The ST135S-1 well, in which First Australian has a 12.5% working interest (reducing to 9.375% after payout), has a planned total depth of 9900 feet (3017m). On Friday, the well was drilling ahead in a 13½-inch hole at a depth of 1047ft.

It will test a multiple Frio Sand Prospect supported and defined by 3D seismic and subsurface data. Drilling is expected to take a total of 12 days.

The prospect is adjacent to and across a saddle from the existing Smith Point field, which has cumulative production of 6 million barrels of oil and 42 billion cubic feet of gas from multiple wells and multiple normally pressured Frio Sands (from F-2 through the F-15 Sand).

Three drilling locations have been identified from seismic mapping, First Australian said.

A portion of the play lies in the northeast half of Galveston Bay State Tract 135, where First Australian recently submitted the winning bid ($US169,500) with operator Genesis Production and others to secure protective acreage now totalling 640 acres offshore Gulf of Mexico.

The well lies three miles (4.8km) from an existing platform facility, which would allow use of spare tankage for temporary flow through with favourable processing fees, First Australian said. From here, gas and oil may be transported to shore via a pipeline, where gas goes into a trunk line and oil is trucked from a tank facility.

The company concluded that this was an attractive opportunity due to the relatively low risk of the prospect, the multiple Frio Sand targets, the quality technical control, the attractive indicated profitability (for only one or two sands from a possible six), the nearby platform facility and the potential for near-term production.