January 24, 2019 / 9:54 AM / a month ago

UPDATE 1-Premier Oil's offshore Mexico well shows more potential for oil

(Adds details, shares)

Jan 24 (Reuters) - 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 percent interest in the block alongside Talos Energy Inc and Sierra Oil and Gas, rose more than 4 percent 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 percent, higher than pre-drill estimates and topped its first appraisal well’s 63 percent ratio.

“This is an excellent start to the Block 7 Zama appraisal programme in Mexico. It enhances our interpretation of the large Zama discovery and increases our confidence in our resource estimates,” Chief Executive Tony Durrant 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 Wednesday that the initial phase of the appraisal program was completed about 28 days ahead of schedule and 25 percent below initially projected costs. (Reporting by Arathy S Nair in Bengaluru Editing by Saumyadeb Chakrabarty and Anil D’Silva)

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