Baron Oil seeking Peru extension after seismic results

The AIM-traded company sent representatives to meet with Perupetro in Lima on 3 March to review the results, and inform the licensing authority that it would extend the licence period for a further 18 months.

Baron Oil also confirmed it would relinquish 20% of the licence area as required under the terms of its exploration contract.

"We have been encouraged by the recent seismic results and we believe this is an area with significant potential," said chairman and CEO Bill Colvin.

"We will now work to define a well location and design and cost an exploration well that will enable us to test as many of the potential hydrocarbon bearing zones as possible," he added.

Colvin said once that work was completed, the company would decide whether to move forward and drill a well, likely bringing in a partner to share drilling costs.

"We have no additional work commitments by extending the licence as those are all fulfilled already," Colvin added.

The company said the seismic data showed a number of notable indicators, including an apparent small gas accumulation of up to 5bn cubic feet in sands at a depth of 4,425 feet, to the nort east of the original Minchales well bore.

Baron Oil said the data also clearly showed several gas chimneys which it believes were the source of a 10 foot gas zone identified in a shallow sand at a depth of 2,535 feet in the original Minchales well and the apparent accumulation to the north east.

The company said it seemed the gas was leaking up from fractured basement rock at 6,000 feet below the surface, causing the gas chimney effect.