JOHN KOPCHEFF
MANAGING DIRECTOR
VICTORIA PETROLEUM N.L.
AUSTRALIA
NEW CALEDONIA
USA
WESTERN AUSTRALIA
EP 413
ONSHORE NORTH PERTH BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 5%
EP 413 covers an area of 539 square kilometres and is situated in the North Perth Basin seven kilometres to the south of the giant 400 billion cubic feet Dongara Gas Field.
Victoria Petroleum NL considers the permit EP 413 to be very prospective and well placed for the presence of oil and gas, an opinion supported by the October 2002 oil discovery at Jingemia-1, the Arc Energy Hovea and Eremia oil and gas discoveries 5 kms to the north east and 15 kms to the west in the adjacent offshore permit WA-286-P, the Roc Oil Cliff Head oil discovery,
Jingemia No. 1 intersected an oil column of between 29 and 33 metres in good reservoir quality Dongara Sandstone at 2,414 metres, confirmed by subsequent wireline logging and production testing.
On 8th May 2003 the project operator of EP413 Origin Energy commenced a three (3) month extended production test ("EPT") at Jingemia - 1. The EPT was successful in acquiring information on the long term oil production performance and assisting in finalising plans for commercial field development in early 2004. Production rates were varied throughout the test period as engineering requirements dictated.
During the EPT period, Jingemia-1 produced in excess of 125,000 barrels of oil with Victoria Petroleum's net entitlement being 6,250 barrels. During the EPT, the Jingemia-1 well consistently flowed at rates of up to 2,000 barrels of oil per day with no water.
As a result of the encouraging results from the EPT, the Jingemia-2 well to test the southern extent of the field and the Jingemia-3 well to provide maintenance for higher flow rate field production were successfully drilled in September 2003.
A second EPT is planned to commence in early November 2003, with the Jingemia-1 well planned to be flowed at rates of up to 1900 barrels of oil per day, following government approval.
A further development well, Jingemia-4 is anticipated to be drilled in December 2003 to significantly increase the Jingemia Oil Field production rates to 4,000 barrels of oil per day in the first quarter 2004.
Oil produced from the second EPT and in the future will be trucked to the BP Kwinana oil refinery 360 kilometres to the south.
Based on the January 2002 seismic survey and subsequent interpretation, mapping, Jingemia-1 production test data and the Jingemia-2 and 3 appraisal well drilling results, the Jingemia Oil Field is interpreted to have the potential to contain a most likely recoverable oil reserve of 5 million barrels.
Adjacent to the Jingemia Oil discovery, additional prospects, Drover and Moorba have been mapped and form additional attractive exploration targets.
Additional prospects and leads in the southern part of the permit, Freshwater Point North and Stockyard are interpreted from seismic and adjacent drilling data to have the potential to contain mean recoverable reserves of 38 million barrels of oil and 42 billion cubic feet of gas, if oil and gas are present. The Freshwater Point North Prospect is considered to be an onshore extension of the offshore Cliff Head-Vindarra trend.
These leads are already the subject of exploration activities with the interpretation of the detailed gravity survey carried out recently assisting in defining the extent of these and other leads in the areas of future 2D and 3D seismic acquisition.
Victoria Petroleum NL considers it has a prospective permit in the North Perth Basin, in an exciting reemergent area of exploration activity surrounded by the significant offshore Cliff Head and onshore Hovea and Eremia oil and gas discoveries and associated infrastructure, and within the permit, the recent Jingemia oil field discovery.
Victoria Petroleum NL is encouraged by the 100% wildcat exploration success rate in this resurgent phase of drilling in the Northern Perth Basin with all three wildcat exploration wells drilled being oil discoveries.
The Jingemia oil discovery is of considerable value to Victoria Petroleum as it has elevated Victoria Petroleum into the ranks of Australia's oil producers with the associated cashflow.
Origin Energy is the Operator of EP 413.
WA 254 P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 9.31% (Part 2), 6.17% (Parts 1, 3 & 4)
The permit comprises four graticular blocks of 322 square kilometres in area on the Legendre Fault trend in the offshore Carnarvon Basin.
In April 1999 the Sage block provided Victoria Petroleum NL's first offshore oil discovery, Sage-1, with the testing of 2,155 barrels of 48.8 degree API oil per day from a net 25.5 metre oil column.
Subsequent seismic reprocessing and interpretation indicates the Sage Oil Discovery to have a potential recoverable oil reserve of between 8 and 13 million barrels. The potential also remains for a Sage Oil Field tie-in to any nearby development in WA-254-P Part 2 or adjacent permits, should a significant discovery be made in those areas.
