For a while yesterday morning, Woodside Petroleum shares were the only major stock in green in the big sell-off after it surprised the market with a big gas discovery off the northwestern WA coast.
But after an hour or so even that positive news was overcome by the selling and Woodside shares lost 45c, or 1%, to close at $45.23, after being as high as $45.83 after the opening.
The news of the discovery came in a one page statement to the ASX that said Woodside had discovered gas at the Xeres-1 exploration well.
It said it had encountered "about 51 meters of gross gas" within the well.
The discovery comes after gas was found in the Martin-1 exploration well earlier this year.
Woodside said in March that a 100 metre gross gas zone had been found in this well.
"Martin-1 is located in Western Australia’s Carnarvon Basin within 14 km of Woodside’s existing gas discoveries at Martell-1, Noblige-1, Larsen-1, Larsen Deep-1 and Remy-1," the company said in March.
Woodside said Xeres – 1 "reached a total depth of 3285 metres.
"The discovery has been confirmed by wireline logging, including the establishment of a gas pressure gradient and the recovery of gas samples to surface," Woodside said.
The well is located about 12 kilometres from the Pluto-1 discovery in licence WA-34-L, Carnarvon Basin, Western Australia.
Woodside said it has full equity interest in the Xeres-1 well, but that will fall to 90% if the joint venture participants in WA-34-L Tokyo Gas and Kansai Electric exercise their rights to acquire a 5% equity interest each now have in the new well.
Woodside said earlier this year that success at Xeres-1 would likely provide it with enough confidence to order key equipment that takes a long time to manufacture for a second production train at Pluto.
The first production train is already in operation as it starts the complicated process to test the LNG train and associated equipment.
LNG production is expected in August from the facility.
The existing LNG train will have the capacity to produce 4.3 million tonnes of gas a year.
If the expansion at Pluto is given the go-ahead, Woodside has said the second train would be in production by the end of 2014, with the next three coming on stream at yearly intervals up to 2017.
Woodside currently has approvals for 12.3 million tonnes of LNG a year which covers the first three trains, or up to phase two of the project.
At the annual results in February, CEO Don Voelte said, "We are counting on success in the Martin WA-404-P and the Xeres WA-34-L prospects to give us the assurance to order LLI’s mid this year".
Those discoveries have happened, so the ordering of major items for the second train could be the next announcement with the half year results in August.
