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- Elixir Energy (EXR) has tanked today after sharing a disappointing operations update
- Results from a permeability report at a Mongolian well were at the lower end of expectations
- According to Elixir, coal quality at the well is poorer than predicted
- The second well in the area is spudding today
- Elixir shares have lost 43 per cent in early afternoon trade, currently worth 1.7 cents each
Investors are selling off Elixir Energy (EXR) shares in bulk today after an underwhelming operations update from the company’s Mongolian Nomgon IX project.
The oil and gas explorer said it has now received a permeability report from some pre-Christmas testing at the Ugtaal-1 well in the area, but the results were not what it had hoped for. The company said the testing was successfully undertaken but results were at the “lower end” of expectations.
Elixir blamed poorer than predicted coal quality for the weakened permeability results. Moreover, while gas content testing is still ongoing, the company said preliminary findings also reflect this lower than expected coal quality.
In an attempt to offset the bad news, Elixir also told shareholders the second well in the Nomgon project is spudding today. The Nomgon-1 well sits roughly 37 kilometres south-west of Ugtaal-1. Elixir said recent fieldwork has reaffirmed the strong potential in the area for coal seam gas (CSG) exploration.
Elixir Managing Director Neil Young remained hopeful about the second well.
“We are looking forward to the last of the core-hole wells planned for our first year’s drilling campaign. The Nomgon-1 well is one which we are highly confident will intersect coal seams at depth — and will provide a good first test of a different sub-basin in the PSC [production sharing contract],” Neil said.
The company has also officially proposed its 2020 plans to the Mongolian petroleum regulator. A meeting with this regulator is scheduled for the end of January.
While Elixir kept a hopeful tone in the light of some disappointing results — saying the permeability report has provided some “invaluable learnings” for its exploration efforts — the market hasn’t responded kindly.
In early afternoon trade, Elixir shares are down 43.33 per cent and worth 1.7 cents each. The company has an $8.51 million market cap.