Additional prospects generated over the year and their potential recoverable oil reserve targets, if oil is present include the Collier Prospect (13 million barrels), the Jaya Suriya Prospect (36 million barrels) and a number of additional leads that require additional work.
Apache Energy N.L. is the Operator of the WA 254 P Joint Venture.
WA 261 P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 12.5%
WA-261-P covering an area of 299 square kilometres in the offshore Carnarvon Basin is located immediately to the south and adjacent to the Apache Energy/Santos Limited permit WA-209-P containing the 45 million barrel Stag Oilfield, currently producing approximately 15,000 barrels of oil per day.
Chamois-1 was drilled in September 2000, targeting the Jurassic Athol and Triassic Mungaroo formations that are becoming prolific producing horizons in the Carnarvon Basin. While the Mungaroo Formation was dry, the Athol Formation contained approximately 6 metres of net oil pay and the M. Australis sandstone contained about 3 metres of net gas pay.
At present the Chamois Oil Field of up to 3.9 million barrels of recoverable is deemed sub-commercial, but the recovery of oil from the target Jurassic formation provides encouragement that further drilling on the Chamois Prospect may yet result in the discovery of a commercial pool of hydrocarbons in the permit.
A large Stag Sand pinch out trap, south of the 50 million barrel Stag Oilfield was tested by the Ceres-1 well in November 2002. Although only minor oil shows were observed in the Stag sand resulting in the well being abandoned, good oil shows in the Athol sands provided encouragement for the presence of further potential Athol sand oil pools in the permit.
Further work carried out by the Operator has defined the stratigraphic Vesta Prospect interpreted from 3D Seismic data to have the potential to contain up to 23 million barrels of recoverable oil, if oil is present.
The Vesta prospect is located on a migration pathway within WA-261-P updip to strong oil shows to the west recorded in nearby Ceres-1 and the oil pool at Chamois-1.
The primary target reservoir at Vesta-1 at 747 metres is in the Athol sandstone found to contain oil in very porous (29% porosity) and very permeable (890md) sands in Chamois-1.
Vesta-1 is planned to be drilled in late December 2003.
Success at Vesta-1, located about half way between the Chamois Oil Field and the Stag Oil facilities, 22 kilometres to the north east, will lower the minimum economic field size requirement to 4.5 million barrels of oil for discoveries in WA-261-P and, assuming the oil price is sufficient, may justify the development of the Chamois Oil field in addition to a Vesta oil discovery.
Apache Energy is the Operator of the WA-261-P Joint Venture.
WA 312 P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 18.3%
WA-312-P is located in the Dampier Sub-basin of the offshore Carnarvon Basin, Northwest Shelf, Western Australia and covers an area of 1,850 square kilometres.
Lying approximately 50km to the north of Karratha, the permit comprises 23 graticular blocks over 1850 square kilometres, and is situated less than 1 kilometre south of the 80 million barrels recoverable Wandoo Oil Field, currently producing 24,000 barrels of oil per day, the Hampton-1 gas discovery, and 11 kilometres to the east of the 45 million barrels recoverable Stag Oil Field, currently producing 15,000 barrels of oil per day.
The permit has had only three wells drilled in it and is considered lightly explored given the proximity to the prolific oil and gas fields to the north and west.
The permit has been granted for a six-year term and the initial three years exploration will be taken up with a program of seismic re-processing and acquisition to mature a drilling target.
A 3D seismic survey was carried out in the western portion of the permit and has indicated several promising leads and prospects in this area, with the 9 million barrels of oil potential Southeast Wandoo Prospect, 3 kilometres from the Wandoo Platform considered an immediate future drilling candidate for farmout in 2004.
Interpretation of the seismic data acquired during this survey, combined with the existing extensive 2D seismic data base indicates the presence of up to nineteen prospects and leads. Among the nineteen leads and prospects mapped to date within the Permit there are a number of prospects and leads at the Wandoo and Stag oil producing horizons that will be the focus of exploration attention as they are in an area of favourable infrastructure. Eight of the nineteen leads have a cumulative unrisked recoverable oil reserve potential of up to 145 million barrels of oil.
Victoria Petroleum NL is the Operator of the WA-312-P Joint Venture.
WA-340-P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 20%
Following the late March 2003 quarter award of WA-340-P covering 325 square kms, Strike Oil NL as operator commenced exploration in this permit, adjacent and to the southwest of WA-312-P.
Four Jurassic to Cretaceous age structural stratigraphic leads ranging in size from 19 to 60 million barrels of oil recoverable (P10) are present in the permit. Work has commenced to upgrade these leads to prospect status for possible drilling in the next one to two years.
