Wellington-headquartered L&M said it intended drilling Fireball Creek-1, in licence PEP 38521, to a depth of about 450m during late January to test a potentially productive trend of shallow gas opportunities within the West Coast permit.

L&M is funding 65% of the cost of that well to earn 32.5% equity, and will take over as operator on completion of drilling.

Its deep drilling program is likely to start with a well targeting the Beaumont sandstone structure within the Otahu Prospect in licence PEP 38226. Depending on the outcome of seismic interpretation, it may drill the Whitestone Deep lead immediately afterwards.

The company said it had completed small seismic acquisition programs in the PEP 38226 (Waiau) and PEP 38230 (Te Anau) licences and had identified further drilling targets within the Te Anau permit.

Two seismic lines, totalling 44km, were run within the Waiau permit -- from the McIvor limestone outcrop in neighbouring PEP 38238 (Blackmount) southward over Otahu and terminating over the Rowallan lead in the southern portion of the permit. This confirmed the southern closure of Otahu.

About 20km of 2D seismic was acquired over Whitestone Deep in PEP 38230 and processing and interpretation of this data would be completed during the first quarter of 2008.

Also in PEP 38230, a temperature study of fluid inclusions found within samples taken in the permit indicated the most attractive drilling options were likely to be those structures, like Whitestone Deep, at depths of 2500m or more.

Integration of these samples with the new seismic data collected would enable a decision to be made regarding drilling a well to test Whitestone Deep sometime later in 2008.

Meanwhile, L&M said an AVO Inversion Analysis project within its Southland (Solander Basin) licence PEP 38237 was nearing completion and the results would be available early in 2008.

The company expected to undertake a farm-out campaign in early 2008 with respect to several offshore prospects and leads identified in the permit, though drilling of any offshore wells was not likely until 2010 when another rig was expected for a Great South Basin drilling campaign.

Company managing director John Bay said that in addition to conventional oil and gas exploration, L&M was also progressing technical studies on the extensive coal seam methane potential within the company's permits.