Kea Petroleum dropped 31.9 per cent on the London stock exchange to 19 pence after the exploration company said latest drilling results indicated a "reduced reservoir potential" at its Beluga-1 well in New Zealand, the Financial Times reported.
Kea said wireline log tests revealed that likely gas pay in themain Tariki Sands target suggested a smaller reservoir potential when compared with a report produced by MBA Petroleum Consultants in February.
The well is sited west of the Waitara River near the township of Tarata, and hydrocarbon gas seeps have historically been seen nearby in the river.
It is currently being cased across the Tariki Sands, below 3500m, in preparation for flow testing.
If the flow testing is successful, the trap which Beluga-1 has intersected could prove commercially viable because of the relative ease of connecting to a nearby pipeline infrastructure and selling to Methanex NZ under Kea's 15-year gas offtake agreement, signed in January. Kea listed on the London market in February.
Beneath the Tariki Sands, the upper few hundred metres of the Mangahewa Sands of the Kapuni Group were intersected as a secondary target and partial gas saturations were encountered. Existing 3D seismic data indicated that a new well could potentially be drilled into an "updip trap" about 1km to the south to tap gas-charged and productive Mangahewa Sands.
A decision on drilling a deep well to test this trap from the Beluga site is expected to be taken over the coming months.
Methanex - which agreed to contribute up to US$10 million ($14 million) to drill and complete the Beluga-1 well - supported the decision to case it.
Kea's chairman, Australian businessman Ian Gowrie-Smith, said he now felt considerably more confident of the prospects of being able to deliver gas to Methanex from the licence.
"We look forward to the results of the flow testing," he said.
The well is within 20km of the Methanex production facilities, and only 6km from a tie-in to the high capacity low temperature separator gas pipeline, which provides a direct link to those facilities.
