Highlights
• L&M Petroleum aims to join Salinas Energy in drilling program targeting light oil prospects in the prolific San Joaquin Basin of California.
• 18 million barrel recoverable potential Osso Bucco Prospect will be drilled first.
• Rig secured for November drilling.
L&M Petroleum (LMP) today announced that it has taken a significant first step in broadening its exploration portfolio and establishing a beachhead in the San Joaquin Basin of California, one of the world’s most productive basins, by agreeing principal commercial terms to ‘farm-in’ to Perth based Salinas Energy’s San Joaquin Basin light oil prospect drilling program.
The principal commercial terms contemplate that, subject to the conclusion of a formal ‘farm-in’ agreement, LMP will have the right to earn a 20 percent working interest in an extensive portfolio of leads and prospects in the San Joaquin Basin assembled by Salinas after a comprehensive, two year geo-scientific evaluation of that oil prolific basin.
It is proposed that the first well in the drilling program will test the Osso Bucco prospect, which will target prospective (recoverable) resources of 18 million barrels of oil equivalent (comprised of light oil and gas). Salinas maps Osso Bucco as a possible extension of a producing reservoir in the large Paloma Oil and Gas Field, which has produced approximately 60 million barrels of oil and over 400 billion cubic feet of gas.
The primary drilling target for Osso Bucco is a trap that Salinas have defined from well and 3D seismic control in a reservoir that is still being produced by a major oil company on the southeast side of the field area. The top of the primary target is predicted at a depth of 11,350 feet and a well to 12,000 feet total depth is planned to evaluate the prospect at an estimated completed and tested well cost of US$4.4 million. Salinas’ leases cover over 2,700 acres mostly within the original Paloma field boundary. Previously produced reservoirs at shallower levels have potential as secondary targets in the Osso Bucco prospect.
John Bay, LMP’s Managing Director and Chief Executive said, “This is a very significant first step in our first move into a prospect outside of New Zealand. This will allow the company to balance our high risk/high reward New Zealand frontier exploration portfolio with opportunities targeting oil and gas in one of the most prolific producing basins in the world.”
“A discovery here will be able to be quickly monetized at global oil prices via the comprehensive infrastructure and extensive markets available in California. Salinas Energy has a proven track record of commercialising oil and gas exploration. We are very pleased to agree principal commercial terms with an excellent operator such as Salinas and are confident that we will reach final agreement to form the basis of a relationship which should allow us to access projects that may generate ready cash-flow and provide access to significant upside for our shareholders,” said Mr Bay.
The ‘farm-in’ agreement to be entered into by the parties and the final drilling timing is to be subject to the addition of a further partner (which Salinas are confident of securing). Salinas is advanced with preparations for the drilling including necessary permitting, purchase of long lead items (such as steel well casing) and has contracted a rig capable of drilling the prospect in November-December this year.