China focused gas exploration outfit Leyshon Resources has today unveiled the long anticipated preliminary results of its drilling and wire line logging of the ZJS5 well.
By at one point in last Thursday's session the company's share price had almost tripled so far this month, on the back of very strong trading volumes, ahead of that report.
Initial analysis of the logs and samples of the well - which was drilled to a depth of 2,155 metres - indicated that about 56.4 metres pay intervals have been encountered. In particular, around 30.8 metres of the 56.4 metres have exhibited relative high porosity measurements which indicate that these zones could have the potential to flow gas at commercial rates, the company announced.
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At least one City analyst described the results as strong, albeit preliminary, and had actually expected the share price to react positively to the same.
Management expects to conclude testing the first of the potential pay zones by the end of the year. The second well in the program, ZJS6, is expected to spud shortly with well completion also scheduled for towards the end of the year.
Critically, "both wells are located within approximately 10 kilometres of a tie-in point on the recently commissioned Lin-Lin pipeline which supplies the growing demand in Shanxi Province where well head contracts have recently been struck in the US$ 6 - 7.5 per mscf range," the company explained.
The drilling and logging were carried out by the company's wholly owned subsidiary Pacific Asia Petroleum Limited (PAPL). PetroChina has the right to buy back a 40% interest in the product sharing contract at the development stage.
Flow test results expected in next few weeksThe company's Managing Director, Paul Atherley, commented: "(...) We are very much looking forward to the flow test results on the multiple prospective pay zones over the next few weeks.
"The Ordos Basin is the beating heart of Central China, the world's fastest growing major economy and is quite simply one of the best places in the world to be discovering gas right now."
Analysts at Seymour Pierce were relatively upbeat, saying that,"The share price has rallied in recent weeks in expectation of a commercial discovery, and with near term drilling into the new year, we expect this trend to continue."
The company's shares ended the session 26% lower at 18.88p and have now given back approximately half their gains of the past month.
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