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President Petroleum to drill 3 exploration wells on PEL 82 oil and gas licence after positive seismic results, shares rise

President Petroleum (AIM: PPC) plans to undertake a three exploration well drilling programme at the PEL 82 oil and gas licence in Australia after seismic data confirmed its prospectivity, and will work on amending the work programme for the PEL 132 licence to ensure its retention.

The first two wells will be targeting a combined resource of 70-80 mmbbls (million barrels) of oil or 100 bcf (billion cubic feet) of natural gas in the Waarre/Flaxman sands. Total prospective resources within the licence area are estimated at 430 mmbbls of oil or 630 bcf of gas.

The start date of drilling operations is expected to be impacted by the limited availability of rigs in Australia. The company is aiming to secure a rig by Q1 2010 with negotiations currently underway. Mobilisation costs are yet to be determined, while drilling costs are expected to amount to US$3-4 million per well.

President Petroleum has decided to prioritize the PEL 82 licence and propose an amended work programme on the PEL 132 licence to ensure its retention, which is unlikely to involve seismic or drilling activity in the near future.

“The planned 2010 drilling programme in Australia is a decisive step towards realising the promising potential of our current Southern Hemisphere assets, particularly the PEL 82 licence. The new board has moved quickly to review the existing asset base and take steps aimed at maximising its potential at the earliest opportunity,” said Chairman of President Petroleum Stephen Gutteridge.

The company also updated the market on its US operations, saying that production from existing wells at the East Lake Verret field has been in line with expectations with flow rates easing back due to the cold weather in December. Natural gas production in Q4 2009 averaged 0.73 mmcfd (million cubic feet per day), 19% up on Q3, whilst oil production was 4% higher, at 38.5 bpd (barrels per day) for an average Q4 production of around 160 boepd (barrels of oil equivalent per day).

The company said it remained focused on achieving “transformational expansion” through acquisition and would work on achieving that goal in 2010.

Shares in the company added 5.5% on the news.

Disclosure: The author holds no positions in the company