Southern coal bed methane gas explorer L&M Energy will persevere with its Southland efforts despite its recent $3.4 million exploration programme not having identified commercial gas finds.
Listed L&M Energy (LME) posted a loss for the year ended December of $4.8 million, with total costs of $7 million.
The $3.4 million Ohai pilot project was not included in the bottom line because it was exploration work in progress and it would not appear on the balance sheet until it was completed.
LME managing director Kent Anson said while Ohai's pilot programme had not delivered commercial gas flows, the company remained committed to "unlocking the substantial gas resources" LME believed were within the Ohai field.
In the director's report, Mr Anson said 2012 would be a defining year for the company.
LME, in its various forms and subsidiary companies, had spent close to $40 million in recent years exploring a variety of southern energy resources in the lower South Island, with analysts having already noted LME needed to deliver more definitive results.
While carrying no debt, cash on hand for LME had declined from $8.7 million a year earlier to $2.15 million at December.
Mr Anson said work on coal seam gas projects would continue "particularly in the Ohai permit", where last year a vertical well was drilled which was then intersected by a lateral well.
"An exploration well will be drilled in the Kahili [Taranaki] permit which, if successful, will be able to be rapidly commercialised due to the existing, nearby, Vector gas processing facility," Mr Anson said.
In the same area, a 3-D seismic programme would be run to target a follow-up exploration well, which could be close to existing production facilities, he said.
"At the same time, coal seam gas exploration is continuing in our other permits," Mr Anson said.
On Monday, L&M Energy updated the market on its separate Kaitangata permits in South Otago, 60km south of Dunedin, where the first of five wells is being test-drilled to appraise the coal seam gas potential.
The Wangaloa-2 well, about 1.6km southwest of the earlier Wangaloa-1 well, had been drilled to a depth of 324m toward the target depth of 350m.
"The well is set to test the coal seam gas potential from five sub-bituminous coal horizons (named Capstick, Jordan, Kai Main, Carson and Shore) within the coalfield," LME said.
Income for the year of $2.1 million included $1.7 million in reimbursement from the New Zealand Energy Corporation, which went toward Taranaki onshore drilling costs, in exchange for the corporation getting a 50% joint venture partnership in another area.
