L&M told its first annual meeting since listing on the Australian and New Zealand bourses in January that it was excited about the results from its shallow well program and was further evaluating the shallow Sharpridge Creek play.

“Depending on the final analysis of the three Sharpridge Creek wells and additional seismic data, it is likely that we will drill more shallow wells over the next few months,” L&M managing director John Bay told the meeting in Wellington last Thursday afternoon.

Late last month L&M said Sharpridge Creek-3 – an appraisal well to the Sharpridge Creek-1 well drilled early last year – had also encountered sub-commercial residual oil shows.

Sharpridge Creek-3 recorded fluorescence associated with a slow streaming cut in sandstone, and oil shows of dull yellow fluorescence, with a bluish-white cut, within interbedded coal seams, at depths between 270m and 300m, about 40m higher than those encountered in Sharpridge Creek-1.

L&M plugged and abandoned Sharpridge Creek-2 after it hit basement earlier than expected.

All Sharpridge wells are in licence PEP 38226 in the southwest of the South Island's Waiau Basin. L&M is drilling them in conjunction with the government-owned Mighty River Power, with MRP earning its 50% stake by contributing to the drilling costs of the wells.

Bay also said L&M’s first deep well in the Waiau permit, Eastern Bush-1, though recently plugged and abandoned, did help the company gain a much better understanding of the geology and the petroleum system in the basin.

“In particular, we were quite pleased to find that the geo-stratigraphy in Eastern Bush-1 was very much as predicted,” he said.

“It was also very encouraging that the Beaumont Sandstone reservoir we encountered in Eastern Bush was much more continuous and had better porosity than expected.

“We are now identifying similar structures in the area containing potential commercial levels of hydrocarbons for possible future drilling,” Bay added.

He said L&M’s second deep PEP 38226 well, Dean-1, had about 1000m to go before hitting the targeted McIvor limestones at a depth of about 2100m. Drilling should be completed within a week or so.

“We have had several good gas indications while drilling Dean, giving us reason to be cautiously optimistic.”

Bay said drilling the Dean prospect – with a best estimate potential resources of 194 billion cubic feet of gas originally in place – would be the last deep well for 2007.

Future deep drilling – including the possible drilling of a third well, Merton Creek-1 – would not start until the results of the 2007 seismic acquisition program planned for later this year had been interpreted.

In addition, Bay said L&M had finalised the interpretation of over 1000km of seismic data acquired last year over the offshore Solander licence PEP 38228 and the 50km of seismic acquired in the Te Anau licence PEP 38230.

L&M had undertaken a 250-sample soil geochemical study in Te Anau to identify potential sweet spots for a possible seismic acquisition program.

“I believe the future looks bright for L&M and that the plans for further activities over the next 12 months will result in strong exploration success,” Bay concluded.