UPDATE: Kea Petroleum makes new discovery in Puka 2 well
Shares in New Zealand focused explorer Kea Petroleum (LON:KEA) advanced in early deals after it confirmed a new oil discovery in the Puka 2 well.
It said that Puka 2 encountered 4.6 metres of reservoir sands - with a ‘vertical thickness' of 3.3 metres - and analysis indicates that the discovery has some of the highest porosity and permeability measures recorded in the area to date.
Kea says it will case and subsequently test the discovery as soon as possible.
On AIM this morning Kea Petroleum shares were up 2p, or 26%, trading at 9.5p.
In an interview with Proactive Investors chairman Ian Gowrie Smith explained that Kea wanted to find out whether the Puka 1 discovery was a ‘closed structure', which would have meant its potential would be capped around the 1mln barrel mark, or whether it was part of a larger startigraphic structure - i.e. comprising of layered reservoirs.
"Puka 2 was an ambitious hole because we stepped out over 600 metres to see if it was a stratigraphic play," he said.
"The significance of the discovery is that [we now know] it is a stratigraphic play, and the surprise is that we found the more valuable Mako sands. So it was a very revealing hole for us."
Earlier today the company said that this new discovery in the Mako sands would be likely to have much better flow rates than Puka 1 and Kea can now look forward with confidence to an early and substantial cash flow."
The company also told investors that this discovery cannot be overestimated. The existence and quality of the lower sand package at Puka is significant for the potential field size as well as its potential productivity, it added.
City broker WH Ireland said in a note that the positive result will help build momentum in the broader region.
"The fact that Kea has found a deeper working petroleum system at Puka-2 is good news for the wider prospectivity of the basin, where 6-8 wells are planned through the course of this year," analyst Angus McPhail said.
"This geological knowledge will help to de-risk further prospects in the greater Puka region which are relatively low risk/high return in our opinion."
The stockbroker rates Kea as a ‘buy' with a 22.5p price target.
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