Strike Oil NL is the Operator of the WA-340-P.
EP 325
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 85%
EP 325 covers an area of 1,093 square kilometres in the Exmouth Sub basin of the central Carnarvon Basin and contains the Rivoli Gas Discovery.
The Joint Venture is focussing on the potential for development of the existing and predicted natural gas resources of the Exmouth Gulf. As the Government of Western Australia proceeds with its policy of private electricity generation a market has developed for natural gas in the Cape Range Peninsular to which EP 325, containing the 19 billion cubic feet Rivoli-1 Gas Discovery and the potential 27 million barrels of oil or 52 billion cubic feet of gas Champion (previously Cooper) Prospect are ideally located.
Engineering and economic studies are proceeding to determine the feasibility of development of the Rivoli/Champion trend to supply natural gas to Exmouth and the region.
Recent geological and geophysical analysis provides confidence that the Champion Prospect is most likely to be an oil target.
Preparations for the drilling of Champion-1 in mid 2004 have commenced and potential farmin partners are now being actively sought to provide Victoria Petroleum with a 15% free carried interest through the drilling of Champion-1.
Victoria Petroleum NL is the Operator of the EP 325 Joint Venture.
EP 41
CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 88.8% (Part 1); 69.6% (Part 2)
EP 41 parts 1 and 2, cover an area of 393 square kilometres situated onshore and partially offshore in the Carnarvon Basin on the Cape Range Peninsula and Exmouth Gulf. The historically significant site of the first major oil flow in Australia, Rough Range-1, recently in commercial production as Rough Range-1B, lies within EP 41 Part 3, adjacent to EP 41 Part 2.
Following the farmin drilling program in EP 41, Part 3, by Empire Oil NL, Victoria now retains a 10% interest in two prospects within EP 41 Part 3, a 69.6% interest in Part 2 and 88.7% interest in Part 1.
Current exploration activity is focused on the offshore portion of EP 41 Part 1, following up potential oil and gas bearing prospects on tend and to the south west of the Rivoli Gas Field, and west of the Champion Prospect. These prospects and their hydrocarbon target potentials are Rivoli South West (20 BCF) and Champion West (12 million bbls/21 BCF).
Victoria Petroleum NL is the Operator of the EP 41 (Parts 1 & 2) Joint Venture.
EP 359
CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST- 55.85%
EP 359 covers an area of 1,954 square kilometres situated in the Carnarvon Basin predominantly onshore on the Cape Range Peninsula and partially offshore in the Exmouth Gulf.
The up to 25 million barrel Fiona and up to 15 million barrel Suzanna oil prospects are potential drilling targets in EP 359.
Further evaluation of the drilling targets in EP 359 for farmout and drilling in 2004 is in progress.
The production of oil at Rough Range at rates of up to 1,106 barrels of oil per day by Empire Oil NL in May 2000 has highlighted the viability of even small fields in this region to be economic, given the strength of Australian oil prices.
Victoria Petroleum NL is the Operator of the EP 359 Joint Venture.
EP 406
CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 95%
EP 406 covers an area of 4,750 square kilometres situated in the southern part of the Carnarvon Basin over the Bernier and Dorre Islands, the adjacent eastern area of Shark Bay and onshore area adjacent to the town of Carnarvon.
Victoria Petroleum N.L has an agreement with Pancontinental Oil & Gas N.L, the previous sole permittee whereby Victoria Petroleum N.L has been assigned a 95% interest in the permit and operatorship for free carrying Pancontinental Oil & Gas N.L through the drilling of the first well in the permit.
Victoria Petroleum N.L considers the permit is prospective for hydrocarbons in the Birdrong Sandstone formation and underlying Devonian sequence based on the gas shows recorded in wells drilled onshore adjacent to the permit.
An initial stratigraphic well to test the prospectivity of the Birdrong and Devonian formations in the permit is planned to be drilled in 2004 following receipt of the necessary environmental and EPA government approvals and farmout.
Victoria Petroleum N.L., is the Operator of the EP 406 Joint Venture.
SOUTH AUSTRALIA
PEL 86, 87, 89, 104, 111 AND 115
COOPER/EROMANGA BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 40%
Victoria Petroleum now has the largest gross acreage position of 21,890 sq kms in the South Australia Cooper/Eromanga Basin, with a net acreage position second only to Beach Petroleum Ltd.
Within the overall South Australian/Queensland portion of the Cooper/Eromanga Basin Victoria Petroleum maintains its position as the largest gross and net holder of exploration acreage with a gross holding of 50,300 sq kms.
