ONSHORE OTWAY BASIN VICTORIA Permits

PEP 163

(Lakes Oil Group, Operator: 100% interest)
Further mapping has continued in the permit to identify Lower Cretaceous Eumeralla tight gas plays and Pretty Hill targets well from seismic and well data. A well is likely to be drilled in the permit in the second quarter of 2012, targeting one of the potential Pretty Hill prospects in the northern part of the permit. Evaluation of potential drillable targets in the southern region is also being conducted using existing exploration data.

"Cliff exposure showing Lower Cretaceous stacked channel sand reservoirs - Otway Basin"

PEP 169

(Lakes Oil Group, Operator: 100% interest)
Under a recently announced agreement Armour Energy Ltd will earn a 51% interest in the Permit by funding the drilling and completion of a well in the Moreys prospect planned for late in the first quarter 2012).

PEP 169 permit has existing infrastructure and is connected to the eastern Australian gas network.
PEP 169 is a proven hydrocarbon province:

• Production to date of over 90 BCF within 20 kms of Moreys 1.
• 23 Gas Discoveries in area since 1979 : 14 commercial fields (OGIP >5BCF).

Proposed Drilling Program: Proposed Moreys 1

The Moreys Prospect is a small, tilted fault block that straddles the border with adjoining permit PEP 168.  It is located along a known WNW trending hydrocarbon fairway with nearby gas fields located to the west and east and an existing gas pipeline within 1 km. The primary objective is the Late Cretaceous Waarre 'C' sands with secondary targets in the overlying Flaxman Formation and underlying Eumeralla Formation. While the structural feature is relatively small, seismic amplitude anomalies at the Flaxmans and Waarre C' horizons extend much further than the mapped closure at the Waarre 'C' level. Known gas fields in the vicinity of the Moreys Prospect have significant AVO and amplitude anomalies at the Waarre 'C' level. Similar signatures can be seen over Moreys Prospect.

The AVO study completed over the prospect area from the re-processed 3D seismic data has resulted in significantly enhancing the prospectivity and decreasing the risk of the prospect. The prospective resource has been upgraded from one small tilted fault block that also has an upside out to the edge of the amplitude anomaly.

A P50 Waarre 'C' prospective recoverable resource for the structural closure in PEP 169 is estimated to be 7 - 9 BCF. In addition, based on seismic and AVO mapping of the entire feature located in PEP 169 only (Waarre 'C' plus Flaxmans), the P50 prospective recoverable resource is estimated to be 46 BCF. 

Preparation and planning for drilling are currently underway and the estimated start to drilling is first quarter of 2012, but will be dependent on funding, rig availability and approvals.

"PEP 169: Location map of Moreys prospect (left) and Time Structure Map upper Waarre 'C' horizon (light green)   showing location of Moreys Prospect  along western boundary of PEP 169"

 

"North –South composite seismic line across Moreys prospect"

Detailed seismic mapping in PEP 169 of other conventional structural plays in Late Cretaceous reservoirs continued and at least 5 new structural prospects have been identified in the south and southwest of the permit.

In addition to the Waarre targets, several secondary targets have been mapped in the Tertiary Pebble Point Formation and Early Cretaceous Eumeralla Formation which occur at relatively shallow depths. The secondary targets are still being evaluated as there is less drilling control data in this area and have a higher risk.