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Failure of Tuatara well hurts KEA share price

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 17 NZPA - Shares in Kea Petroleum fell 17.8 percent on London's AIM stock market overnight after the New Zealand-based oil and gas explorer said it will plug and abandon the offshore Tuatara-1 well off Nelson, because no economic potential has been identified in the area.

"(The well) was potentially an exciting opportunity. It was a high risk opportunity and it is probably a reasonable reaction from the market," said analyst Nathan Piper at RBC Capital Markets.

The Tuatara-1 well was drilled by its partner Australian Worldwide Exploration (AWE) New Zealand at the end of July in the western Tasman Bay at the southern part of the offshore Taranaki Basin.

The Tuatara prospect was mapped as covering an area of approximately 10 square km, and AWE had calculated a median recoverable resource in the event of discovery of 80m barrels of oil.

The well was drilled to a total measured depth of 1911 metres, during which minor oil shows were intermittently reported at depths between 1790m and 1850m.

Kea has a 10 percent stake in the well, together with Carnarvon Petroleum, Roc Oil and AWE with 60 percent.

Kea farmed into the Tuatara licence in May this year at the same time as raising Stg7 million ($NZ15.5m) in a share placement to fund its estimated $NZ4.2m share of the drilling costs.

The dry well follows June's setback for Kea in its NZ drilling programme when it decided to re-drill part of the onshore Beluga-1 well, which also lies on the Taranaki basin.

AWE recently took Environment Minister Nick Smith -- a qualified geotechnical engineer -- out to the semi-submersible Kan Tan IV drilling rig off Nelson, 10 nautical miles from D'Urville Island, while the minister was considering whether a new Environmental Protection Authority should oversee environmental checks on seabed mining.

At the time AWE chief operating officer Dennis Washer said the daily cost of drilling was $US580,000 ($NZ815,000) cost - and the compay was being charged $US380,000 a day for the rig alone.

He noted that despite the cost, there was only a one-in-five chance that Tuatara- 1 would identify a production prospect, and that if the well was a flop, the steel casings in the well would be cemented in place and the well plugged.

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