With the current exploration success rate of 40% in the South Australian Cooper/Eromanga Basin for the ex-Santos acreage, exploration success may be forthcoming with the up to five well drilling program planned for 2004 in Victoria Petroleum NL's permits PEL 104, PEL 111 and PEL 115.
With the South Australian Cooper Basin as an immediate "core area" of exploration focus for the Company, a further 11 wells are planned to be drilled over the next 3 years, in addition to the "back to back" up to 5 well drilling program planned to commence in March 2004 in PEL's 104, the adjoining PEL 111 and PEL 115.
With some 21 wells planned to be drilled in the next nine months by the industry, including Victoria Petroleum, the South Australian Cooper Basin will be a "hot spot" of drilling exploration activity.
With the drilling activity within and adjacent to Victoria Petroleum's permits, it is considered that Victoria Petroleum is well placed to have the opportunity to enjoy exploration success in the 2004 drilling program as Beach Petroleum Ltd, Stuart Petroleum Limited and Cooper Energy NL have recently.
PEL 104
PEL 104 covers an area of 1,095 square kilometres and is immediately adjacent to the Tirrawarra Oil Field, the largest oil field in the Cooper Basin and onshore Australia with estimated recoverable reserves of 70 million barrels of oil and 340 billion cubic feet of gas. The block is also immediately adjacent to the Fly Lake Oil & Gas Field and surrounds the Callabonna Jurassic oil field production licence.
PEL 104 is considered highly prospective for a Jurassic and Permian oil and gas in view of its immediate proximity to producing oil and gas fields and the presence of prospective Permian and Jurassic section within the major portion of the block.
The July 2003 Christies-1 commercial oil discovery and the August 2002 Sellicks-1 2,160 barrels of oil per day discovery by the Beach Petroleum/Cooper Energy consortium 32 kilometres to the south of PEL 104 has significantly upgraded the Permian oil potential on the western edge of the Permian Cooper Basin where PEL 104 is located.
The extensive database of 2,117 kilometres of 2D seismic and 12 square kilometres of 3D seismic provides a strong initial database for the delineation of prospects within the block. Only 3 wells have been drilled in the Permit, with two wells with interpreted by passed gas pay and the other well with oil shows.
Twenty eight prospects and leads with Jurassic and Permian target horizons are indicated from preliminary mapping in the block with the chance for a major Permian stratigraphic pinchout trap in the western portion of the block.
A 150km seismic program to define drilling locations is to be acquired in December 2003 over two prospects interpreted to have the potential to contain up to 18 million barrels of oil , if oil is present.
A further indication of the high prospectivity of PEL 104 for oil and gas is provided by the successful farmout to industry participants of Victoria Petroleum's 80% of the cost of the first three years work program of 150 km of seismic and two wells to provide Victoria Petroleum with a 40% free carried no cost interest.
The successful farmout resulting from the industries perceived high prospectivity of the block will see drilling in PEL 104 well ahead of the permit commitment work program with planning currently underway for a March 2004 two well drilling program.
Victoria Petroleum NL is the Operator for PEL 104.
PEL 111
PEL 111 lies to the north of and adjacent to PEL 104 and covers 1,185 square kilometres. The Charo oil discovery is contained within the block. Victoria Petroleum's initial evaluation has identified at least 10 leads and prospects. The seismic survey planned for December 2003 in PEL 104 has now been extended to include PEL 111 to define a drilling location on the West Charo Prospect, interpreted to have the potential to contain up to 12 million barrels of recoverable oil, if oil is present.
It is intended to drill a well in the first half of 2004 following the two wells planned to be drilled in PEL 104 to the south.
Victoria Petroleum NL is the Operator for PEL 111.
PEL 115
PEL 115 is located on the south eastern edge of the Cooper Basin and covers 1,106 square kilometres. The permit is "broken up" into six separate areas and surrounds the oil and gas producing fields at Dullingari, Toolachee, Strzelecki, Della and Kidman with cumulative recoverable reserves of 104 million barrels of oil and 2.5 trillion cubic feet of gas.
The permit represents one of the lowest risk areas for exploration in the Cooper Basin. Initial studies of the available seismic data have identified over 30 leads and prospects with both oil and gas potential. The proximity to infrastructure suggests that the economic viability of any exploration success is assured.
Strong consideration is being given to a possible two well drilling program in mid 2004 to test two of the 28 prospects and leads defined by 3D Seismic within the permit.
Victoria Petroleum NL is the Operator for PEL 115.
