Premier Oil’s second appraisal well in the Zama project offshore Mexico showed more potential for oil, raising hopes of a huge discovery.
Shares of Premier, which holds a 25% interest in the block alongside Talos Energy Inc. and Sierra Oil and Gas, rose more than 4% in morning trading.
The company said net-to-gross ratio, which represents the volume of rock that is able to store hydrocarbons, came in at 73%, higher than pre-drill estimates and topped its first appraisal well’s 63% ratio.
“This is an excellent start to the Block 7 Zama appraisal program in Mexico. It enhances our interpretation of the large Zama discovery and increases our confidence in our resource estimates,” Tony Durrant, Premier’s CEO, said.
Premier said the reservoir quality was similar to that at Zama-1 and in line with expectations.
BMO Capital Markets analyst David Round said the result was positive and that he expects this to “improve confidence around higher Zama volumes estimates.”
However, the company said it did not hit oil in a deeper exploration prospect called Marte.
Premier said it will now drill a secondary wellbore away from the original hole of the Zama-2 appraisal well, which was deepened to evaluate the high-risk Marte exploration prospect.
Talos Energy said on Jan. 23 that the initial phase of the appraisal program was completed about 28 days ahead of schedule and 25% below initially projected costs.
About 3.2 billion barrels of oil equivalent in conventional resources were discovered in first-quarter 2019, analysts say.
The new plays were identified in the Granite Wash and Fractured Granite intervals, which are hydrocarbon saturated and flowing on test.
Premier said in a press release on April 16 that Talos Energy, the operator of Block 7 offshore Mexico, successfully conducted a drill stem test of the Zama-2 side track well (Zama-2ST1).