paterson's comment on moby #1 results

Event: Moby #1 well results



Details:



· The Moby #1 well in permit Vic P47 has drilled to a total depth of 639m.

· The target Gurnard formation was intersected some 17m high to prognosis, which suggests there could be some upside to pre-drill volume estimates. The gross gas column is at least 32m, and appears to be gas charged. The final electric logging runs will determine weather the porosity and permeability is similar to that at Patricia Balleen.

· The operator (BAS) is awaiting receipt of wireline logs to confirm the presence of gas and reservoir properties.

· Equity participants in the permit are: MOG 35%, Eagle Bay Resources 25%, BAS 40%.





Impact:



· Our base case valuations for BAS/EBR/MOG assumed only the mean 70 Pj). A 32m gross gas column suggests upside from this assumption.

· This implies a valuation for BAS of between $0.35-$0.40/share.

· For MOG - assuming the gas only case - we conclude a value of $0.32/share (fully diluted for all options), while for EBR, we suggest a value around $0.05/share for its interest in the Moby well.

· Note we have not included any upside from the postulated oi leg.

· We continue to rate BAS as a STRONG SPEC BUY, as it has very high leverage to the Zane Gray well (expected to be drilled in late November), while we would look to reduce our rating on MOG to a HOLD at around $0.30/share.

· Note that the Moby 1 well will be plugged and abandoned in any event, after a full suite of logs and sidewall cores, plus formation testing is completed.