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Kea Petroleum plc (LSE:KEA) is now about to become a commercial oil and gas producer, according to the New Zealand-focussed explorer.
The director made the statement following the results of the production testing made at the Puka-1 well in onshore New Zealand. Oil and gas flowed at a controlled rate of 290 barrels per day and 2.2 million cubic feet per day, for four days, without water formation.
“Kea believes it is now on the brink of becoming a commercial oil and gas producer as well as an explorer,” stated Chairman, Ian Gowrie-Smith.
However, Kea said the firm cannot yet provide a reserves estimate based on the initial tests and said a second well may have to be drilled to determine the how big the oil field is.
Estimated gross recoverable resource in the said field, which was spudded on 24th March 2012, was at one million barrels of oil with a potential upside of up to three million.
Shares were up 9.2% to 8.875 pence by midday GMT after hitting 9.125 pence shortly after the announcement was made.
Setbacks
But it wasn’t always good news for Kea for its 2012 drilling programme. In fact, Puka-1 well is the first real good news the company has on the exploration front.
Result of the Douglas-1 well, which was spudded in April, proved disappointing as formation water dominated the flow testing due to extensive fracture in the Tikorangi Limestone, which hosts the nearby producing Waihapa oil field.
Drilling of the Mauku prospect has also been delayed due to extreme weather conditions. Spudding of the Mauku-1 well is now scheduled during the fourth quarter after it had been earlier stated to be in the first quarter of 2013.
What Matters Most
Delay in drilling Mauku-1 was also due to the fact Puka-1 well struck excellent quality light oil, as Kea put it, with a density of 43.7 degrees API and pour point of 15 degrees Centigrade, as announced on 10th April 2012.
Puka-1 well, the first well in Kea’s 2012 drilling programme, altered the company’s timeline as this is by far the most successful discovery made by the company from its licences in New Zealand, giving the company the potential of becoming an oil and gas producer in the near future.
Follow up wells are now in advanced stage of planning and design, soon to be drilled in the fourth quarter this year, according to the company.
“The Directors believe that there is potentially an enlarged Puka field with reserves that might be established by drilling a Puka 2 well together with additional seismic, further appraisal and development drilling,” Kea said.
Company Spotlight
Kea Petroleum plc is UK-incorporated oil and gas exploration company with assets in New Zealand and Australia. It joined the Alternative Investment Market of the London Stock Exchange in 2010.
