The company, which is aiming to find gas for an approved LNG project, said the well intersected the Elang Formation at a depth of 3929m and the Top Plover Formation almost 20m deeper.

“Both of these sand units have indications they are gas-charged in Heron-2,” MEO said.

“Interpreted good quality medium-grained Plover sand was encountered from 3973 metres to 3983 metres with mud losses of up to 60 barrels per hour, which is being considered as indicative of good reservoir permeability.”

The gas was encountered 237m up-dip of a known gas-bearing interval in Heron-1, according to MEO.

Pre-drill interpretation of 3D seismic suggests the Heron North and Heron South structures are connected with a common observed flat event at 4260m, interpreted to coincide with the structural spill point and possibly representing a gas-water contact.

“The combination of a wet gas fingerprint, presence of carbon dioxide and the high pore pressure are considered strong evidence of a gas-charged reservoir,” MEO said.

The company plans to set the seven-inch liner to isolate the over-pressured Flamingo Formation.

“This will allow a slight reduction in mud weight to reduce the losses for the completion of drilling through the remainder of the Plover Formation that is interpreted to be gas-charged,” the company said.

“This configuration also allows for the possibility of a barefoot production test of the Heron North Plover Formation subject to confirmation of reservoir parameters by further drilling and logging, and subject to joint venture approval.”

Drilling is expected to re-start in a six-inch hole next week.

Following Heron-2, the rig will move to the Heron-3 well, aimed at testing the commercial viability of hydrocarbons in a 500m horizontal section through the Darwin Formation, the reservoir section of the large Epenarra structure.

The two-well campaign will be funded 75% by MEO and 25% by farminee Petrofac, in return for a 10% stake in the permit.

Petrofac has an option to increase this stake to 15% by funding 37.5% of the well costs.

Share placement

This morning the company also announced it was placing 50 million shares at $1.25 per share to Australian, UK and European investors to raise $62.5 million.

MEO said it already had sufficient funds to undertake the current two-well drilling campaign, but needed additional funds for further work in the region.

The capital raising will be used to start studies into the potential construction of a methanol plant and LNG tank substructures, pre-FEED, finalisation of Basis of Design documentation and Capex reviews of the projects.

The funds will also pay for production testing of the gas-bearing zones in the wells, along with the acquisition of about 800 square kilometres of new 3D seismic over the Epenarra and Heron structures. This seismic shoot is expected to start in March.

Both 2D and 3D seismic is also planned to be shot in MEO's recently acquired North West Shelf permits.