Linxing WestThe Linxing West area of the Linxing PSC covers 573km2. The Linxing West area has established reserves and contingent resources which will initially be targeted through development through the pilot programme which came onstream in late. Two thirds of the Linxing West area is considered discovered as of December 31, 2013 with the remaining third considered prospective.

SEH holds a 31.7% net interest in Linxing through its shareholding of SGE. SGE (SEH 49%, CNEML 51%) holds a 64.75% interest in Linxing PSC. CUCBM, a subsidiary of CNOOC, holds the right to back in for 30% interest on ODP approval and CBM Energy holds a right to back in for 5.25% interest by paying 7.5% of back costs. The Linxing PSC exploration period was extended in August 2013 to August 2016 with no relinquishment of acreage or change to PSC allocation structure.

During 2013, nine wells were drilled as part of the Linxing (West) drilling program, bringing the total to 17. Drilling is ramping up significantly in 2014 with eight rigs mobilised to Linxing West in early 2014. Additional pilot drilling to tie into production and further exploration drilling is planned for 2015 and beyond.

During 2013 testing was completed on over five payzones from wells drilled during both the 2012 and 2013 work programs. Testing of lower-level zones produced encouraging results, with multiple zones with similar pressures planned to be comingled to maximise well output. Testing of upper level zones produced flow-rates well in excess of minimum commercial rates. In 2014, three testing teams have been deployed to Linxing West to gather important reservoir information in the north and enable pilot production to be expanded in the south.

SGE continues to apply technology to determine optimal drilling locations completion techniques to maximize flow rates and ultimately recoverable reserves per well. The following significant flow rates have been announced from vertical, pad and horizontal drilling in 2014: