UPDATE: Karoon: Promising Well Test Results Offshore Western...

UPDATE: Karoon: Promising Well Test Results Offshore Western Australia


By Ross Kelly

Of DOW JONES NEWSWIRES


SYDNEY (Dow Jones)--Karoon Gas Australia Ltd. (KAR.AU) said Thursday that further production testing on the Kronos-1 exploration well offshore Western Australia state indicates that any nearby production wells could potentially flow gas at commercial rates.

Karoon and joint venture partner ConocoPhillips (COP) recently said that an initial production test on the well generated flow rates at 26 million standard cubic feet per day, but added that the flow was restrained by the size of the testing equipment.

"Based on an analysis of the well test data, Karoon believes that future production wells drilled adjacent to the Kronos-1 location have the potential to flow at commercial rates in excess of 100 million standard cubic feet per day," Karoon said.

If it can convert an existing contingent resource estimate for the greater Poseidon field of at least 7 trillion cubic feet of gas into a proven resource, flow rates at such levels would be enough to underpin construction of a standalone liquefied natural gas terminal.

Karoon reiterated that more exploration and appraisal drilling will occur on the greater Poseidon structure in the first quarter of 2011.

Kronos-1 found gas in a deep structure, but shallower wells typically produce higher gas yields. A shallower discovery in the campaign, Poseidon-1, hit a large gas column but a flow test couldn't be completed after a testing tool got stuck in the well.

Karoon said a condensate-to-gas ratio of 9.5 barrels per million standard cubic feet was measured at the surface of Kronos-1, which is below its target for the surrounding area of 33 barrels.

Gas from Kronos-1 had a 10% carbon dioxide content, Karoon said, in line with expectations.


FYI Reads as accumulation trading ATM. When would Conoco move on a takeover of KAR do you think?