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Key Petroleum (ASX: KEY) has raised A$3.99 million for its upcoming wells more than the A$3 million it had originally sought, demonstrating the strong support it enjoys from professional and sophisticated investors.

Investors subscribed for 142 million shares priced at A$0.028 each and proceeds will be used to fund the company's upcoming Cyrene-1 exploration well in EP 438 onshore Canning Basin.

Funds will also be used to mature Key's other Canning and Perth Basin exploration campaigns including the drilling and testing of conventional and unconventional objectives in Waugh-1.

"We can cover this year's exploration costs and we have some money to so some things next year," managing director Kane Marshall told Proactive Investors.

The oversubscription also reflects the confidence in the company's new board and corporate strategic direction as it comes despite a challenging market.

"This injection of capital will now allow the company to get on with drilling wells and adding value for our shareholders. This is a very exciting time in the Key story and we now look forward to participating in the upcoming Cyrene-1 commitment well."

Cyrene-1

Cyrene-1 is operated and partly funded by farm-in partner Buru Energy (ASX: BRU). The well will be drilled by the Ensign Rig 32 after a mechanical failure damaged the Century Rig 7 that was supposed to do the job.

Buru will cut a core through the Goldwyer Shale to assess the unconventional oil potential of this play prior to drilling through the target Willara Formation to test for the presence of any moveable oil.

The liquids rich Goldwyer Shale, which is present in large areas of the Canning Basin and the target of New Standard Energy's (ASX: NSE) 3 well drilling program with ConocoPhillips, is believed to have attractive economic parameters that are similar to the North American Bakken and the Eagle Ford shales.

The Willara is thought to contain well developed karsitic porosity analogous to that of other limestone formation reservoirs and a discovery here can be quickly commercialised thanks to its proximity to the Great Northern Highway and port facilities.

A Willara oil discovery can be developed quickly with Marshall saying that two years was a reasonable timeframe as Cyrene wells would be simple vertical wells that require simple faciltiies.

"Any discovery at oil at Cyrene can impact other developments by influencing how they get the oil to market, whether they will truck to Kwinana or are they going to spend money on the infrastructure in Broome."

Waugh-1

Key is also planning to drill with Empire Oil & Gas (ASX: EGO), the Waugh-1 well in EP 437 onshore Perth Basin.

The partners plan to carry out three to four dedicated flow tests over the Cattamarra Coal Measures carbonaceous shale interval before drilling, where elevated methane levels were encountered at the Dunnart-1 well.

Waugh-1, which is located updip of Dunnart-1, will then be drilled into the Bookara Sandstone where an open hole drill stem test will be carried out to evaluate whether the oil bearing Bookara Sandstone contain moveable oil.

The well is expected to spud in late 2012 or early 2013.

If oil is recovered to surface, a core will be cut from the bottom of the tested Bookara Sandstone interval through to the basement in order to better understand this play type.

Waugh-1 targets a fault dependent closure estimated at having potential recoverable oil of up to 5 million barrels of oil. Any unconventional gas discovery could be sold into the existing infrastructure located close by at the Dongara Gas Field or could be used to power oilfield facilities at Waugh-1 in the event of an oil discovery or any other oil discoveries in EP 437.

Empire is currently negotiating a rig slot to drill the well with the DCA Rig 7 depending on approvals from the Western Australia State Government.

A successful discovery at Waugh will be easy to develop, with Marshall saying that it is close to existing infrastructure, a major town and a main road.

He added the wells would also be shallow, resulting in lower well costs compared to other oil pools.

"You could be looking at 18 months to 2 years to get crude sales. Will be surprised if it takes longer than that."

Key and Empire both hold 50% of EP 437 with Empire acting as the operator.

Other plans

Marshall added that if the company had substantial amounts of money left over from drilling Cyrene-1 and Waugh-1, it would want to put its money into its other Canning Basin assets.

"We have got R1 EP 104 and West Kora and we will certainly be looking at what we do there in terms of exploration effort next year."

He added that while West Kora was a small oil pool, Key's technical and commercial team could look at how to change the economics there to potentially get back some oil production.

Analysis

The strong response to the capital raising is a clear sign of the interest and the quality of Key's Canning Basin and Perth Basin assets.

Cyrene-1 is a draw as it will be drilled by experienced Canning Basin operator Buru Energy and is also located close to the Ungani oil field, which is currently undergoing an extended production test.

In the event of a success, Cyrene can be quickly commercialised along with Ungani. To top it off, it will also provide information about the Goldwyer Shale that will help evaluate its potential as another regional unconventional play.

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