Karoon and WA-398-P joint venture partner ConocoPhillips are conducting a drill stem test on the exploration well, which was perforated over the interval 4999-5052m in the Plover Formation reservoir.

Karoon said the flow rate had been constrained by current surface equipment configuration.

The production test will continue for about seven days and will include shut-in and flowing periods, surface sampling of reservoir fluids, possible bottom-hole production logging and reservoir fluid sampling.

Petrophysical interpretation indicates that the well has penetrated a sand interval in the Plover Formation.

Kronos-1 modular dynamic testing pressure data confirms that the Kronos area is a separate gas accumulation, with a gas-water contact potentially more than 200m deeper to that discovered at Poseidon-1.

Investors have responded more favourably to this news than to the mixed results from testing of the Poseidon-2 well reported earlier this year.

Attempts to test the shallower Montara Formation reservoir were inconclusive, leading Karoon to say it was unlikely that communication to the reservoir had been established during the perforation process, though data from the well suggested there was moveable gas in the reservoir.

Meanwhile, testing of the Plover B Formation resulted in a flow of 850,000cfd gas, due in part to completion brine in the well severely restricting gas flow to surface.

Karoon and ConocoPhillips decided to plug and abandon the Poseidon-2 well, partly due to the lack of suitable equipment to establish communication at the Montara Formation.

Shares fell 32% to $4.51 following the announcement in February.

ConocoPhillips holds 60% of WA-398-P while Karoon holds 40%.

Shares in Karoon Gas closed up 45c at $8.12 yesterday.