Ann next week, page-16

Here’s my view on OEXs immediate 77H prospects and rationale’.

Status of original OEX investment case: remains unchanged:

• No major change in either business operation or market conditions re sale of oil/gas
• No basis to change investment other than personal discomfort at this stage of proceedings

Risk: reduction in major operational risk items eg drill, fracc, plug mill-out etc

• Overall significant reduction in risk conditions – especially when compared to 76H
• Though several major non-operational risks still remain – successful flow back & flow test results for commerciality
• Any CR ann would severely dent SP going forward

Risk: positives include significant market announcements of 21 & 24/7 regarding initial flow back of ~40% of fracc fluids on good pressure

• Better than expected oil shows at API 50, observation that 77H compares well with typical high performance wells

Reasonable current expectations based on news at hand:

• Next ann expected sometime between 4/8 to 11/8 reporting back on matters flagged in initial post fracc announcement of 21/7 re “CAMBAY-77H – Flaring Gas and Light Oil Recovered in Clean-up”

o Strong clean-up hydrocarbon flow encountered following mill-out operations
o Gas flaring operations have commenced to ensure well-site safety
o Light oil/condensate flows to surface during flow-back and recovered for sale
o Higher than expected light oil/condensate flows particularly encouraging
o ~40% of the frac water has been recovered

• “The well is currently cleaning up and Oilex will advise the market of a stabilized flow rate via a production test once frac fluid return and clean-up operations have been completed ….. Flowback started very strongly (on 7/4) and remains on track to take 2 to 3 weeks “

o next ann re stabilized flow rate expected sometime between 4/8 to 11/8
o this is not expected to be a final assessment of commerciality, which will come after completion of production testing in 1 to 2 months TBA
o however, the stabilized flow rate will give a reasonable early indication of commerciality

Possible scenarios and risk for impending announcement/report on stabilised flow rates
News to include finalisation of clean-up, majority of fracc fluids recovered with further news on stabilised oil/gas flow rates & volumes as follows:

1.    .High Case: initial good flow rates followed by increase instabilised flow rates pre production test
   • Excellent prospects for commerciality – time to crank up the printing press
   • Strong market response – possible SP ~ >40c +++ ???
2. Medium Case: initial good flow rates followed by continuing stabilised rates, no increase
   • Average to good prospects for commerciality – lower/minor risk
   • Average to good market response – possible SP ~ 20 to 30c+ ???
3. Indecisive Case: initial good flow rates followed by minor to moderate decrease in stabilised rates pre production test; within ‘normal’ range
   • Average prospects for commerciality; some minor risk
   • Flat market response – SP fluctuation ~ 10 to 20c ???
4. Worst Case: initial good flow rates followed by significantly decreased stabilised rates pre production test
   • Minor to poor prospects of commerciality, highest risk
   • Possible panicky market response – possible SP crash to ~ <5c ???

My assessment, for what it’s worth, is that circumstances and risk have not materially changed since 21/7.

Based on 77H announcements to date and industry knowledge of comparable wells (not my personal knowledge mind you, but others' experiences aired on this and similar O&G threads), I’d rate our current prospects at:

• >80% confidence of 3 or better
• >50% confidence of 2 or better and
• <20% confidence of 4.

We’ll all know soon enough.

My apologies about the formatting, it doesn't seem to like copying and pasting from word.