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Target Energy Limited Issues June 2014 Quarterly Report

WEST PERTH, AUSTRALIA -- (Marketwired) -- 08/01/14 -- US-focused oil and gas producer Target Energy Limited ("Target") (OTCQX: TEXQY) (ASX: TEX) is pleased to issue its Quarterly Report for the quarter ending 30 June 2014.

  • Fairway oil production up 11% on prior quarter
  • Company maintains high level of activity in Permian Basin
  • 5 wells drilled back-to-back at Fairway in Q1/Q2 2014
  • Production set to rise as new wells are stimulated
  • Drilling of further 5 Fairway wells to commence in August 2014
  • Company divests 10% Working Interest in Fairway for A$6.2m

1. Operations
Permian Basin, Texas

1.1. Fairway Project - Howard & Glasscock Counties (Target 35%-60% WI)

On 30 June 2014, Target Energy executed a transaction in which the Company sold a 10% working interest in its Fairway leases.

Further details regarding the transaction are included in Section 5.1 below.

1.2. Drilling

1.2.1. Wagga Wagga #2 (Target 35% WI)

The Wagga Wagga #2 well is situated approximately 706 metres (2,316 ft) south of Wagga Wagga #1 in Glasscock County. Drilling commenced on 16 April 2014 and concluded with the well reaching its Total Depth at 2,984m (9,790 ft) on 30 April 2014 (Table 1). Analysis of wireline log data indicated that that the well had encountered potential pay in the Wolfberry section and Fusselman Carbonate. The well was completed as an oil producer.


----------------------------------------------------------------------------
                   Well Reporting Summary - Wagga Wagga #2
----------------------------------------------------------------------------
Name and Type of Well     Wagga Wagga #2, Step Out/Appraisal (Oil)
----------------------------------------------------------------------------
Well Location             Glasscock Co, Texas
----------------------------------------------------------------------------
Lease Description         E/2 S221, Block 29, A-496; W&NW RR Co Survey
----------------------------------------------------------------------------
TEX Working Interest      35%
----------------------------------------------------------------------------
Report Date               7:00 pm 1/05/14 (Western Aust Standard Time) /
                          6:00 am 1/05/14 (USA Central Daylight Time)
----------------------------------------------------------------------------
Current Depth:            2,984.0m (Total Depth). All reported depths are
                          measured below the Rotary Table (RT) on the rig
                          floor.
----------------------------------------------------------------------------
Progress                  Well spudded 04:00 on 15 April 2014. Drill to
                          Total Depth at 2,984.0m (9,790 ft). Run wireline
                          logs; run and cement 5 1/2" production casing to
                          2,984.0m.
----------------------------------------------------------------------------


Table 1

1.2.2. Homar #1 (Target 50% WI)

Drilling commenced at Homar #1 well on 5 May 2014, with the well reaching a Total Depth of 3,292m (10,800 ft) on 29 May 2014 (Table 2). Homar #1 experienced strong oil and gas shows throughout the Wolfberry section as well as a strong show in the Fusselman Carbonate. The well was completed as an oil and gas producer.


----------------------------------------------------------------------------
                      Well Reporting Summary - Homar #1
----------------------------------------------------------------------------
Name and Type of Well     Homar #1, Oil Exploration Well
----------------------------------------------------------------------------
Well Location             Howard Co, Texas
----------------------------------------------------------------------------
Lease Description         S24, Bl 35 A-1538; T&P RR Co Survey, Howard Co
----------------------------------------------------------------------------
TEX Working Interest      50%
----------------------------------------------------------------------------
Report Date               7:00 pm 5/06/14 (Western Aust Standard Time) /
                          6:00 am 5/06/14 (USA Central Daylight Time)
----------------------------------------------------------------------------
Current Depth:            3,292 m (Total Depth). All reported depths are
                          measured below the Rotary Table (RT) on the rig
                          floor.
----------------------------------------------------------------------------
Progress                  Drill ahead to 3,292m (10,800 ft); run and cement
                          production casing. Rig released on 4 June 2014.
----------------------------------------------------------------------------


Table 2

1.2.3. Ballarat 185 #1 (Target 50% WI)

Drilling commenced at Ballarat 185 #1, approximately 5 kms east of the Sydney lease in Glasscock County, on 7 June 2014 with the well reaching its Total Depth of 3,030m (9,942 ft) on 28 June 2014 (Table 3). Wireline logs indicate potential pay in the Ellenburger, Fusselman and Wolfberry sections. The well will be tested in the Ellenburger and Fusselman zones prior to a decision regarding timing of a fracture stimulation program.