PEL 86, 87, 89
These permits cover at total of 13,500 square kilometres and lie to the north and west of permits PEL 104, PEL 111 and PEL 88.
The permits cover a huge area of underexplored but prospective Eromanga Basin sediments. Drilling density is low with only three wells having been drilled, one with recorded oil shows.
PEL 88
COOPER/EROMANGA BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 10%
Victoria Petroleum NL has earned a 10% interest in Petroleum Exploration Licence PEL 88 covering an area of 4,987 square kilometres by contributing to the cost of the drilling of the Eucalyptus-1 well, which commenced drilling in late September 2003.
The Eucalyptus-1 well was drilled to a depth of 2,660 metres and tested the seismically defined Eucalyptus structure which had been interpreted to have the potential to contain recoverable reserves of up to 9 million barrels of oil, if oil was present.
Target horizons in the Eucalyptus-1 well were Jurassic and Triassic sandstones and some encouragement for the oil bearing potential of the Eucalyptus Prospect had been provided by the combined oil flow rates of 3,210 barrels of oil per day reported from the Triassic sandstone from the Santos James Oil Field discovery well, James-1, 14 kilometres to the west of the proposed Eucalyptus-1 well location.
Although oil shows were observed in the target Jurassic and Triassic sands, the sands were tight with the open hole drill stem test carried out recovering formation water.
The oil shows observed in Eucalyptus-1 along with the James Oil Field oil flows to the west provide encouragement for the potential for commercial reserves of oil to be discovered in the other prospects present in the permit.
Follow up prospects to the north of the James Oil Field and the Eucalyptus-1 well are the Acacia Prospect with the potential to contain recoverable oil reserves of up to 15 million barrels, if oil is present and the Casuarina Prospect with the potential to contain recoverable oil reserves of up to 18 million barrels, if oil is present.
Cooper Energy N.L. is the Operator for PEL 88.
QUEENSLAND
ATP 560P
EROMANGA BASIN, QLD
VICTORIA PETROLEUM N.L. INTEREST - MCIVER BLOCK - 50%
This 100 square kilometre sub block of permit ATP 560P is located in the central Eromanga Basin of southwest Queensland.
Evaluation of the future exploration potential of the prospects in the McIver Block is in progress.
Victoria Petroleum N.L. is the Operator for the McIver Block.
ATP 560P
EROMANGA BASIN, QLD
VICTORIA PETROLEUM N.L. INTEREST - UELEVEN BLOCK - 17 %
This 105 square kilometre sub block of permit ATP 560P is located in the central Eromanga Basin of southwest Queensland.
Further evaluation of the prospects and leads in the Ueleven Block is planned by the Operator for the Ueleven Block, Lakes Oil N.L.
ATP 589P
COOPER / EROMANGA BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTERESTS: -
60% (Barcoo Block);
24% (Springfield and Regleigh Block);
15% (Bright Spot Block)
Victoria Petroleum N.L. has varying interests in ATP 589P in accordance with the relevant farmouts in ATP 589P which covers an area of 15,301 square kilometres in the southwest Queensland portion of the Cooper / Eromanga Basin.
This Cooper / Eromanga Basin Permit is adjacent to the Energy Equity permit containing the 9.4 million cubic feet per day Bunya-1 gas discovery and the Oil Company of Australia 4 million cubic feet per day Thylungra-1 gas and condensate discovery.
Significant Jurassic oil potential has been interpreted to be present in ATP 589P based on the oil shows in the numerous wells drilled in the permit and the extensive seismic data grid. The 30 million barrel potential Barcoo Junction and 36 million barrel potential Moothandella prospects have been interpreted from this data, if oil is present.
Several other prospects and leads identified in ATP 589P (1) adjacent to the Barcoo Junction area and Moothandella are being been evaluated as potential future farmout drilling targets. The completion of the southwest Queensland to Mt. Isa gas pipeline confirm the strategic exploration value of the acreage position that Victoria Petroleum N.L. holds in this area of the Cooper / Eromanga Basin.
This Queensland permit along with the significant interest in PELA 104 in the South Australian portion of the Cooper/Eromanga Basin makes your company a significant player in the newly resurgent Cooper/Eromanga Basin.
A farmout agreement has been entered into with a private company which could see the drilling of the Moothandella and Trinidad North prospects in ATP 589P in 2004 following completion of the current round of Native Title negotiations.
Victoria Petroleum NL is the Operator for the Barcoo Block of ATP 589P, Part 1 and ATP 589P, Part 2.
