Several conventional gas shows were recorded in Zuspan-1, and the flow of gas from Neal-1 was strong enough to displace water from the wellbore, which overflowed at the surface, it said.

Zuspan-1 well encountered an almost two-metre thick Freeport seam as predicted, but the initial results of desorption tests indicate relatively low gas contents, possibly due to depletion, the company said. Five kilometres away, the Neal-1 well penetrated a series of thinner seams, also with low gas contents.

“In addition to gas, oil staining was noticed by drillers when pulling logging tools from the Neal-1 hole, and a small quantity of the oil was collected,” Molopo said in a statement to the ASX.

“The oil-bearing interval has not yet been determined and is unlikely to be commercial, but it may correspond to shallow oil-producing zones in Ohio.”

Comprehensive analysis of the logs is underway in Pittsburgh, while sandstone cores from the Zuspan-1 and Neal-1 holes have been sent for porosity and permeability studies.

A production well is likely to be drilled in the area, if these studies confirm the presence of gas-bearing sandstones of sufficient thickness and adequate reservoir quality, possibly in association with fractured gas shales, Molopo said.

“Although drillstem tests cannot be conducted in these small-diameter holes, a suite of geophysical logs confirms the likelihood of gas at several stratigraphic levels."

“Desorption tests on the coal samples continue and the joint venture will now focus on identifying CBM targets where depletion is less likely, with an immediate focus on the conventional gas development potential.”

It added that similar Allegheny channel-fill sandstones produced gas in the neighbouring Meigs County, directly across the Ohio River from Mason County.