NEON - Paloma West Oil & Gas Field

Project Status

Neon singled out the Lower Stevens sand which encountered a column of more than 200 feet of continuous potential oil pay and said the potential pay zone could extend over at least 740 acres of its lease holdings in the San Joaquin basin.

It also noted the Lower Antelope shale where it said a combination of naturally fractured shales combined with a mature source rock made the 350 foot section “a prime candidate” for unconventional production.

Neon added the Fruitvale shale, which is 1300 feet thick at the well location, also exhibited characteristics of a producing oil shale.

The company had originally planned to drill the well to a total depth of 15,500 feet but that was revised when a drilling pipe sheared while pulling out after getting stuck and the company was forced to side track the well before drilling deeper.

At the time Neon said it would only drill below 13,200 feet if wellbore conditions warranted the deepening without compromising the ability to run production tests over the shallower zones.

As a result of the revised total depth the Round Mountain objective was not drilled but the company said it would likely be a target of future drilling.

After the well is prepared for production testing the drilling rig will be released and a lower cost workover rig will be brought on location to carry out the production testing programme.

All the targeted sandstone and shale reservoirs are part of the Miocene age Monterey Formation, the famous oil source and reservoir formation in the southern San Joaquin Basin.

The well will drill though a series of shallower Pliocene mostly dry gas reservoirs on the way down that are expected to be depleted by historic production.

The first reservoir to be evaluated will be in the Antelope Shale member of the Monterey which envelopes the main reservoir of the field, the Paloma or Upper Stevens Sandstone.

All the Monterey Formation sandstone reservoirs including the Paloma Sandstone were originally formed as submarine fans derived from the NE and deposited into the deep water basin prevalent in the San Joaquin Basin during the Miocene.

Only three wells have penetrated to the deeper reservoir levels in the west half of the field area (the most recent being some 26 years ago in 1985) each encountering extensive live oil and gas shows and with two wells flowing oil and gas at low rates.

The increased position in the project will be subject to any consent to assignment of the interests that may be required by the underlying lessors and to completion of Solimar's previously announced private placement to raise $7 million.

The dry hole cost of the Paloma Deep -1 is estimated at $4.9 million. Solimar will be funding its share from cash reserves and the proceeds of the placement.

The Paloma deep -1 is an ambitious drill program designed to evaluate a series of targets within part of a known field where the reservoirs have not been adequately tested by the historic drilling.

The well location has been chosen using 3D seismic which was acquired after the prior development of the field.

The Paloma Deep -1 will be the first appraisal well drilled on the field using 3D to help identify favorable reservoir trends within the field closure.

The anticlinal structure which traps the hydrocarbons was formed much later and has a different, NW - SE orientation. (Topco)