(MENAFN - ProactiveInvestors - Australia) MEO Australia (ASX: MEO) will raise A10 million from a Singaporean investor to fund production testing of its Gurame-1XST1 well offshore north Sumatra after confirming the first target sand is gas saturated.
The funds will be raised through a private placement with Asian Energy, a company managed by Singapore-based investment advisor Noonday Asset Management Asia.
MEO will issue Asian Energy 40.8 million shares priced at A0.245 each.
Noonday has extensive expertise in investing across Asia having made significant investments in the Asian energy sector, particularly in Indonesia, and also as an exclusive sub-advisor to San Francisco-based global fund manager Farallon Capital Management.
"The decision to production test the Baong sands represents a significant investment. We are delighted to welcome Noonday as a cornerstone investor and substantial shareholder," MEO managing director Jrgen Hendrich said.
"Having a large, highly respected financial institution such as Noonday on the register, provides investment support and funding options for MEO as the company pursues a portolio of projects in Northern Australia, Thailand and Indonesia.
"Noonday's investment expertise within the Asian energy sector, particularly in Indonesia, is a key strategic element that will become increasingly important as we seek to mature our projects towards development."
MEO had committed to production testing the Gurame SE-1XST well in the Seruway production sharing contract after wireline logging results coupled with gas shows encountered while drilling indicated that the Baong sands are gas saturated.
Image logs show the Baong sands to be finely laminated with significant fracturing. A dual packer MDT was run which confirmed the reservoir has matrix permeability.
The production test of the Baong sands will determine gas composition and reservoir productivity.
This will be carried out after the well intersects the second primary target, the Belumai sands.
Gurame SE-1X well was selected as the lowest risk drill-ready candidate for early development.
It will be drilled to a total depth of 3,425 metres to test an estimated 0.5 trillion cubic feet gas resource with potential for 57 million barrels of oil in the Baong Sandstone and the deeper Belumai Formation primary targets.
MEO expects the target reservoirs at this location to be naturally fractured and gas bearing, a combination which should enhance the potential to achieve a commercial flow rate.
The Seruway PSC is located within the offshore portion of the North Sumatra Basin, Indonesia and contains multiple existing gas and oil discoveries as well as undrilled prospects
MEO has a 100% interest in Seruway.
MEO's ability to secure funding to production test the Gurame SE-1X well is testament to the well's potential as a gas producer.
The Gurame structure is already known to have an active hydrocarbon system, having produced both oil and gas from historic wells drilled between 1968 and 1972.
Additionally, MEO may be able to leverage on existing onshore infrastructure to accelerate development of the field.
A commercial gas discovery will provide a strong catalyst for an upgrade in the company's valuation while confirmation of oil will add further value.