Geodynamics reports delays in drilling progress at Habanero 4

Geodynamics reports delays in drilling progress at Habanero 4 Drilling crew preparing for spudding of Habanero 4, Australia (source: Geodynamics)
Alexander Richter 15 Aug 2012

Geodynamics reports delay in drilling progress of its Habanero 4 well at the Innamincka Deeps Joint Venture with cost overrun, and the decision of its JV partner Origin Energy to not fund beyond this point.

Australian Geodynamics has recently advised of delays on the drilling progress of its Habanero 4 well at the Innamincka Deeps Joint Venture.

The reverse cementing operation decision was taken after a review of the causes of the failure of the Habanero 3 well.

The total cost to complete the well and associated stimulation and open flow test activities is now estimated to be approximately $50 million, an increase of $1.5 million or 3% compared to the maximum authorised expenditure of $48.5 million agreed with joint venture partner, Origin Energy.

In line with the agreement between the joint venture partners that the well had to achieve interim cost and technical milestones and maintain the final estimated cost of the well within the agreed budget, Origin Energy has advised it will not contribute further to the well costs. Page 2 of 3 Geodynamics is now responsible for ongoing risk and cost of the well. Origin retains the right to elect to resume paying its full contribution to the well cost and return to full
participation in the well at any stage. Geodynamics has no knowledge of Origin?s intention with respect to this right at this time. The incremental cost to Geodynamics as a result of the increased final well cost and Origin?s decision to cease further participation in the well is estimated to be approximately $2.76 million.

Geodynamics? Managing Director and Chief Executive Officer, Mr Geoff Ward, said, “It is disappointing we have encountered delays that have led us to exceed our agreed budget.

Habanero 4 is one of the most technically challenging wells to be drilled in Australia this year, particularly given we have taken on a number of technical firsts to address the issues identified in previous wells which are at the limits of current well technology.

While the cost overrun is regrettable, I am very pleased with the excellent safety performance during a period of intense operational activity, the overall quality of the well that we have achieved so far and the efforts to control costs as delays have been experienced.

Geodynamics is committed to completing the well to high safety and operational standards so that we can progress the planned testing and demonstration program including the trial of the 1 MWe Habanero Pilot Plant later in this financial year.

Geodynamics remains well funded to complete the well and is able to absorb the incremental cost of Origin?s decision to cease participation within existing funding and without prejudicing our ability to complete the remainder of our proposed well and testing program.”

Source: Geodynamics project update (pdf)