Cornea Joint Venture – WA-342-PThe Cornea Joint Venture...

Cornea Joint Venture – WA-342-P


The Cornea Joint Venture comprises the interests held in WA-342-P, which is adjacent to WA-332-P and WA-333-P.


On October 22, 2007, the Joint Venture lodged a request for a variation of the permit WA-342-P so that instead of drilling a well in Year-5 the permit would require geotechnical studies, while Year-6 of the permit would require reprocessing 1000 kms² of the existing 3D seismic data set. Such variation of the permit has been granted, with Year-6 of the permit commencing on November 28, 2009.


The joint venture has carried out extensive studies as to prospectivity of the known Cornea gas/oil accumulation, where it is postulated that there is scope for recovery of prospective resources of between 40 million and 90 million barrels of oil, if our geological concepts and assumptions are correct. However, the challenges at Cornea include a low permeability reservoir with difficult to model production characteristics and the long, narrow shape of the field.


Cornea represents an opportunity to invest in an appraisal drilling campaign with the possibility of development, if the geological assumptions are correct and if initial and subsequent appraisal drilling objectives are realised. The plan for Cornea is to now drill a vertical exploration/appraisal well in the predicted best sands and conduct well-designed tests to define oil and gas contacts. Conditional on a positive outcome, a subsequent horizontal appraisal well could be undertaken to determine production possibilities. An initial successful appraisal well would also provide a focus for economic analysis and the applicability of various methods for funding a development, including subsequent capital raising and/or joint development (part sale or farmout). An appraisal and field development strategy for Cornea would be prepared, if appropriate.



22



--------------------------------------------------------------------------------


In anticipation of the drilling of the Cornea-3 appraisal well, the various joint venture participants transferred their interests to new wholly-owned subsidiaries.


Participants in the Cornea Joint Venture at the end of the quarter were:


Cornea Resources Pty Ltd (subsidiary of Exoil Limited) (Operator) 29.75%
Cornea Petroleum Pty Ltd (subsidiary of Batavia Oil & Gas Pty Ltd) 29.75%
Coldron Pty Ltd(subsidiary of Gascorp Australia Pty Ltd) 15.00%
Cornea Oil & Gas Pty Ltd (subsidiary of Australia Oil & Gas Corporation) 17.00%
Cornea Energy Pty Ltd (subsidiary of Goldsborough Limited) 8.50%


The Cornea Joint Venture have engaged the services of Australian Drilling Associates Pty Ltd to provide project management services to support the conduct of Cornea-3 appraisal drilling operations and have taken by assignment a drilling slot in a group sponsored multi-well program utilising the semi-submersible drilling rig, the Songa Venus. The drilling slot is for the drilling of a vertical appraisal well into the postulated Cornea oil rim, anticipated in late 2009/early 2010.


Evaluation of the Cornea-3D seismic data set has indicated that significant oil resources may exist within better quality sand units that could be developed with multi-lateral, horizontal wells. Before such a development can be considered, the production flow rates of these reservoirs need to be proved, as do the location of the transition zone and free water level.


The purpose of drilling Cornea-3 is to acquire modern, high quality nuclear magnetic resonance (NMR) logs within the reservoir sands to obtain more accurate information on reservoir porosity, especially productive porosity and permeability, as well as hydrocarbon saturation and the location of the transition zone and free water level. The acquisition of better formation pressure measurements and formation fluid samples with a modular formation pressure tester tool (“MDT”), including possible flow test from a dual packer MDT, are planned. Data from the Cornea 3 appraisal well will be used to plan a subsequent horizontal appraisal well and to evaluate the commerciality of the field, and ultimately a field development plan, if found appropriate.