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Leyshon has gas flowing at Ordos Basin well and to spud next onshore China drill

23rd September 2014

Leyshon Energy has announced that it is well advanced in the interim testing programme at the Zijinshan gas project located in the Ordos Basin in central China and is actively pursuing its interest in a number of acquisition opportunities in the region

Leyshon has gas flowing at Ordos Basin well and prepares to spud next drill onshore China
Flow testing of three zones in Well ZJS7 is underway with each of the three zones flowing flammable gas with methane contents of up to 99 per cent recorded

"The Interim Testing Programme has confirmed the presence of gas in the target zones and has given us the confidence to drill Well ZJS8,” said John Manzoni, Leyshon Energy chairman. “In addition there continues to be very encouraging results being reported in adjacent operations which suggest that we remain at an early stage in fully evaluating the 700 square kilometre Zijinshan project. The information we have gained from testing these two wells puts us in a strong position to locate and design Well ZJS8.”

Flow testing of three zones in Well ZJS7 is underway with each of the three zones flowing flammable gas with methane contents of up to 99 per cent recorded.

Flows in all zones tested have so far been discontinuous and work is on-going to establish more consistent gas flows. Results from ZJS7 indicate water production along with the gas production in the tested zones; this water production could be inhibiting gas flow and preventing commercial flow rates.

In addition similar results are being achieved on one zone in Well ZJS5. This is the same zone as the upper zone being tested in Well ZJS7. Test work is on-going and results are being evaluated.

There has been no test work so far on Well ZJS6. Testing of this well will be largely dependent on the results from individual zones in Wells 5 and 7.

These results so far are below our expectations for this area of the field. The results, along with our understanding of well performance in nearby fields, are however sufficiently encouraging to proceed with drilling an additional exploration well, ZJS8. Discussions on the location and design of this well with the company's partner have commenced.

The interim testing programme now has an estimated cost of around USD 4m and, depending on the timing and results from Well ZJS8, is expected to be completed by the end of this year. The cost includes the drilling and testing of Well ZJS8.

The purpose of the interim testing programme is to evaluate the project with a view to making a decision whether to commit to the USD 17m main exploration and appraisal programme which is scheduled to commence in 2015.

The main programme is an exploration and appraisal programme which comprises drilling, fracking and flow testing multiple wells with the remainder of the costs covering PSC maintenance and geological costs. The number of wells to be drilled will be determined based on results progressively achieved and will to a large extent determine the overall expenditure on the programme.

The programme, which may well be modified to reflect results, is designed to upgrade the existing resources such that a Chinese Reserve Report can be obtained.

The company has finalised the documentation related to the interim testing programme and is pleased to advise that the exploration licence has been renewed until 7 May, 2016.

As previously stated, Leyshon has been actively pursuing a number of acquisition and investment opportunities in the oil and gas sector in China.

It has made three bids for assets on a fully funded basis. In each case Leyshon was either outbid or the transaction failed to complete due to circumstances outside its control.

Leyshon is in active discussions with potential vendors of assets in the region in line with the acquisition strategy previously outlined and in the normal course of business. There is no indication whether these discussions will lead to a commercially binding transaction.

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