Kea Petroleum (LON:KEA) this morning reported that drilling work was underway on the Tuatara-1 drill site in the southern area of the offshore Taranaki Basin of New Zealand. The well will be drilled by the Kan Tan IV rig in 50m water depth to a 2000m target depth, which is expected to be reached by mid August. The well will target the oil bearing potential of Miocene aged sandstones, which are expected to be encountered below 850 metres depth.

Kea farmed into a 10% stake in the Tuatara licence in May this year at the same time as raising £7m in a share placing priced at 16p to fund its estimated $3m share of the drilling costs. The New Zealand Minister of Energy has since given his formal approval of the farm in. The Tuatara prospect is mapped, on modern 2D seismic, as a dip closed structural trap covering an area of approximately 10 sq km. The permit operator AWE New Zealand, has calculated a median recoverable resource in the event of discovery of 80 million barrels of oil.

The Tuatara trap bears a marked geological resemblance to that of the Maari oil field, situated some 80km to the north-west, and displays similar Direct Hydrocarbon Indicators to those observed on seismic over Maari, which has produced at rates up to 40,000 barrels per day since commencing field production in late 2008. Fair to good oil shows at the equivalent sandstone level were observed in the only other well drilled in the permit area.

Kea’s chairman, Ian Gowrie Smith, said: “In the event of an oil discovery at Tuatara, we are confident of the ability of operator AWE to progress the rapid development of the resource, bearing in mind its demonstrated prowess in doing so on the very successful offshore Tui oil field, further north in this basin. Kea's involvement in Tuatara-1 is a clear demonstration of its strategy to get involved in exploration projects which can be expeditiously brought into profitable production in the event of success, and to ally itself with like-minded and capable partners. We anticipate announcing other new ventures in the near future.”

Shares in Kea rose by 4.7% to 16.5p in early trading. During June the company’s stock slumped from 29p to 15p on news that it had decided to re-drill part of its onshore…

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