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Leyshon Energy to press ahead with new well at Zijinshan

Published: 21:08 22 Sep 2014 AEST

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Leyshon Energy (LON:LEN) has seen mixed results from its latest flow tests on wells drilled at Zijinshan in the Ordos Basin in central China.

Well ZJS7 flowed flammable gas in each of its three zones, but were discontinuous and work is ongoing to establish more consistent gas flows.

Water was also present, which may be inhibiting the establishment of commercial flow rates. Tests are still underway on the upper zone.

In addition, similar results are being achieved on one zone in Well ZJS5 in the same zone as the upper zone being tested in Well ZJS7.

There has been no test work so far on Well ZJS6. Testing of this well will be largely dependent on the results from individual zones in Wells 5&7.

Leyshon said the results were below expectations for this area of the field, but still sufficiently encouraging to drill another well, ZJS8.

The interim testing programme now has an estimated cost of around US$4mln and, depending on the timing and results from Well ZJS8, is expected to be completed by the end of this year.

The test programme will help Leyshon decide whether to or not to go ahead with a US$17 million main exploration and appraisal programme.

This will comprise drilling, fracking and flow testing multiple wells with the remainder of the costs covering PSC maintenance and geological costs. Leyshon added its exploration licence has been renewed until May, 2016.

It added it had failed in three bids for other assets, but remains in talks with other potential vendors.

Cash in hand is US$26mln cash not including US$5 mln owing.

John Manzoni, chairman, said, "The Interim Testing Programme has confirmed the presence of gas in the target zones and has given us the confidence to drill Well ZJS8.

In addition there continues to be very encouraging results being reported in adjacent operations which suggest that we remain at an early stage in fully evaluating the 700 square kilometre Zijinshan project.

“The information we have gained from testing these two wells puts us in a strong position to locate and design Well ZJS8."

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