Ann: Quarterly Report December 2014, page-11

Pretty much agree with all the above posts.

DLS delivered a very solid quarter. Very happy to see the price received was over AUD $95.
I do think the current quarter will recieve a lower number than that, even with the hedge, probably closer to $85, but still, excellent margins which will continue to support the work programs (albeit they will be a slightly scaled back).

Interesting to note that DLS/BPT have brought forward more drilling on Bauer. Clearly the reason is cost, i.e, much cheaper to just keep expanding the Bauer field than working on the other explored fields (which would not need to have pad drilling due to being smaller). Not that they won't drill the other fields, but for now, just much better on the bottom line until the POO recovers or even stabilises. The double bonus is it will support DLS 2P reserves, as the last pad drilling did.

I just had a listen to the Quarterly Q&A, these are just a bit of a summary.

Santos/DLS J/V wet gas discoveries will be coming online roughly end of this quarter. Which is nice, as they have a solid sales agreement, just just tie em in and off they go. It will be interesting to see what sort of production rates they achieve (all at no cost to DLS).

Unconventional program in ATP 940: drilling is over for at least the rest of Fy15. Which is great news, as I see no reason to spend more until we know whether Chevron will proceed with Stage 2 of the BPT/Chevron J/V. If Chevron goes ahead, I think DLS/BG will start things moving again. The flow rate from Charal was uninspiring, but not unexpected, in the sense that it is no different to BPTs in the north. Anakin has already been fracced, so we should receive further results in coming weeks, which will, hopefully at least prove definitively that the BCGA extends into ATP 940. The other two drilled wells will not be fracced straight away (depends on BG). Either way, Capex for the Uncon is winding down for now, so DLS can focus on conventional targets which will, as Brad put it, add production, cashflow and reserves (its all about shoring up the balance sheet to whilst keeping production high to weather the storm).

The Hedging situation - Basically, Bauer production is 75% hedged until June 2015, then from July to Dec 2015, its 50% hedged, with Jan-Jun 2016 25% hedged. Brad qualified that DLS will of course look for opportunities to add to the hedging program where possible depending on what the price of oil does. I am personally surprised that they were able to get the Collar at such a price, i.e US $60 minimum & US $90 maximum, when SXY was only able to get theirs for approx US $57-72, either DLS got the additional collar earlier than SXY, or... they simply got a better deal? Either way, very happy with DLS downside protection to a possible continued low oil price.

OPEX, or cost of production was significantly down due largely to a drop in royalties, which I guess shows that DLS core oil production is capable of surviving even lower prices if need be.

Capex or the full year, will be reduced, albeit not officially until Feb when the half year results come out. Prudent in the current market, but I am fairly confident there will still be a fair bit of drilling to come.

Flax/Juniper field - DLS still in discussions regarding a possible farmout. Brad would not explain any further, but with the current market, I think he implied that there is no rush (but anything might eventuate). Extra flax wells, not being brought online yet, because its capex that might be better spent elsewhere in the short term (although Flax-3 is currently producing at low rates due to natural decline). Juniper-3 well not to be fracced yet, hopefully we will know in Feb. IMHO, realistically, they will slow down on Flax unless they get a farm-in.

The wells left to be drilled for FY15, 50% are free carry's for DLS, with the others being Bauer, and... I am assuming this, in PEL 101.

Vanessa wet gas well - Technical results are excellent, delay to getting into production to do with what the total cost will be and the connection to the SACB pipelines. So I think it will go ahead due to the high gas flows. Also, because DLS has PEL 101 and PEL 570, its a more positive project for DLS as more fields etc might be tied in at later dates if they are successfully appraised.

Last question to Brad was - 'Does DLS see its self as a buyer of assets, or a target?' Both....

Think that's about it. Happy to hold, with DLS well hedged, yet fully open to any upside if the price of oil does start to recover.