More from Spirit:Subsequent to those thoughts I've gained...

More from Spirit:

Subsequent to those thoughts I've gained greater confidence in the Huingan model. There appears to be a major eocene kitchen a few kms to the north of the well-bore, and latest work on the Waihapa-Ngaere field has identified hydrocarbon entrapment beginning quite recently - 6my. Maturation theory can be calibrated to the hydrocarbon potential of the Waihapa eocene, and low CO2 concentrations (Tariki-Waihapa-Huinga) are consistent with the hydrocarbon production being well advanced. Maybe conservatively, let's say about 10% conversion to date, and this indicates possible production at about 3 B boe. The particular coal/shale in our eocene is also liquids rich, so hydrocarbon would be expected to be oil-dominant. A 3 B boe reservoir with typical recovery factor of say 1/3 ( 1B boe) might require say 100m net hydrocarbon column over say 30 square km - probably not an unreasonable possibility after reference to the available seismic mapping and potential reservoir intervals as yet untested.

I'm also leaning to the view that our reservoir pressure might be low-normal. That could be positive on two counts - firstly, the reservoir seal might still be uncompromised, thus with the potential for a large build-up of hydrocarbon; secondly, the pressure regime might be suitable for driving a high recovery of hydrocarbon from the reservoir.

Actual flows will be interesting. The Murihiku and Kapuni appear to be a contiguous reservoir. Therefore the fracture zone might be expected to flow clean and strong, however the rock debris in the lower sand might remain resistent to clean-up. Also, the 3-1/2" bore and flowing rock debris might also have potential for well-bore jam, similar to our experience with the initial test. In summary, if Huinga is to be a real success I'd say we need to be getting at least some excellent flows from out of the Murihiku fault zone.

Finally, these deep wells are hugely expensive and I'd anticipate that an additional deep well would be outside of the funding capacity of the junior explorers in the JV, including BLO. So, I'm seeing the production revenue out of Huinga as necessarily driving the future drilling programme.

Spirit