ATP 736P, ATP 737P, ATP 738P, ATP 752P
COOPER/EROMANGA BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 80%
Permits ATP 736P, ATP 737P, ATP 738P, ATP 752P covering an area of 11,600 sq kms, were successfully applied for by Victoria Petroleum NL in early 2003 as part of the Company's strategy to become a major exploration player in the Cooper/Eromanga Basin in Queensland as well as South Australia.
Although exploration cannot take place in these permits until Native Title agreements are executed, expected to take place within the next 12 months, all of the permits are considered to be prospective for the discovery of oil and gas.
Permit ATP 752P, ex-Santos released acreage, is considered particularly prospective as it lies between the Triassic sands 4,200 bopd James Oil Field 15kms to the west and the Jurassic sand 897 bopd Cook Oil Field on the permits eastern boundary. Within the permit, the Yanbee-1 well is interpreted from wireline logs to have untested oil zones in the Jurassic Murta, Hutton Poolawanna sands.
Yanbee-1 will make an attractive exploration target when exploration drilling can commence in the permit, as the Hutton sand flowed at 897 barrels of oil per day in Cook-1, 2 kms to the east.
Victoria Petroleum N.L. is the Operator for the permit.
ATP 333P
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 100%
ATP 333P covers an area of 388 square kilometres on the western flank of the Bowen Basin in Queensland. The Reids Dome Gas Field is situated within ATP 333P and based on initial reservoir studies, a reserve of up to 1 billion cubic feet of gas is indicated for the three wells drilled on the Reids Dome Gas Field prior to November 1994.
Victoria Petroleum has resumed as the Operator of ATP 333P Joint Venture, and is planning to work up locations for a two well drilling program following farmout, in the northern part of the Reids Dome in 2004.
ATP 465P
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 8% (ATP 465P)
ATP 465P covers an area of 539 square kilometres within the central portion of the Bowen and Surat basins in Queensland.
Queensland Gas Company Limited (QGC), has drilled two Coalbed Methane (CBM) wells and one core hole in the Walloon Coal Measures of the Cherwondah Anticline, with the drilling of Trafalgar-1, Lawton-1 and the core hole Lawton-2.
Trafalgar No. 1 intersected 19.6 metres of coal within the four upper seams of the Walloon Coal Measures. Testing of the well during drilling produced gas at a rate of 20,000 cubic feet per day (570 cubic metres per day) and water production measured at 360 barrels per day. These results are typical of the initial flows from wells drilled in the Powder River Basin in the USA.
After dewatering, these wells produce significant gas flow rates. Trafalgar No. 1 demonstrated that the coals of the Walloon Coal Measures are gas saturated and the 360 barrels of water production indicates that the coals have good permeability. Gas saturation and good permeability are the essential criteria for successful coalbed methane production.
Lawton-1 had similar results, in which a flow test of interval 129-378m produced gas at rates up to 19,400 cubic feet / day.
Victoria Petroleum NL has an 8% contributing carried interest in the QGC Coalbed Methane drilling program.
Current results indicate the Walloon Coal Measures of ATP 465P/ATP 695P/PLA 171 have the potential to contain 350 billion cubic feet of recoverable Coalbed Methane gas reserves.
Interest in methane gas produced from coal deposits is increasing in Australia, particularly in the Bowen Basin. ATP 465P is adjacent to the Peat Coalbed Methane field, which is now producing sales gas into the pipeline linking it to Brisbane markets.
Victoria Petroleum will have a 4% free carried interest through this program.
Roma Petroleum NL is the Operator of the ATP 465P Joint Venture.
ATP 471P
WERIBONE BLOCK, SURAT BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 20.65%
This 12 square kilometre sub-block of the greater ATP 471P located in the Surat Basin in central Queensland contains the Yarrabend-5 gas well, which may be part of the Yarrabend Gas Field in adjacent licences to the north.
Due to recent ownership changes in the Joint Venture, the testing of Yarrabend-5 has been postponed indefinitely.
In the event that commercial rates of gas production are observed for Yarrabend-5, it is expected that the Yarrabend-5 would be tied into the existing production infrastructure and gas pipeline network 1.5 kilometres to the north.
Oil Company of Australia is the Operator in the Weribone Block.
ATP 574P
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 18.5% (Walloon Coals); 75% (Remainder)
ATP 574P covers an area of 616 square kilometres within the central and southern portions of the Bowen and Surat Basins in Queensland.
Queensland Gas Company Limited (QGC) drilled two CBM farmin wells, Pinelands-1 and 3, which flowed gas at up to 10,600 cubic feet of gas per day, and the Pinelands-2 core hole to further evaluate the coal absorption properties of the target Walloon Coal Measures.
