Mosaic discovers new gas resource in southern Queensland

Jul 27, 2001 02:00 AM

Mosaic has discovered a major new gas resource in the Surat Basin in southern Queensland worth an estimated $ 200 mm if its early indications are backed up by testing. The discovery at Churchie-1 is the third by Mosaic in the Surat Basin, an area that has largely been abandoned by traditional gas companies. However, Mosaic said it had discovered a possible resource of 50 bn cf of gas and 2 mm barrels of condensate. It holds a 49 % stake in the well with Santos holding the remainder.
Mosaic's stake in the well would be worth about $ 100 mm, more than double its market capitalisation. However, Santos refused to ascribe any resource size to the well claiming it was too early to make assumptions. It will now case the drill hole and carry out testing to firm up its early estimates.

The discovery added to much smaller ones at Spring Grove and Downlands East. The discoveries back the gamble taken by the company to exit its Timor Sea assets in favour of the Surat because of lower costs in deliveringthe gas to the market from the prospects.
The company said it appeared to have unlocked a key lower zone that had been missed by previous explorers. CEO Howard Brady said the industry considered the Surat to be a backwater of gas production. "Mosaic is breathing new life into the Surat Basin," he said. While it was too early to ascribe any real value to the resource, Dr Brady said it was necessary to inform the market how big the gas find may be. "We know this area backwards," he said.
Mosaic had previously indicated the Churchie well may have about 8-10 bn cf. The previous discovery at Spring Grove unearthed gas and potentially light oil. The well was cased and suspended as a gas discovery.

Novus Petroleum, meanwhile, said that it had earned sales revenue of $ 61.5 mm for the June quarter 2001, compared with $ 46.5 mm in the previous quarter. Novus said the strong revenue was achieved on the back of steady oil production volumes and an increase in gas production of more than 1200 mm cfpd.

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