----------------------------------------------------------------------------
                  Well Reporting Summary - Ballarat 185 #1
----------------------------------------------------------------------------
Name and Type of Well     Ballarat 185 #1, Oil Exploration Well
----------------------------------------------------------------------------
Well Location             Glasscock County, Texas
----------------------------------------------------------------------------
Lease Description         S185, Bl 28, A-815 and A-A483, Waco & Northwestern
                          Survey
----------------------------------------------------------------------------
TEX Working Interest      50%
----------------------------------------------------------------------------
Report Date               7:00 pm 1/07/14 (Western Aust Standard Time) /
                          6:00 am 1/07/14 (USA Central Daylight Time)
----------------------------------------------------------------------------
Current Depth:            3,030 m. (Total Depth) All reported depths are
                          measured below the Rotary Table (RT) on the rig
                          floor.
----------------------------------------------------------------------------
Progress                  Drill ahead to 1,114m (3,655 ft); run and cement
                          intermediate casing. Drill ahead to 3,030m (9,942
                          ft); run wireline logs. Run and cement production
                          casing. Rig released on 1 July 2014.
----------------------------------------------------------------------------


Table 3.

1.3. Completions

1.3.1. Wagga Wagga #2 (Target 35% WI)

A 7-stage fracture stimulation of the Wolfberry section was performed on Wagga Wagga #2 on 7 July 2014 after testing in the Fusselman Carbonate and the Devonian yielded only minor oil. The stimulation covered an interval of 440 metres, using approximately 23,000 barrels of load water. To date approximately 37% of the load water has been recovered, with oil flowing with the load water. At last report the well was flowing 31 BOPD with 178 BW (Table 4).


----------------------------------------------------------------------------
                   Well Reporting Summary - Wagga Wagga #2
----------------------------------------------------------------------------
Name and Type of Well          Wagga Wagga #2, Oil & Gas producer
----------------------------------------------------------------------------
Well Location                  Glasscock Co, Texas
----------------------------------------------------------------------------
Lease                          S221, Block 29, A-496; W&NW RR Co Survey,
                               Glasscock Co
----------------------------------------------------------------------------
TEX Working Interest           35%
----------------------------------------------------------------------------
Geological Rock Type           Wolfberry - carbonates, shales and minor
                               sandstone
----------------------------------------------------------------------------
Depth of Zones Tested          2,453m - 2,893m
----------------------------------------------------------------------------
Type of Tests Undertaken       Ongoing flow-back after fracture stimulation
----------------------------------------------------------------------------
Duration of Tests Undertaken   Flowback commenced 9 July 2014
----------------------------------------------------------------------------
Hydrocarbon Phases Recovered   Oil, Gas
----------------------------------------------------------------------------
Other recovery                 8,830 Barrels of Load Water (total load now
                               recovered: 38%)
----------------------------------------------------------------------------
Choke Size Used                Various
----------------------------------------------------------------------------
Flow Rates                     31 BOPD + 178 BWPD (24 July 2014)
----------------------------------------------------------------------------
Number of Fracture             7 zones stimulated
Stimulations
----------------------------------------------------------------------------
Material Volumes of Non-       Nil
Hydrocarbon Gases
----------------------------------------------------------------------------


Table 4

1.3.2. BOA 12 #3 (Target 50% WI)

A 4-stage fracture stimulation of the Wolfberry section was performed at BOA 12 #3 on 2 May 2014. The program covered a 225 m interval, using approximately 15,700 barrels of load water. The well was put on pump on 15 May 2014 and averaged 65 BOPD with 139 BWPD Water and 43 mcf of gas until 31 May 2014 (Table 5), at which time the well production was combined with that of BOA 12 #1.


----------------------------------------------------------------------------
                     Well Reporting Summary - BOA 12 #3
----------------------------------------------------------------------------
Name and Type of Well          BOA 12 #3, Step Out/Appraisal (Oil)
----------------------------------------------------------------------------
Well Location                  Howard Co, Texas
----------------------------------------------------------------------------
Permit                         S12, Block 33 T-2S, A-1353, T&P RR Survey
----------------------------------------------------------------------------
TEX Working Interest           50%
----------------------------------------------------------------------------
Geological Rock Type           Permian to Mississippian Shales & Carbonates
----------------------------------------------------------------------------
Depth of Zones Tested          app 2,800m - 3,000m
----------------------------------------------------------------------------
Type of Tests Undertaken       Flowback, post-fracture stimulation
----------------------------------------------------------------------------
Duration of Tests Undertaken   17 days
----------------------------------------------------------------------------
Hydrocarbon Phases Recovered   1,144 Barrels of Oil (34%) + 427mcf gas from
                               22 May
----------------------------------------------------------------------------
Other recovery                 2,370 Barrels of Water (66%); app 6,800
                               barrels of load still water to recover
----------------------------------------------------------------------------
Choke Size Used                On Pump
----------------------------------------------------------------------------
Flow Rates                     Average: 65 BOPD + 139 BWPD + 43 mcf (15-31
                               May 2014)
----------------------------------------------------------------------------
Number of Fracture             Four stages
Stimulations
----------------------------------------------------------------------------
Material Volumes of Non-       Nil
Hydrocarbon Gases
----------------------------------------------------------------------------


