- It’s been a tough start to the trading day for Elixir Energy (EXR) after the company reported some stale results from its Cracker-1S well in Mongolia
- The Cracker well is part of the Nomgon IX Coal Bed Methane Production Sharing Contract (PSC)
- While the well was drilled to a targeted 563 metres, it intersected Triassic sediment rather than Permian sequences, which is not what Elixir hoped for
- As such, the well has been remediated and Elixir is moving its drill rig onto a new well in the area
- The company said the Cracker well is one of the dozens to be drilled in the Nomgon PSC, and so today’s results are just a small part of the bigger picture
- In other news, Mongolia’s COVID-19 restrictions continue to ease, which means Elixir has moved a second contracted drill rig into the PSC area
- Still, Elixir shares are trading almost 8 per cent lower this morning at 29 cents each
It’s been a tough start to the trading day for Elixir Energy (EXR) after the company reported some stale results from its Cracker-1S well in Mongolia.
The Cracker well is part of Elixir’s flagship Nomgon IX Coal Bed Methane Production Sharing Contract (PSC). The well was the first-ever drilled in the local sub-basin, according to Elixir, and reaches 563 metres deep.
However, Elixir said the well intersected Triassic sediment rather than Permian sequences, which is not what the company was hoping for. As such, the well has been remediated and Elixir is moving the drill rig to the West-Yangir-1 core-hole in the project area.
Managing Director Neil Young said Cracker is just one well out of many in the Nomgon PSC, and so today’s result is just a small hiccup in light of the greater exploration program.
“Although in isolation the results of Cracker-1S were not in line with our aims, the bigger picture is that Elixir is in the midst of drilling dozens of wells, which will vary in what they tell us,” Neil said.
“Our aim is to build up a large regional gas resource brick by brick through our low-cost ‘rinse and repeat’ model,” he said.
Easing restrictions, doubling drills
As a silver lining to the disappointing news, however, Elixir said COVID-19 restrictions in Mongolia are continuing to ease, meaning its second contracted drilling company has moved a drill rig into the PSC area.
Top Diamond Drilling will drill a shallow exploratory well, dubbed Manlai-1S, in a new sub-basin of the Mongolian PSC. Like the Cracker well. This well will target Permian sediments.
This means Elixir has two contracted drills operating in the Nomgon PSC at once. Moreover, the company said a sonic detection and ranging unit has arrived in Mongolia and will now be deployed on-site to measure renewable energy resources.
“Mongolia is yet again surprising on the upside with its management of COVID, and is now recognised as achieving one of the highest vaccination rates in the world,” Neil said.
“Although there will still be issues to carefully manage, this bodes well for the expansion of our exploration program.”
Nevertheless, Elixir’s share price crumble on the Cracker results, shedding over 23 per cent of its value at market open.
The company has since recouped the worst of its losses, but shares are still trading lower by 7.8 per cent at 11:00 am AEST to 29 cents each.