Karoon Gas (ASX: KAR) is carrying out sampling and analysis of thin sand sections at its Emu-1 exploration well in the Santos Basin, offshore Brazil, that may host hydrocarbons.
However, wireline log interpretation and pressure measurements indicate the main reservoir section is water bearing at this structural position despite elevated mudlog gas shows and oil fluorescence recorded during drilling.
Further analysis of Emu-1 geotechnical information and mapping will be conducted to determine the full impact of the well results.
Karoon will next drill the Bilby-1 well to complete its primary drilling program and satisfy the minimum work commitments for Block S‐M‐1101, S‐M‐1102, S‐M‐1037, S‐M‐1165 and S‐M‐1166.
The company currently holds 100% of the blocks though it has completed agreements with Pacific Rubiales Energy Corporation (TSX: PRE) to divest a 35% interest in the first four blocks.
Pacific Rubiales will be making a decision in the coming weeks on their option to acquire a 35% participating interest in the fifth block, S‐M‐1166.
Karoon's Santos Basin Blocks are located 112 kilometres off the coast of the Santa Catarina region of Brazil, south of Rio de Janeiro, in 400 metres of water.
The first Santos Basin exploration well, Kangaroo-1, discovered oil in Eocene aged rocks.
This discovery will be appraised in a follow up well to be drilled as soon as a suitable drilling rig can be sourced and mobilised to the Kangaroo-2 location.
The Santos Basin has recently yielded multiple oil discoveries and is becoming an exciting area for exploration.
Karoon had $228.3 million in cash as of 31 December 2012.
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