Table 5

1.3.3. Homar #1 (Target 50% WI)

A 5-stage fracture stimulation of the lower Wolfberry section was performed at Homar #1 on 8 July 2014. The program covered a 328 m interval, using approximately 17,300 barrels of load water. Flowback commenced on 9 July -- the well has so far recovered approximately 52% of the load water (9,000 BW) with oil flow having commenced on 15 July 2014. Flow rates will be reported once levels have sufficiently stabilised.

1.3.4. BOA North #4 (Target 50% WI)

BOA North #4 is presently awaiting fracture-stimulation.

Forward Program

2014 Drilling Program

A further five wells are planned to be drilled in the Fairway Project including new wells on the Company's BOA, Darwin, Ballarat, Bunbury and Taree lease-holdings.

2. Current Indicative 2014 Drilling Schedule


----------------------------------------------------------------------------
                                                                Target
     Estimated                                             Working Interest
      Timing*            Prospect           Location             (WI)
----------------------------------------------------------------------------
    August 2014        BOA North #5       Howard Co, Tx           50%
    Aug/Sep 2014        Bunbury #1        Howard Co, Tx          60%#
   September 2014        Taree #1       Glasscock Co, Tx         60%#
      Q4 2014           Ballarat #2     Glasscock Co, Tx          50%
      Q4 2014            Darwin #4        Howard Co, Tx           50%
----------------------------------------------------------------------------

*Timing indicative only - actual order, timing and well selection will vary.
#Bunbury, Taree WI will reduce to 50% following Second Closing of sale to Aurora Energy Partners.

3. Production (1 Apr - 30 Jun)


----------------------------------------------------------------------------
                                  Gross Gas Cumulative   Net Gas  Cumulative
                                  Prodn in   Gross Gas  Prodn in    Net Gas
                                   Period      Prodn     Period      Prodn
         Project          TEX WI   (mmcf)     (mmcf)     (mmcf)     (mmcf)
----------------------------------------------------------------------------
Section 28                   25%       16.5    2,380.6        4.1      595.1
E. Chalkley                  35%        2.4       59.3        0.8       20.8
Merta                        25%       10.8      407.1        2.7      101.8
Fairway+                    35%-
                             60%       45.5      204.7       26.0      121.6
----------------------------------------------------------------------------
Total                                  75.2    3,051.7       33.7      839.2
----------------------------------------------------------------------------





---------------------------------------------------------------------
                           Gross Oil Cumulative   Net Oil  Cumulative
                           Prodn in     Gross    Prodn in    Net Oil
                            period    Oil Prodn   Period      Prodn
         Project             (BO)       (BO)       (BO)       (BO)
---------------------------------------------------------------------
Section 28                       480     91,385        120     22,846
E. Chalkley                    1,459    115,705        511     40,497
Merta                            144      5,250         36      1,312
Fairway+                      23,703    116,297     13,011     68,567
---------------------------------------------------------------------
Total                         25,785    328,636     13,677    133,223
---------------------------------------------------------------------


Net Production is scaled to Target's Working Interest, before royalties; mmcf = million cubic feet; mmcfgd = million cubic feet of gas per day; BO = barrels of oil, BOPD = barrels of oil per day, BOEPD = barrels of oil equivalent per day (Target reports a thermal equivalent when combining gas and oil production, where 1BOE = 6 mcf).

+ Net Oil and Gas Production reduced on 1 May 2014 to reflect 10% WI sale in relevant producing interests.

