Coal seam gas explorer, L&M Energy, expects to know by Christmas the commercial viability of its 173PJ Ohai coal seam gas field on the South Island of New Zealand.

The pilot testing programme at Ohai is being funded by the A$7.1 million capital raising the company completed in July through a private placement to institutional and sophisticated investors.

That capital raising is being supported by a share purchase plan (SPP) to existing shareholders in which more than 10% of shareholders have already participated.

The SPP was supposed to close at 5pm on Thursday, August 26 but has been extended by the Company to 5pm on Wednesday, September 1, to enable shareholders who received documents late to participate.

L&M Energy chairman, Geoff Loudon, said the additional funds will enable the company to complete the Ohai pilot.

He said seismic work has started to determine the placement of the initial test well.

'The seismic should be completed in two weeks, after which drilling will commence in late October,' Mr Loudon said.

The pilot well will enable the company to determine flow rates from the field.

'We should have a very good idea of the commercial viability of the Ohai field by the end of the year,' Mr Loudon said.

Previous drilling in the area of this latest test well shows the coal to contain up to 11 cubic metres of gas per tonne of coal.

'That appears to be very gas-rich coal when you compare it to some of the Queensland fields which offer about six to eight cubic metres of gas per tonne of coal,' Mr Loudon said.

Tags: L&M Petroleum Limited