New Guinea Energy (ASX:NGE) has received independent experts' tick on the prospective resource potential at its PPL 267 licence in Papua New Guinea that could lead to the development of about 20 million barrels of recoverable oil.
A technical review by Gaffeny, Cline & Associates has concurred with New Guinea's assessment of the resource potential, noting that PPL 267 is most likely an oil play.
The company had earlier identified significant oil target in the licence, with about one third of the estimated 50 million barrels of petroleum in place, expected to be recoverable.
The resource evaluators also identified a lead with structural closure at the Alene and Toro reservoir levels with unrisked P50 prospective resource of 9.4 million barrels and 12.2 million barrels respectively with a 12% chance of geological success.
The company's chief executive officer Grant Womer said, "If exploration is successful, and with potentially more than 20 million barrels of recoverable oil, this target's proximity to water-borne transportation routes should facilitate comparatively low finding and development costs and be helpful in converting a discovery into a revenue generating asset in a relatively short timeframe."
The PPL 267 licence covers approximately 7,695 square kilometres or about 1.9 million acres.
The company last year acquired the extension of the tenement for a further 5 years.
It drilled the Panakawa-1 exploration well in June-July 2010 to a total depth of 2424 metres and the well encountered well-developed reservoir sands in the Alene Member (Ieru Formation) in excess of 57 metres net reservoir averaging 22% porosity.
Reservoir quality sandstones were also present in the Toro Formation within a gross interval totalling 67 metres.
Residual gas was also noted in the Toro Sandstone suggesting a combined Alene-Toro historical gas column of up to 150 metres.
The affirmation by independent resource evaluators provides a value creating scenario for New Guinea Energy, and will potentially set the stage for possible drilling which could unlock the 50 million barrels of petroleum in place.
The licence also has infrastructure advantages, being close to the mouth of Bamu river near the southern coastline of PNG and is accessible by barge.
New Guinea is well cashed up for any drilling activity holding a total of $13.35 million in cash at the end of last quarter following the sale of PPL 277 to Esso PNG Exploration and Oil Search for US$15 million.
The company has a cash backing of $0.015 and with share price at $0.028 cents, the petroleum assets are priced by the market at very little based on the market cap of around $19 million.
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