4. Lease Holdings


----------------------------------------------------------------------------
                                                              TEX WI  TEX WI
                                                              At 31   At 30
              Lease /                                Depth    March    June
  Project      Unit      Basin      Description     Limits     2014    2014
----------------------------------------------------------------------------
Fairway
          * BOA        Permian   S12, Block 33,         None     60%     50%
                                 T-2S, A-1353;
                                 T&P RR Co
                                 Survey, Howard
                                 Co
          * Darwin     Permian   S44, Block 33,         None     60%     50%
                                 T-1S, A-1292;
                                 T&P RR Co
                                 Survey, Howard
                                 Co
            Bunbury    Permian   S102 A-1405;           None     60%     60%
                                 S103 A-1405;
                                 S104 A-1495; Bl
                                 29 W&NW RR Co,
                                 Howard Co
          * Ballarat   Permian   S 184 & 185, Bl        None     60%     50%
                                 28, A-815 & A-
                                 A483; W&NW RR
                                 Survey,
                                 Glasscock Co
            Taree      Permian   S193, Bl 28, A-        None     60%     60%
                                 815 and A-A483;
                                 W&NW RR Co
                                 Survey,
                                 Glasscock Co
            Sydney     Permian   S188 Block 29 A-       None     60%     60%
                                 170; W&NW RR Co
                                 Survey,
                                 Glasscock Co
            Unnamed    Permian   S4, Block 32, T-       None     60%     60%
                                 2-S, A-1354; T &
                                 P RR Co Survey,
                                 Howard Co
          * Homar      Permian   S24, Bl 35 A-          None     60%     50%
                                 1640; S26 Bl 35
                                 A-1415; T&P RR
                                 Co Survey,
                                 Howard Co
          * Wagga      Permian   S221, Block 29,        None     45%     35%
            Wagga                A-496; W&NW RR
                                 Co Survey,
                                 Glasscock Co
----------------------------------------------------------------------------
Merta
            Merta No.  Gulf      S3 A-219         7,650 ft -     25%     25%
            1 Well Gas Coast     International      7,880 ft
            Unit No. 2           and Great
                                 Northern RR Co
                                 Survey, Wharton
                                 Co
----------------------------------------------------------------------------
Section 28
            SML #A-1,  Gulf      St Martin Ph           None     25%     25%
            A-3 Unit   Coast
            SML #A-2   Gulf      St Martin Ph           None     25%     25%
            Unit       Coast
----------------------------------------------------------------------------
E Chalkley
            Unit       Gulf      S11, 13, 14 &15, 8,000 ft -     35%     35%
            Agreement: Coast     T12S-R6W,         10,000 ft
            CK W RA SU           Cameron Ph
----------------------------------------------------------------------------

                         Gross
  Project     Royalty    Acres   Net Acres
------------------------------------------
Fairway
          *        25%     640.0     320.0
          *        25%     640.0     320.0
                   25%     918.0     550.8
          *        25%     355.7     177.8
                   25%     320.0     192.0
                   25%     480.0     288.0
                   25%     610.0     366.0
          *        25%     260.0     130.0
          *        25%     305.0     106.8
------------------------------------------
Merta
                 25.7%     303.0      75.7
------------------------------------------
Section 28
                   28%      40.0      10.0
                   28%      40.0      10.0
------------------------------------------
E Chalkley
                 30.5%     714.9     250.2
------------------------------------------
                 Total      5626    2797.3
------------------------------------------

* Changes effective 1 May 2014

5. Corporate

5.1. Sale of 10% Interest in Fairway Project to Victory Energy

On 2 July 2014, Target Energy, through its wholly owned subsidiary TELA Garwood LP ("TELA Garwood"), confirmed the sale of a 10% working interest in its Fairway Project to Aurora Energy Partners ("Aurora"), a company associated with Victory Energy Corporation (OTCQX: VYEY).

A Purchase and Sale Agreement ("PSA") was signed by TELA Garwood and Aurora on 30 June 2014, with an effective date of 1 May 2014. In response to external delays in completing conveyancing of titles, the PSA split the closing of the sale into two parts.

  • The first part ("First Closing") was completed on 30 June 2014, with Aurora making an immediate payment of A$2.7m (US$2.5m) to TELA Garwood and in return TELA Garwood assigning to Aurora a 10% working interest in its Darwin, BOA and Wagga Wagga production leases and in various other leases.
  • Subject to the completion of the outstanding conveyancing items, the Second Closing is scheduled for 31 July 2014, at which time Aurora will pay the outstanding balance of A$3.5m (US$3.3m) to TELA Garwood and in return TELA Garwood will complete the balance of the assignments.
  • The total purchase price is A$6.2m (US$5.8m) after a reduction of US$0.2m in accordance with conditions of the sale.

Laurence Roe
Managing Director

NOTE: In accordance with ASX Listing Rules, any hydrocarbon reserves and/or drilling update information in this report has been reviewed and signed off by Mr Laurence Roe, B.Sc, Managing Director of Target Energy Limited, who is a member of the Society of Exploration Geophysicists and has over 30 years' experience in the sector. He consents to the reporting of that information in the form and context in which it appears.

CONTACT INFORMATION
Media Inquiries:
USA
Bradley Holmes
Target Investor Relations (Houston)
+1 713 304 6962 cell
+1 713 654 4009 direct

Laurence Roe
Target Energy
+1 713 275 9800 direct

Australia
Ross Dinsdale
Business Development Manager (Perth)
+61 429 702 970 cell
+61 8 9476 9000 direct

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