summary in sgy ann. from 1 oct. re paloma

Dear All,

Whilst waiting I had a look at the SGY thread and came across an announcement of 1 October titled:- "Fourth Quarter MD&A and Officer Certification - June 2013".

I am not sure it contains any news from that already announced, but it may be of interest more generally because of the summary and figures setout regarding the Paloma field.

"Paloma Project: No further interest (Previously 10.6% Working Interest (San Joaquin Basin))

At the beginning of the financial year the Paloma Deep-1 well was production tested in the Lower Antelope (Monterey) Shale section and on 29 Aug 2012 the Company announced the preliminary results of 7 BOPD and 20 MCF of gas with a 68% water cut. The well was shut in for a pressure build up with subsequent testing planned.

The Paloma Deep-2 well (the deepest well which reached 13,931ft), was designed to test targets encountered in Paloma-1. The primary targets were the Fruitvale and Lower Stevens B intervals; however, the initial zone tested was the deeper McDonald Sandstone which recovered light oil at surface along with a small flow of gas. This zone may be investigated as a candidate for hydraulic fracturing stimulated development. Preparations were being made to test the primary objectives.

Paloma 3 is a shallow appraisal well which was completed at the end of June 2012. Initial tests focused on a 5 ft shallow gas sand at 5,435 ft. Production testing recorded a maximum unassisted flow rate of 2.2 MMCF per day and it is anticipated that the sand may be commercialised as part of a larger field development. There were also plans to test two additional shallow gas sands.

Over the December quarter testing of the Lower Stevens “B” sand in the Paloma Deep-2 vertical appraisal well continued. The zone was fracture stimulated with water and propant designed to be deposited within the induced fractures. Initial flow back of fracture fluid included oil and gas. Production tubing was run and additional perforations were shot and after a few days of intermittent swab testing the well recovered over 40 barrels of 34°API gravity oil.

Paloma Deep-2 produced at rates of up to 8 barrels of oil and 20 thousand cubic feet of gas per day. This was lower than the Paloma Deep-1 well which produced at a maximum flow rate of 226 barrels of oil/condensate per day and nearly 2 million cubic feet of gas per day. The reason for the lower flow rate is believed to be mainly due to lower reservoir permeability, although the nature of the well completion and fracture stimulation may be contributing factors. Testing on the Paloma Deep-2 well was completed in the March 2013 quarter.

Towards the end of the financial year the Company received a Notice of Non Consent from the Operator in accordance with the terms of the Joint Operating Agreement. The Notice of Non Consent arose from the Company’s decision not to contribute on a cash call. The effect of this notice was that the Company’s interest in the three wells (Paloma Deep-1, Paloma Deep-2 and Paloma 3) and the 240 acre area surrounding the wells will transfer to Neon Energy (ASX:NEN). Additionally the Company’s working interest in the remainder of the Paloma “Western Leases” will be reduced to 10.6%.

As a result of being served the Notice of Non Consent the Company would not benefit from any farmin agreement that pertained to the existing three wells or surrounding 240 acre area or benefit from any hydrocarbon production that might result.

The Company has since reviewed its options in regards to the overall project and the decision was made subsequent to the end of the financial year to relinquish its remaining interests in the leases at Paloma in order to focus resources on the Kreyenhagen project."