RELEASE TO SHAREHOLDERSWA-342-P and WA-333-P DRILLING COST...

RELEASE TO SHAREHOLDERS
WA-342-P and WA-333-P DRILLING COST MATTERS
Moby Oil & Gas Limited (ASX Code: MOG) advises that the dispute with the contractor in relation to the WA-333-P Joint Venture and the drilling of the Braveheart-1 well, as referred to in the Quarterly Report for the quarter ending 31 March 2010 (Quarterly Report), has today been resolved between Hawkstone Oil Pty Ltd, as Operator of the Joint venture and the well, and the contractor.
The Company also provides this update of the as now known current costs of the drilling of each of the Braveheart-1 well and the Cornea-3 well.
As advised in the Company?s Rights Issue documentation (dated 18 November 2009), the then estimated cost of drilling the Braveheart-1 well was $15,300,000. The actual likely cost will be in the order of $18,393,157, as advised in the Quarterly Report. The costs of drilling the Cornea-3 well, as estimated in a release to shareholders dated 26 November 2009, were $17.36 million. Based on the terms of the farmin agreements entered into, the likely final cost is expected to be in the order of $19,662,630. The combination of these cost over-runs has increased Moby?s pro rata share.
The overruns were principally brought about by the decision to evacuate the rig while drilling each of the wells. This was due, in the case of Cornea-3, to a cyclone and in the case of Braveheart-1, a tropical low. In addition, a stuck pipe incident added a considerable cost to the Braveheart-1 well.
In the case of WA-342-P and the Cornea-3 well, Moby is obliged to meet a 22.375% share of the cost overrun above the cap limit of $17,360,000. In the case of WA-333-P and Braveheart-1, Moby is obliged to meet 26.4375% of the cost overrun above the cap limit of $15,300,000. The additional costs, totalling $1,409,279, will, as necessary, be covered by existing working capital and the facility referred to in Appendix 5B of the Quarterly Report. Moby presently plans to draw down AUD$1,295,000 of the facility (detailed below) in order to meet these increased obligations.
The facility is for $1,500,000 and will provide sufficient funding such that, together with the Company?s existing funds, as referred to in the Quarterly Report, all of the costs of exploration for the current quarter, and which result from the above cost over-runs, will be satisfied. Additional funding will, as necessary, be available to enable the Company to have sufficient working capital to meet its anticipated requirements in the foreseeable future.
Save for the cost over-runs, the Company has minimal ongoing exploration expenditure planned or committed in the foreseeable future.
The facility has been provided by Gascorp Australia Pty Ltd, a company associated with Mr E G Albers, a director of the Company, and is on terms which are favourable to the
Company. The interest rate payable on funds drawn down is at the prevailing bank overdraft rate and the liability ranks below other creditors, with the funds being repayable or satisfied only from the funding sources specified. Until the facility is discharged, the liability to make any repayment of the amounts made available under that facility will be deferred for 18 months and rank behind other creditors.
In due course, the Company will seek to raise funds, whether by farmout, by partial sale of assets, by placement of shares (and options) or by new shareholder entitlement issue, as and when considered appropriate by the Board, in order to satisfy the facility.
By Order of the Board