Victoria Petroleum NL has an 18.75% interest in the QGC drilling program.
QGC's independent experts report of July 2000 states that the Walloon Coal Measures of ATP 574P have the potential to contain 650 billion cubic feet of recoverable coal bed methane gas reserves.
Victoria Petroleum NL retains its 75% interest in the deeper Jurassic and Triassic hydrocarbon potential of the permit as a review of existing well data shows that there may be by-passed oil in an old abandoned well in the permit, Giligulgul-1.
A 15km seismic survey carried out in February 2002 to further define the drilling location for North Giligulgul-1 and the areal extent of the North Giligulgul Prospect, confirms the potential for the prospect to contain up to 16 million barrels of recoverable oil updip from a 1964 Union Oil Co. well with strong oil shows, if oil is present.
Drilling of North Giligulgul-1 is planned to commence in the first quarter 2004 following the successful January 2003 farmout to a private company.
Victoria Petroleum N.L will have a 30% free carried interest through the drilling of North Giligulgul-1.
Victoria Petroleum NL is the Operator of the ATP 574P Joint Venture, with the CBM drilling program being managed by Queensland Gas Company Limited.
ATP 593P
SURAT / BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 60%
ATP 593P situated on the western margin of the Surat / Bowen Basin covers an area of 3,930 square kilometres. The primary targets in the permit are structural traps along the Merivale High trend which is the southern extension of the Merivale Fault system, along which the majority of the Denison Trough fields are located. Ten leads and prospects have been mapped along the Merivale High trend with the potential to contain up to 84 million barrels, if hydrocarbons are present.
Interpretation of the existing seismic data in ATP 593P identified the updip Don Juan Prospect as Hutton/Precipice sandstone four way dip closed structures, updip to the immediately adjacent strong residual oil shows in the Hutton / Precipice sandstones of Don Juan-1 and Flaneur-1.
Significant updip potential is considered present, with the Don Juan Prospect interpreted to have the potential to contain up to 4 million barrels of oil, if oil is present.
Victoria Petroleum N.L has entered into a farmin agreement with a private company whereby Victoria Petroleum N.L will have a 24% free carried interest through the drilling of the North Don Juan-1 to be drilled in November 2003.
Victoria Petroleum NL is the Operator of the ATP 593P Joint Venture.
ATP 608P
SURAT BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST, 74.22% (Rookwood Block); 60% (Remainder)
The permit covering an area of 6,400 square kilometres is located in the western Surat Basin adjacent to several oil fields and includes the zero edge of the Boxvale sandstone, the primary producing reservoir in the area. Several four way dip closures are mapped and ready for drilling.
A possible untested Boxvale sandstone zone in Rookwood-1 may be present, indicating a potential target of up to 12 million barrels in the Rookwood South Prospect, if oil is present.
A redrill of the Rookwood Prospect, Rookwood South-1, is planned for first quarter 2004, following North Don Juan-1 under a farmin agreement entered into with a private company. Victoria Petroleum N.L will have a 29.69% free carried interest through the drilling of Rookwood South-1.
Victoria Petroleum NL is the Operator of the ATP 608P Joint Venture.
PEL 57
OTWAY BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 10%
Victoria Petroleum N.L. has a 10% interest in PEL 57 which covers an area of 794 square kilometres in the onshore Otway Basin.
In May 2001, McNamara Park-1 was drilled in the adjacent permit PEL 72 without encountering hydrocarbons.
Exploration has now focussed on the north western portion of the area with the Honans Scrub seismic program of 60 kilometres over the Orana Prospect carried out in the second quarter of 2002.
Origin Energy is the operator of the PEL 57 Joint Venture and the adjacent Katnook/Hazelgrove producing gas fields.
APM 1178 (PRA 436 RENEWAL)
NEW CALEDONIA BASIN, NEW CALEDONIA
VICTORIA PETROLEUM N.L. INTEREST - 33%
The Participants in the former PRA 436 exploration effort are currently studying the potential for a second well on the Gouaro Prospect in the renewed Authority to Prospect for Minerals (APM) covering an area of 591 square kilometres.
The first well, Cadart-1, was drilled to a total depth of 1930 metres in January 2000. An open-hole test of the interval 1650-1930 metres produced gas to surface at a rate too small to measure. After a 36-hour flow test, the well bridged off and the gas flow died. Subsequent attempts to sidetrack the well and re-drill the prospective section were unsuccessful and the well was abandoned on 17th February 2000.
A ready market for gas to electricity from 6 million cubic feet per day up to 50 million cubic feet per day potentially increasing to 100 million cubic feet per day in 2003, at attractive gas prices is available for the adjacent industrial and nickel refining operations in New Caledonia.
