Linc Energy lifts on oil shows from drilling in South Australia

Shares in Linc Energy (ASX:LNC) spiked 5.5c after the company reported "oil shows" from the first round of drilling in its Arckaringa Basin Petroleum Exploration Licenses aimed at assessing the suitability of the Permian Mount Toondina coal seams for Underground Coal Gasification.

Following the announcement, shares in the company were trading 5.5c higher at $1.45.

In October 2009, Linc Energy mobilised ‘Boart Longyear Rig 9’ to the Arckaringa Basin, South Australia where it currently holds seven Petroleum Exploration Licenses prospective for UCG, CSG and conventional petroleum.

Six wells were drilled, of which four cut large diameter core over the Upper Mount Toondina sequence for geotechnical analysis, specialised coal gasification testing and coal seam gas analysis.

Two of the wells have been completed as piezometers to provide a baseline for ground water behaviour in the area.

The company says the oil shows at Maglia-1 in the Arckaringa Basin are the most significant find in the history of the basin.

Heavy flooding postponed the final two wells in the ‘PEL’ program along with drilling aimed at appraising conventional coal mining in selected areas held under mineral Exploration Licenses.

Subject to weather conditions, it is anticipated that finalisation of the program will occur early in the second quarter of 2010.

Multiple coal seams were intersected in every well with the exception of Nuba-1 that intersected basement without penetrating the Mount Toondina formation. Individual seams of up to 6 metres thickness were identified by geophysical logging. Detailed analysis is ongoing.

During drilling of Maglia-1, oil shows and a strong petroliferous odour were observed within cored sandstones at 366.4 to 369.4 and 393.4 to 396.4 metres coring depth.

Good reservoir attributes have also been encountered in historical drilling of the overlying Permian Boorthana and Mount Toondina Formations, the latter of which is where the Maglia-1 oil show was encountered although this well, targeting UCG appraisal, was not drilled on any structural trap.

All of the potential reservoir units that occur in this area are considered to have adequate and extensive regional seals.

Linc Energy Chief Executive Peter Bond said the news in the Arckaringa PELs was a significant milestone.

"The results have confirmed my belief in the energy bearing potential of this vast acreage and reinforces the reasoning why we purchased SAPEX in the first place.

"It takes the prospectivity of this basin for petroleum to the next level; one where the existence of an active petroleum system is now proven.

"We will progress our plans with increased confidence and vigour as a result of this important discovery, which I believe is just the first of many exciting announcements concerning Linc Energy’s traditional oil and gas assets."