Lion Energy (ASX:LIO) and its partners are evaluating their Lofin-2 appraisal well in the Seram (Non Bula) production sharing contract, Indonesia, after continuing to encounter hydrocarbon shows.
Wireline logging is currently underway to be followed by open hole flow testing to evaluate the 861 metre open-hole section of the Manusela primary objective.
Should logging and testing confirm that the well is still in hydrocarbons at the bottom of the hole, it is likely that the well will be deepened further from the current total depth of 5471 metres.
Lion has a 2.5% interest in the Seram (Non Bula) PSC, which is operated by CITIC Seram Energy Ltd (51%) with other co-venturers being KUFPEC (Indonesia) Ltd (30%) and Gulf Petroleum Investment Company (16.5%).
“We continue to be encouraged by results from Lofin-2 with positive geological indications with respect to hydrocarbon shows and reservoir within the Manusela limestone objective, although we caution that performance of limestone reservoirs can be uncertain,” chief executive officer Kim Morrison said.
“We compliment the Operator, CITIC, on the successful engineering outcome thus far on the well and now look forward to results of the wireline logging and testing program.”
Lofin-2
Lofin-2 was spudded on 31st October 2014 to appraise the Lofin-1 discovery made in 2012 that flowed 15.7 million standard cubic feet of gas and 171 barrels per day of oil/condensate.
It seeks to investigate the extent of the hydrocarbon column below the 160m delineated in Lofin-1 which could not be drilled deeper due to engineering issues.
The well encountered the top of the primary objective Manusela Formation limestone at 4,615 metres, about 345 metres deeper than the top Manusela Formation in the Lofin-1 discovery well.
Analysis
Continued hydrocarbon shows from the Lofin-2 appraisal well are potentially significant for Lion Energy and its partners though wireline logging and flow testing will be required to assess its potential.
The company’s conventional assets provide the potential to provide near-term cashflow to fund the longer term, higher reward unconventional exploration.
Notably, its interest in the oil producing Seram block was cash flow positive in 2014 with its large cost recovery pool ensuring that approximately 95% of the oil revenues flowed through to the joint venture.
Despite the modest interest, the block is important to Lion and a recently commenced development drilling phase on the main Oseil oil field is anticipated to significantly grow production.
The company is well-funded with $5.6 million in cash and deposits as at the end of 31st December 2014.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong / China.