The Israeli partners in the Myra 1 well - Israel Land Development Company Energy Ltd. (TASE: IE), Modiin Energy LP (TASE:MDIN.L), and IPC Oil and Gas Holdings Ltd. (IPC) (TASE: IPC) - stated in notices to the Tel Aviv Stock Exchange (TASE) on Friday that the well has not yet reached the gas-bearing target strata. The notices were made in response to "Globes'" report on Thursday that no gas had been found at the well, so far. In addition, a source close to the drilling told "Globes" today, "We wouldn't have invested an extra $40 million if we weren't convinced that there is a real chance of success."
The notices state, "Under the current drilling plan, the drilling is due to continue until the first week of September 2012, when the gas-bearing strata are scheduled to be reached. The well operator, GeoGlobal Resources (India) Inc., estimates that these strata are at a depth of 4,800-5,000 meters."
These figures do not agree with previous estimates by other parties involved in the well, which said that the target strata were at a depth of 4,300 meters. One possible reason for the discrepancy is that there are several target strata at different depths.
On Thursday, "Globes" reported that the Myra 1 well had reached a depth of 4,600 meters without finding substantial signs of natural gas. It is, however, premature to declare the well a dry hole, despite the disappointing initial results.
Netherland Sewell & Associates' (NSAI) best estimate of the two licenses is 6.5 trillion cubic feet of natural gas with a geologic probability of success of 54% for Myra and 18% for Sarah. ILDC Energy owns 43.6% of Myra and Sarah through subsidiaries Emanuel Energy Ltd. and Emanuel Energy Oil and Gas Exploration LP, Modiin Energy owns 29.2%, IPC owns 13.6%, and GeoGlobal Resources Inc. (AMEX: GGR) owns 5%.
IBI Investment House analyst Gil Bashan told "Globes" in response to its report, "It is hard to know what's happening there, what stage the drilling has reached, and what are the depths of the target strata. The gas was supposed to be at shallower strata than the 4,800-5,000 meter depths in today's announcements, which are surprising compared with previous announcements and reports. However, it is possible new information was discovered during the drilling which changed the estimates based on the seismic surveys, and that gas will nevertheless be found in the structure."
Bashan advises investors to wait for the well's final results. However, if it is a dry hole, it will have repercussions on Israel's natural gas industry. The Sarah and Myra fields were supposed to compete against the Tamar discovery as Israel's second largest natural gas discovery. In the absence of competition, Tamar will be Israel's sole gas supplier.
A dry hole at the Myra 1 well will be the first big failure by Israel's natural gas exploration industry, and will change the estimates of gas reserves in Israel's exclusive economic zone and will therefore reduce estimates of how much gas can be exported.
Modiin Energy's share price fell 22% by midday today to NIS 0.22, giving a market cap of NIS 520 million, ILDC Energy's share price fell 11% to NIS 0.21, giving a market cap of NIS 600 million, and IPC's share price fell 45.7% to NIS 0.19, giving a market cap of NIS 36 million.
Published by Globes [online], Israel business news - www.globes-online.com - on August 12, 2012
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