Shares in Karoon Gas slumped as much as 32 per cent today after a recent well drilled to test a new gas discovery in the Browse Basin did not deliver the gas flow investors had been hoping for.
In a statement released after market close yesterday, Karoon said its Poseidon-2 well discovered a new gas zone in the Montara formation however a drill stem test failed to produce the results the company was after.
"Karoon believes that it is highly likely that communication to the Montara reservoir was not established during perforation procedures," Karoon said in a statement.
"Lack of suitable equipment at the well site directed at attempting to establish communication to the Montara reservoir has resulted in the decision to move to commence drilling in a new location."
The Poseidon-2 well was a follow-up to the Poseidon-1 well, which in April had led Karoon and joint venture partner ConocoPhillips to claim a significant discovery.
Karoon said the release of the latest Poseidon-2 results will not impact on the Poseidon contingent resource estimate of 7 trillion cubic feet, which is enough to support a potential liquefied natural gas project.
It added that the drilling of the Poseidon-2 well six kilometres from the Poseidon-1 well was always considered risky with respect to obtaining high gas flows.
The company will now drill the Kronos-1 well.
"Kronos-1 is aimed to confirm commercial production rates from possible future development production wells located on the crest of the greater Poseidon structure," Karoon said.
Shares in the company dropped $2.09 to a low of $4.51 today before closing at $5.91, a drop of 69 cents on yesterday's closing price.
