Kea Petroleum reported that testing of the Wingrove-2 well has now ceased. As previously updated, production during testing was compromised by excessive water flow and other issues. A total of 347 barrels of oil were produced during the test with average production rates of approximately 20 barrels of oil per day. The test was of a number of thin sands within the shallow Urenui formation between 1,150 and 1,300 metres depth.

The original main target of Wingrove-2, the deeper Mount Messenger sands, recorded high background gas levels during drilling, but were breached and were not considered for testing. However, they remain a significant oil play objective elsewhere in this area, as evidenced by the oil flows achieved in a number of nearby wells in adjacent permits. Being deeper than the Urenui sands, the Mount Messenger sands have higher reservoir temperatures leading the directors to believe they are likely to have better oil production characteristics.

Although the Board is deeply disappointed that Kea could not get Wingrove-2 to achieve commercial production, the Directors are in no way disheartened about the area's prospectivity. The Board continues to believe the area to be oil charged. Seismic acquired early this year successfully delineated two nearby Mount Messenger targets, which are now being considered for drilling. The Ngatoro and Cheal fields which are also close by, have both achieved commercial success at Mount Messenger level, despite the initial wells on both fields being unsuccessful. The Board is optimistic that Kea can achieve similar results. Good success rates on drilling are typically achieved following the first discovery well in such areas.

In addition, Mount Messenger plays are secondary to Kea's main play targets; which are deeper and typically much larger. These are in the Tikorangi, Tariki and Mangahewa Formations, all of which are established as proven commercial producers in the Taranaki Basin. Such a target is the Felix structure, on which the Group is planning to drill the Mauku-1 well to 3500m, in the first quarter of 2012. This target is estimated by the directors to have a resource potential, in the event of discovery, centred at approximately 600 BCF of gas, with approximately 20 million barrels of associated condensate (light oil, of high value).

Tags: Kea Petroleum