Karoon, ConocoPhillips Confident on Poseidon-2 Well

SYDNEY (Dow Jones), Dec. 10, 2009

Karoon Gas Australia Ltd. is confident that the latest well in its drilling campaign with joint venture partner ConocoPhillips in the Browse Basin, Poseidon-2, will be a success, a person familiar with the matter said Thursday.

The comments could substantially boost Karoon's shares when they start trading Friday after they were sold off late Thursday when the company released a statement that said Poseidon-2 had passed its planned depth, but the statement didn't mention any gas pay.

"What they're seeing is the same sort of structure as what they saw with Poseidon-1," the person said. "They're feeling confident about it, but couldn't say anything in detail until higher resolution testing had been completed."

Initial results from the Poseidon-1 exploration well released earlier this year indicated that it had struck a 200-meter gas column. The news put a rocket under Karoon's shares.

Some of the sheen was taken off later this year when the joint venture's second exploration well, Kontiki-1, was unsuccessful, so the market is eagerly awaiting the results of Poseidon-2.

The person pointed to Karoon's announcement yesterday that ConocoPhillips has taken an extra 9% stake in two of the venture's Browse Basin permits offshore Western Australia state as an indication that the U.S. oil major is pleased with the venture's progress.

Analysts have said that Karoon and ConocoPhillips could be sitting on one of Australia's biggest gas resources, noting the proximity of its Poseidon discovery to other major finds like Inpex Holdings Inc.'s Ichthys field.

Karoon Chief Executive Robert Hosking has said it's possible the discovery will rival Woodside Petroleum Ltd.'s initial North West Shelf discovery, which feeds Australia's biggest LNG export terminal.

Two more exploration wells, Lion-1 and Kronos-1, will follow Poseidon-2 and the venture has an option to drill a further four wells.

The Poseidon-2 well is being drilled by the Transocean Legend semisubmersible drilling rig.

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