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Karoon Gas shares jump on joint venture drilling results

KAROON Gas Australia (KAR) says the latest well in its drilling campaign with partner ConocoPhillips (COP) has struck hydrocarbons, sending Karoon's shares up as much as 11 per cent.

Karoon's statement comes two weeks after a person familiar with drilling campaign told Dow Jones Newswires that the well had penetrated hydrocarbons in similar intervals to those penetrated in the successful Poseidon-1 well about six kilometres away.

A large gas pay at Poseidon-2 would provide further evidence that Karoon and ConocoPhillips could be sitting on a resource in the Browse Basin offshore Western Australia state that is big enough to support a multibillion dollar liquefied natural gas plant.

Poseidon-2 is an appraisal well testing for the presence of gas in the Plover geological formation penetrated in Poseidon-1, which was an exploration well.

In a welcome development, Karoon said today that Poseidon-2 struck a 20 metre gas column in the Montara formation, which sits above the Plover formation.

Karoon said early observations indicate that hydrocarbons were also penetrated in the Plover formation but their presence, and the size of any hydrocarbon-bearing intervals, cannot be confirmed until further testing is complete.

However, Melbourne-based Karoon confirmed that Poseidon-2 has penetrated the same three gross reservoir intervals penetrated in the successful Poseidon-1 well.

Initial results from the Poseidon-1 exploration well released earlier this year indicated that it had struck a 200-meter gas column, sending Karoon's shares flying. Technical issues, however, forced the well to be plugged before more extensive testing data could be obtained.

Karoon said more extensive testing of Poseidon-2 has been delayed by Cyclone Laurence. Wireline logs are expected to be gathered in the coming week, it said.

Early-stage independent analysis has estimated that Karoon and ConocoPhillips could be sitting on 7.6 trillion cubic feet of gas. Around 4.0 tcf is required to support an onshore LNG facility.

Poseidon-2 is the third well in their drilling campaign. The second well, Kontiki-1, didn't find much and was written off as a duster.

Two more exploration wells, Lion-1 and Kronos-1, will follow Poseidon-2 and the venture has an option to drill a further four wells.

ConocoPhillips recently exercised an option to lift its interest in the joint venture to 60 per cent from 51 per cent, with Karoon owning the other 40 per cent.