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OIL EXPLORER WITH A STRATEGY THAT LOOKS TO BE PAYING OFF

Sydney - Friday - May 12: (RWE Aust Business News)
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OVERVIEW
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OCTANEX NL (ASX:OXX) is an Australian company exploring for oil
and gas in established petroleum producing basins in Australia and New
Zealand.
The company's strategy of large interests in under-explored
permits, upgrading their prospectivity through seismic and then farming
out the more expensive 3D seismic and drilling obligations has been
extremely successful, says merchant investment banker Intersuisse.
The broking firm has made Octanex a speculative buy at 40c.
Yesterday it was a bit off the pace at 35.5c due to another slide
in commodities and energy prices on Wednesday.
Octanex has a steady flow of progress reports and earlier this
week reported on its Galahad 1, WA-363-P - Exmouth Plateau.
Octanex has been advised by Eni Australia Ltd, the operator of
the Galahad-1 well located in the outer Exmouth Plateau permit, WA-363-P,
that on May 11 the well was at a depth of 2,380m (measured depth below
rotary table) and conducting pressure testing of the marine riser and
Blow-out Preventer (BOP).
Planned operations over the next week are to complete the
pressure testing procedures prior to drilling the 12.25" hole.
The Mungaroo Formation is the target formation for the well, with
mapped closure at the Top Mungaroo (predicted at approximately 2,489m
MDRT) and a series of intra Mungaroo fluvial channel sand targets that
possess AVO anomalies.
The intra Mungaroo targets range over the interval from
approximately 2,698m to 3,344m MDRT.
The Galahad-1 well is being drilled by the Saipem 10000
drillship.
The participants in the WA-363-P joint venture are Eni Australia
40 per cent, OMV Australia Pty Ltd 40 per cent and Octanex Group 20 per
cent.
Meanwhile the company has reported that a farm out of PEP 51906
to OMV New Zealand Ltd has become unconditional following approval by the
NZ government.
The permit is located in the offshore Taranaki Basin of New
Zealand.
Under the terms of the farm out agreement:
* Octanex NZ has assigned a 65 per cent participating interest in
the permit to OMV NZ;
* Octanex NZ retains a 35 per cent participating interest in the
permit and will be free carried through certain agreed phases of
exploration;
* OMV NZ becomes the operator of the permit and of the joint
venture formed to explore the permit;
* OMV NZ will now reimburse Octanex NZ the agreed NZ$1 million of
exploration costs incurred by Octanex NZ in relation to the permit;
* On or before November 19, 2012, OMV NZ must commit to the
drilling of a well within the area of the permit or re-assign all of its
65 per cent participating interest back to Octanex NZ; and
* Until the earlier of the date that a well has been drilled or
OMV NZ re-assigns its 65 per cent participating interest in the permit
back to Octanex NZ, OMV NZ will meet 100 per cent of the costs of all
exploration activities in the permit, including 100 per cent of the costs
of a well, if and when drilled.

SHARE PRICE MOVEMENTS
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Shares of Octanex yesterday eased 2c to 35.5c. Rolling high for
the year is 66c and low 2.5c. The company has 151.2 million shares on
issue with a market cap of $56.7 million.
Referring to the Matuku 3D seismic survey, part of the farm out
agreement terms are that OMV NZ will acquire (and pay for 100 per cent of
the acquisition, processing, mapping and interpretation costs) a new 3D
seismic program within the Permit surrounding the Matuku prospect.
The survey will be carried out by Reflect Geophysical Pte Ltd and
be conducted by the seismic acquisition vessel Orient Explorer.
The survey will take about 35 days to complete.
MV NZ also intends to acquire additional 2D data across parts of
the permit and that 2D data will be acquired on completion of the Matuku
3D survey.
Octanex says OMV NZ has substantial existing New Zealand permit
interests, including being the operator of the Maari oil field (PMP
38160) that is located to the immediate south of PEP 51906 and in which
it holds a 69 per cent interest.
OMV NZ also holds a 10 per cent interest in the Maui
gas/condensate field (PML 381012) and a 26 per cent interest in the
Pohokura gas/condensate field. All of these permits are located in the
offshore Taranaki Basin.
Octanex is confident OMV NZ will bring to bear a considerable
amount of exploration and operational experience, knowledge and expertise
regarding the hydrocarbon potential within PEP 51906.
It considers the permit to have the potential to contain a number
of discrete oil accumulations.
Meanwhile, Octanex is in a strong financial position, with cash
reserves in immediately available funds of $29.3 million with no debt and
negligible forward exploration commitments.
It holds a number of strategic investment shareholdings
including:
* 43,656,180 shares in Cue Energy Resources Ltd (ASX:CUE) with
current value of about $10 million;
* 10,972,923 shares in Orion Petroleum Ltd (ASX:OIP) with current
value of around $1 million; and
* 10,000,000 shares and 5,000,000 options in Central Petroleum
Ltd (ASX:CTP) with current value of about $1.75 million.
Total value of all investments in marketable securities is about
$14 million.
Cash plus liquid investments are equivalent to about 30c per
fully paid share.

BACKGROUND
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Octanex NL and its subsidiaries are involved in oil and gas
exploration and its related activities in the offshore waters within the
jurisdiction of Australia.
The related activities include investment in companies operating
within the wider energy sector, both inside and outside of Australia.
The company was incorporated in Victoria in 1980.
It has ongoing valuable commercial rights in southern Exmouth
permits via a deal with Shell.
ENDS rx