Ode To Oilex

I currently value this stock at 2c maximum in the short term, based on current management and indeed the viability
of the " renowned" Cambay Field. I cannot ascribe much value to Cambay based on the figures they have
supplied ; 73 & 77H @ 1mmscfgd & 40 boopd combined. I think their method of reporting post 21/7 has been
horrendous. It has not only been tardy { I won't use the word misleading}, it has been inconsistent to say the least.

1st 8 days we receive no gas flow figures just boo and that is dug up in the quarterly. Now we get gas flow figures
as the well is struggling under water some 6-8 weeks later. No further update on boo recovered except to say it
will flow {EXPECTED TO FLOW} 40 boopd. No reporting of additional bow to be used in the flush and now we
get {6 weeks later} the amount of bow still in the well. Reported at 229 bowpd recovered on 8/10 and now? Nothing of course.
Still expounding the view as little as 3 weeks ago that 77H had all the hallmarks of a high performance
well. The list goes on, just re-read the last 3 months of anns.

One thing is for sure, 77H will be, if it not already is, a miserable failure. I note ;

1. If there remain only 5000 bow in the system then AT the previous flow rate of 229 bowpd we would see this
well TOTALLY cleaned up and ready for a TRUE production test in 21 days. So what is the rush {after waiting
7 months to get to this stage} to do what is in my experience a 2nd RATE production test whilst water is still in
the well?

Answer is fairly clear I would have thought, the well is obviously NOT flowing back at 229 bowpd as reported
on 8/10, it would be considerably less. The pressure gives this away as well falling from 857psi 8/10 to
220 psi now. A recent horizontally fractured well that I have been invested in recently starting flowing at 2700
psi tubing head pressure. That was admittedly a 16 fracture well however, 220psi wouldn't blow a fart out would it?
Now report that the 4 1/2" casing too wide so probably not suitable for a gas well as this I assume what they
meant. Wider casing would be preferable for fluids would it not but not for gas?. They even state in the last
bit of the Ann " Successful completion of 77H well should progress to putting the well into GAS production"
So {in the absence of any information from Oilex} I would assume that maybe they are down to 100 bowpd
or even less. Why {if the flow was still at 229 bowpd} would you not wait 3 weeks to do a definitive production
test rather than a 2nd rate inconclusive test? Probably because they've calculated it would take them 60 days to clean up that 5000 bow, probably longer, if ever for that matter. So gotta do it now.

So much for their reporting.

As to the current value of Oilex. What do they have? Some projected figures for 77H & 73 combined plus
the remainder of their Cambay acreage, some monies owed from Timor/Indonesia dispute? and the Canning
Basin on-shore WA, plus some cash in bank.

Cash in bank? Let's call it $5 million and I think that may be generous.
Successful settlement of dispute = $3 million
Estimated 1mmscfgd & 40 bopd from 77H and 73 combined. Really about 300mscfgd from 73 and
700mscfgd and 40 bopd from 77H. No declines taken into account although 73 did initially produce
1mmscfgd declining to 300mscfgd after 90-180 days I think. 70% decline. I will assume that 73 will
no longer decline from here and will it flow consistently at 300mscfgd. I will assume 40% decline
for 77H, standard declines in EFS. So with declines the rates would be 300mscfgd + 400mscfg +
24 bopd. 700mscfgd and 40 bopd. Oilex's net = 45% or 315mscfgd & 11 bopd. That equates to
approx $2520 for the gas @ $8mscfg and $880 for the oil or $3400 a day. Oilex would net about
35% of this after corporate tax, royalties, admin, exploration, other leases etc. About $1200 per day
or 435K per year. The well {just 77H} has probably cost us close to 7m now just for our 45% share.
Hardly a great ROI. Take 16 years to re-coup your investment. So yes, after production cash neutral
but hardly worthwhile at those rates, may as well put that $7m in the bank at 5% interest.
So I wouldn't be shouting those 200 boepd figures from the rooftops and 77H still has to prove it
can even achieve that. I will lay London to a brick that even when the well eventually does clean
up entirely it won't be achieving any better than what they've outlined here. I've had a few wells that
have taken up to a year or more to recover all water after they've been BOTCHED. The well, once it
is damaged/poorly cased/poorly fracced also probably will always perform like a 3rd rater, hardly
paying it's own way, let alone the company's.

So for current production I would assign $1m.

The rest of the Cambay Field? Well I won't say it isn't capable of being a very good basin although
one time comparisons with the Eagle Ford Shale in the US are becoming more distant. We are now
being informed ; " Analysis of flowback data for ~ 85 days has been completed by RISC, a specialist oil & gas consulting company, with reservoir engineering personnel experienced in the Canadian Montney tight/shale gas play. The Montney Formation is a major productive unit and possible analogue for the Y Zone reservoir of the Cambay Field due to its hybrid siltstone and shale content. " Oh well, probably the last time they will mention
the EFS. They have also drilled their share of verticals now and 73 seems to have been the best result declining
to 300mscfgd or about 30boepd on todays prices $8mscfg $80 oil. That's gross. That in itself is not a disgusting
result if longer horizontals could improve the play. The problem is we can't execute it properly--now is this the result of poor management or is the field itself a mediocre basin more along the lines of a Marcellus shale rather
than an EFS. Let's face it, whilst management aren't out there drilling in the mud, they do sign off on the well
design, procedures & processes etc that have been made available to them by consultants. Me thinks a few
wiser heads with direct experience with shale fraccing in all it's facets wouldn't go astray on the board to
implement possible follow up wells. This management in it's current form will not be able to extract commercial
quantities of gas/oil from Cambay {if in fact there are commercial quantities available}. Hard to see anyone
lending this crew further money for a 3rd go unless 77H REALLY surprises on the upside.

So, with current management still on board I would ascribe $5m to the Cambay Field.

Canning Basin WA NIL. Until a farm-out is announced only then will value be ascribed to it in the form
of the amount of the commitment from the JV and any back-costs paid out. At the moment it is a costing
us to survey and hold that asset.

Gives $14m @700m shares on issue = 2c a share with current management. Would be valued at
more if a change in CEO and board and 77H surprised on the upside.

Hard road ahead to say the least, getting low on cash, stuck with mediocre management, looking for
$ to have a third go and confidence at an all time low in a shaky world market.