Ann: Quarterly activities & cash flow report , page-3

Galilee Energy (GLL) released its quarterly activity report to 30 September 2012. I took a few comments on the company's key pilot study (ATP529P) as positive.

"All work to date demonstrates that the Betts Creek coal contains gas, it is permeable and capable of being de-watered."

The Galilee Energy-AGL JV has experienced ongoing problems with water pump failures. I took it as positive the JV committed more experienced human resource to the project. The technical issues associated with pumping water at depth appear addressable.

"Whilst the location, depth, temperature .and pressures at which the equipment operates are challenging they are within the performance limits of standard equipment."

The following comment sums up the JV Partners position on ATP529P.

"Overall, the parties believe that a viable project exists once these technical challenges are overcome".

The other interesting development was Galilee Energy have made a decision to drill in their 100 percent owned Galilee Basin tenement (ATP799P) which is north from the current pilot (ATP529P). The company has mobilised a drilling rig and will be drilling in early November 2012. This drilling appears a more aggressive strategy, which also suggests management have some confidence with their current pilot.

The company has budgeted to spend $3.25 million in the December quarter, which will leave a cash balance of around $30 million as at 31 December 2012.

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