Solimar Energy Limited
ASX : SGY
TSX VENTURE : SXS

Solimar Energy Limited

July 06, 2012 07:30 ET

Solimar Energy Limited: Further Testing Planned for Paloma-3 Gas Zone

MELBOURNE, AUSTRALIA--(Marketwire - July 6, 2012) -

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Solimar Energy Limited (ASX:SGY)(TSX VENTURE:SXS) ("Solimar" or the "Company") is pleased to provide the following operations update for the Paloma-3 well that was recently cased and completed for testing after being drilled to a total depth (TD) of 6,000 feet. The results summarized in this release relate to the testing of the first of a number of potentially gas bearing sandstone reservoirs within the Pliocene age San Joaquin Formation that have been identified in the well.

The test results to date:

  • Gas flow to surface at up to 968,000 CFD, from a 5 feet thick sand in the Paloma-3 well, at a depth of 5,435 feet. This interval is one of several potential gas pay sands in the well. Multiple, relatively thin gas sand reservoirs are typical of the San Joaquin Formation gas fields in the area.
  • The initial test was conducted per program with a limited pressure draw down so as not to risk damaging the fine grained reservoir and in keeping with local practice. As a result clean up and a stabilised flow was not achieved in the initial flow period and further testing will be required to assess the gas volumes being accessed and the commercial significance of the gas zone.
  • The additional testing is pending completion at the Paloma Deep-2 well, where wireline logs have now been run at TD of 13,931 feet after encountering extensive oil and gas shows.
  • Preparations are otherwise advanced for further, step-rate testing to achieve clean up of the gas reservoir, incrementally increase pressure drawdown and by varying choke sizes establish the ultimate flow potential. Based on Paloma Field analogous gas production and the minimal pressure drawdown that was applied in the initial test, there is potential for rates higher than in the initial flow period to be achieved.
  • If the expanded test results (of the current zone or the as yet untested zones in the well) are positive a review of the data will then be conducted together with a re assessment of 3D seismic data to assess the gas volumes discovered and the commercial potential. It is hoped that with a positive result from the expanded test, the relatively low cost drilling and operating costs and proximity to infrastructure will combine to support a near term, stand alone, well by well commercial development.
  • Approximately 26 Bcf* of gas has historically been produced from equivalent age, thin Pliocene aged sandstone reservoirs across the Paloma anticline. All such well locations were drilled before the acquisition of 3D seismic across the field area. It is hoped that as with the current well location, additional infill well locations can be sited using the 3D data.
  • The gas discovery at Paloma also highlights the potential of Solimar's 100% owned SELH project, on geological trend to the NW which covers some 3,000 acres and where the Company has discovered gas in similar thin sands within the same aged reservoir. Solimar has plans to drill a well at SELH following interpretation of the 3D dataset covering that project later this year.

Solimar is participating in the Paloma-3 well with a 15% interest and has 15% to 25% interests in a gross 2,847 acreage position on the Paloma field anticline. The Company is participating in concurrent drilling and testing activities occurring at the Paloma Deep -1 and - 2 wells in the adjacent leasehold which will also be the subject of future progress announcements.

Commenting on the initial gas flow in the Paloma -3 well, Solimar CEO John Begg said;

"This is another promising result at the Paloma project. We are looking forward to the results of an expanded test program, shortly to commence, that when combined with the 3D seismic should allow a clear assessment of the commercial potential to be made. A positive outcome could also have implications for Solimar's 100% owned SELH project where there is also discovered gas and the Company has a gas plant and connected pipeline ready to produce any gas that is proved up by additional drilling. These type of gas fields can be inexpensive to develop due to the modest drill costs, simplistic production infrastructure generally needed and low operating costs".

Sincerely

John Begg, Chief Executive Officer

Solimar Energy Limited

*Source ; Website of the California Division of Oil, Gas and Geothermal Resources (DOGGR)

To view the figures accompanying this press release, please visit the following link:

http://media3.marketwire.com/docs/803733.pdf

ABN 42 112 256 649

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