Kea Petroleum (LON:KEA), the oil and gas group working in New Zealand, this morning reported that the Tuatara-1 well being drilled by its partner AWE was in the process of being plugged and abandoned. The move comes after drilling work, which got underway at the end of July, failed to unearth commercial volumes of gas. The news triggered a 17.8% fall in Kea’s share price to leave it trading at 11.8p during early trading.

Tuatara-1 lies in the western Tasman Bay in the southern part of the offshore Taranaki Basin. The well was drilled to a total measured depth of 1,911 metres, during which minor oil shows were intermittently reported over the interval 1,790 - 1,850 metres. Wireline logs were run but no zones of economic potential were identified.

Kea has a 10% stake in the well, together with Carnarvon Petroleum with 10 %, Roc Oil with 10% and AWE with 60%. Kea farmed into 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 Tuatara prospect is mapped, on modern 2D seismic, as a dip closed structural trap covering an area of approximately 10 sq km. AWE New Zealand had calculated a median recoverable resource in the event of discovery of 80m barrels of oil.

Today’s news is the latest setback for Kea in its drilling programme in New Zealand. In June the company’s stock slumped from 29p to 15p on news that it had decided to re-drill part of the onshore Beluga-1 well, which also lies on the Taranaki basin. Kea said it wanted to deviate the well in order to reach other areas of the all-important Tariki sands after finding that the current location might not offer the necessary commercial production rates needed to supply its off-take partner, Methanex.

Kea joined London’s AIM market in February, when it raised £6m in a placing priced at 8p per share. The company is run by Ian Gowrie-Smith who, together with his co-directors at Rift Oil, delivered a three-fold return on investment over a four year period working onshore Papua New Guinea before the company was sold to Talisman last year.

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