates are likely much higher than what the company is reporting.

As Hydra Capital mentions:

Given that Cormark analyst Garret Ursu had previously pegged an aggregate rate of 0.5 mmcf/d as the “technical success” hurdle for the whole well, to see another zone match/exceed that rate from a single zone is impressive indeed.

The flow rates from these test results are extremely good. Even the expectation that the lone analyst was expecting, 0.5 mmcf/d for the whole well, has been completely blown away.

We now have 2 more flow test remaining. I think we see results from one before the end of 2017. After that the economic resource estimate will be published in mid-to-late Jan. This will be a huge catalyst for the stock and will likely start the buyout conversations.

Feels like Xmas came early for the VLE holders.


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