FoxDavies Daily Monitor - Amerisur Resources, KEA Petroleum and Leyshon Resources

Wednesday, November 28, 2012

Amerisur Resources (AMER LN, 43.5p, ▼ 1.14%): Platanillo Update - The fourth well (Platanillo-9) on the Platanillo field has been successfully drilled to a total depth of 8,689ft. It encountered oil columns in the U and N sand formations and is currently undergoing logging and production testing. Drilling of fifth well is expected to commence shortly. Platanillo Block 2P/3P reserves were estimated at 7.7 MMBO/10.6 MMBO at the end of 2011. The Company plans to publish an updated reserves report by year end and we expect significant upward revision in reserves estimates due to successful drilling of producer wells.

KEA Petroleum (KEA LN, 8.625p, ▲ 2.99%): Puka Appraisal Commences - Size, it Seems, Does Matter - The Company has commenced drilling of a follow up well (Puka-2) to explore the potential of higher resources in the Puka field. The first well (Puka-1) discovered 1-3mm bbl oil resources and was declared commercial following encouraging flow test results. However Puka-1 was drilled with a small rig and was primarily designed as a low cost slim hole exploration well which restricted its discovery potential. With Puka-2 well being drilled by a larger capacity rig and has larger diameter, the Company expects possibility of discovering considerably larger resources, probably in the range of 7-10mm bbl of oil. We believe that this is a good update, and one that points towards a positive outlook for the Company.
I n this news:

  • Commenced drilling of Puka 2 has commenced using the DrillForce Mayhew Rig 1. The hole is expected to be drilled to a total depth of 1890m.
  • The drilling is expected to be suspended after surface casing is run at approximately 400m to allow for the commencement of the 3D seismic programme over the area in mid-December and to be recommenced using the DrillForce Rig 6 in mid-January.
  • This will be completed by early February with testing to start later in February.
  • Puka 2 is designed to appraise the Puka field and test whether the Puka 1 discovery is a stratigraphically controlled rather than a simple structural field.
  • Puka 2 is being drilled to a much larger diameter. This should allow for continuous oil and gas production at good rates and is more suitable for addressing wax build up issues.

Leyshon Resources (LRL LN, 19.8p, ▼ 22.55%): Inching Towards Discovery - News that ZJS5 exploration well in the Ordos Basin has encountered 56.4m gas pay intervals is encouraging. The Company plans to conclude testing the first of the potential pay zones by the end of the year. If successful, this discovery could be monetised quickly given tie-in point on the Lin-Lin pipeline is located just 10km from the well location. The recent well-head contract in the range of $6.-7.5/mcf for the gas supplied on the Lin-Lin pipeline also supports monetisation. With the second well expected to spud shortly, we expect the rate of potential catalyst points, as provided by news flow, to increase as time progresses.
In this news:

  • The well was drilled to total a depth of 2,155 meters, then wire line logged.
  • The analysis of the logs and samples is on-going however initial results have indicated that about 56.4 metres pay intervals have been encountered.
  • In particular, around 30.8 metres of the 56.4 metres have exhibited relative high porosity measurements which indicate that these zones could have the potential to flow gas at commercial rates.
  • PAPL has a 100% interest in the exploration phase of the Production Sharing Contract (PSC) with PetroChina, which has the right to buy back a 40% interest at the development stage.
  • The Company has A$ 47 million in cash and 249 million ordinary shares on issue (approximately A$ 19 cents per share and 12 pence per share).

MEO Australia (BUY, A$0.55) (MEO AU, A$0.18, ▼ 35.71%): One Step Forward, One Step Back - Two updates from MEO's management today, one on Gurame (North Sumatra), indicating both the presence of gas and high permeability in the reservoir, and Heron South-1 (NT/P68), where low secondary permeability (permeability provided by natural fractures within the reservoir) restricted the recoverability of hydrocarbons from the interval. The Gurame update is positive, with background gas detected and high permeability inferred, due to loss of drilling fluids in the well. While testing will have to be undertaken, this provides a measure of comfort that a number of the prerequisites for a commercial reservoir are present; the proof of the pudding however, is in the eating, and testing must be undertaken before and full announcement can be made. On Heron South-1, the news is more of a mixed bag. The well test confirmed the presence of movable gas. Further work will be required to ascertain whether the well at the Heron South location at the Elang-Plover horizon is in communication with the other wells drilled to this horizon, i.e. is the Heron structure is a single structure. This has not, however, impacted the prospectivity of the Frigate horizon, which will be tested next. The more disappointing news, however, is that the reservoir at the Heron South-1 location in the Elang-Plover horizon was too tight to allow the gas to flow at commercial rates. This is contrary to what has been observed elsewhere in the Heron structure at this horizon, and underlines the fact that the intersecting the secondary permeability is essential to the commerciality of the structure. While not the slam dunk everybody was hoping for, we believe that the share price reaction is excessive, (down 35%), especially as the Company has multiple targets and a complete failure of the entire Heron prospect would only remove A$0.12 from our NAV. We do not believe that the structure has been killed, but we have adjusted our technical to commercial chance of success to 30%, to reflect the reservoir's added complexity. We are reiterating our BUY recommendation but with a revised A$0.55 Target Price.
In this news:

  • Gurame

    • Drilled out of 7" liner in 6" hole to 3,145mMDRT
    • Pulling drill string out of hole at 1241mMD and preparing to commence wireline logging operations
    • Complete logging operations and plug back to 7" liner shoe
    • Production test Baong sands

  • Heron South

    • Drill Stem Test #1 flowed gas to surface at rates too low to measure accurately
    • Low reservoir permeability considered cause of low flow rates
    • Gas analysis indicates CO2 content of approximately 35%
    • Currently preparing to test upper zone of interest

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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