Leyshon To Buy Unconventional Gas Stake Holder In China; Shares Up

7/18/2012 6:02 AM ET

Shares of Leyshon Resources Limited (LRL.L) increased around 6 percent in morning trade in London after the Australian gold and other minerals explorer said it plans to buy Hong Kong-based Pacific Asia Petroleum Ltd that holds stake in China's unconventional gas revolution.

The seller is Houston-based CAMAC Energy Inc. Leyshon said it is currently undertaking final due diligence and expects to finalise terms shortly and will reach a deal by July 27.

Pacific Asia Petroleum holds interest in the Zijinshan Production Sharing Contract located on the eastern fringe of the prolific Ordos Gas Basin in Central China. China now has the world's largest unconventional gas resources outside the United States.

The company noted that the Zijinshan Production Sharing Contract is with one of China's major oil and gas companies which has retained the right to buy back a 40 percent interest in the contract at the completion of the exploration phase and to jointly fund the project into production.

Zijinshan Gas Project contains gross prospective resources that are potentially large due to the confirmation of the presence of unconventional gas, with in place estimates in the range 1 to 3.8 Trillion Cubic Feet. The Ordos basin generally offers one of the highest potential IRR's in China.

According to industry advisor RISC, the opportunity appears attractive, but it contains significant risk which must be mitigated via the acquisition of appropriate data and completion of a pilot plan. Leyshon said it plans to retain RISC as its advisor in the exploration and development phase of the project.

The initial exploration focus will be on drilling several new wells to test extensions to nearby major shale gas discoveries and production testing the cased wells.

The company said it remains firmly of the view that, in light of the expanding demand for all types of energy within Central China over the next ten years, high quality energy assets located close to transport and distribution infrastructure will become increasingly valuable over time.

In London, Leyshon shares are currently trading at 12 pence, up 0.75 pence or 6.67 percent.

In Australia, the shares closed today's trading at A$0.195, up A$0.025 or 14.71 percent.

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by RTT Staff Writer

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