Mineral Resources Ltd (ASX: MIN) shares are under pressure on Tuesday.
In morning trade, the mining and mining services company's shares are down almost 3% to $67.80.
Why are Mineral Resources shares dropping?
Today's weakness appears to have been driven by broad weakness in the lithium industry today which has overshadowed some positive news relating to another side of the Mineral Resources business.
An announcement this morning provided investors with an update on the Lockyer-5 conventional gas development well (L-5) located in the onshore Perth Basin.
According to the release, following an appraisal of the L-5 well, a sidetrack was drilled to a gas development well location that reached a total depth of 4,574m measured depth relative to the rotary table (MDRT). The Kingia Sandstone objective was successfully intersected at 4,424m MDRT.
The good news is that petrophysical analysis of Lockyer-5 Sidetrack-1 (ST-1) wireline logs has yielded "exceptional results" according to management. It revealed 27m of net gas pay with an average porosity of 18%.
Management notes that this is the highest quality reservoir encountered in all wells that have intersected the Kingia Sandstone across the onshore Perth Basin.
Preparations are now underway for a well test in early April to evaluate gas flow rates and composition.
What's next?
Following the completion of operations at L-5, Mineral Resources relocated the drilling rig to North Erregulla-2 (NE-2). It is expected to reach a total depth of 3,492m MDRT in mid-April.
Management highlights that NE-2 is an appraisal well to test the quality and deliverability of the 47m net oil pay in the Dongara-Wagina Sandstone encountered in the NED-1 well.
Initial laboratory analysis of the oil recovered in NED-1 has provided promising indicators of high-quality oil. Initial wireline log analysis indicates an average porosity of 13%.
The NE-2 pay zone will be fully cored, followed by a full suite of wireline testing and a flow test to further define and unlock the considerable oil potential in the region.