Victoria Petroleum NL considers the frontier nature of oil and gas exploration in New Caledonia is more than offset by the extremely strong market demand for any locally discovered and produced hydrocarbons to replace the 2 million barrels of diesel and fuel oil imported each year to generate electricity for New Caledonia and the encouraging oil and gas shows and gas flow to surface from the Cadart-1 drilling.
On 12 June 2003 APM 1178 PS was granted as a precursor to a new PRA application to recommence exploration in New Caledonia.
Victoria Petroleum NL is the Operator of the APM 1178 Joint Venture.
CALIFORNIA
SAN JOAQUIN BASIN
VICTORIA PETROLEUM N.L. INTEREST: 3.75-100%
San Antonio Prospect Development Project, Salinas Basin
Victoria Petroleum NL Interest - 9.77% BPO, 7.3275% APO
During the year your company participated in the drilling of the San Antonio Prospect which resulted in the discovery of a cumulative net oil bearing interval of 314 metres in the target Vaqueros Sand and Monterey Shale horizons.
Fracture stimulation and testing operations to determine the ability of these target horizons to produce oil to surface at commercial rates were carried out during this year and resulted in the San Antonio-1 well being placed on pump production on 1 August 2003 with the well producing an average of 135 barrels of 38º API oil per day from a total fluid production of 300 barrels of oil and water per day.
This oil is being trucked to the San Antonio Oil Field production facilities, 12 kilometres to the north.
Further encouragement for the ability of the San Antonio fracture stimulated horizons to produce greater quantities of oil are provided by the adjacent production of 500 million barrels of oil from the San Ardo Field.
Further development drilling by the Operator Trio Petroleum including the drilling and fracture stimulation of a horizontal well bore in the oil producing reservoir horizon is planned for 2004.
Any additional oil and gas produced to surface from the San Antonio Oil Field in the future, that is in excess of what can be trucked to the San Antonio Oil Field, can utilise the oil and gas pipeline to the San Antonio Oil Field that runs within 400 metres of the San Antonio-1 well site.
Vallecitos Oil Field Development Project
Victoria Petroleum N.L. Interest - 22.5%
Initial development drilling on the Vallecitos West development area in was not successful as the Vallecitos West-1 development well was drilled too close to the bounding fault for the West Vallecitos development area.
Your company considers successful development drilling on the relatively shallow western and southern areas of the Vallecitos Oil Field has the potential to increase recoverable oil reserves by up to 5 million barrels and increase oil production at rates up to 1,200 barrels of oil per day assuming a successful 3 well development program.
The next Vallecitos development well is planned to be drilled in mid 2004 following a seismic survey in first quarter 2004. In the event of the discovery of the oil and gas reserves considered to be present in the Vallecitos development area, production from the new development wells can be tied very quickly in to the existing oil production facilities of the Vallecitos Oil Field.
Kingfisher Project
Victoria Petroleum N.L. Interest - 60%
The Kingfisher Prospect drilled in September 2001 by the Kingfisher-1 well, indicated a potentially hydrocarbon bearing zone within the Monterey Formation of 126 metres.
Further confirmation of the hydrocarbon potential of the upper Monterey zone was provided by the wireline logs which had similar characteristics to logs from oil producing Monterey zones on trend to the south.
Based on the very encouraging results obtained from the upper Monterey Formation while drilling Kingfisher No. 1 and post well valuation it is considered that Victoria Petroleum has a potentially significant Monterey Formation hydrocarbon asset. The realisation of the potential oil or gas reserves in the Monterey will require re-entry of the Kingfisher No. 1 well and horizontal drilling and fracture stimulation within the upper Monterey Formation.
Evaluation of the ability of the Monterey Formation in the Kingfisher area to produce gas from fractured horizontally drilled Monterey Formation is currently being provided by the adjacent Monterey horizontal drilling by Tri-Valley Oil & Gas Company at the Sunrise-Mayel No. 2H well which has reported encouraging gas shows.
The Sunrise-Mayel No. 2H was reported successfully fractured in the horizontal well bore drilled within the Lower Monterey Formation. Post-fracture operations flowback commenced in September 2002 with a flow of gas to surface from the Sunrise-Mayel No. 2H well of 2.5 million cubic feet per day.
Although this gas flow from the lower part of the Monterey Formation was not sustained, Tri-Valley Oil & Gas Company encouraged by this initial flow re-entered the Sunrise-Mayel well in June 2003 and has horizontally drilled and fracture stimulated an upper Monterey Formation Zone considered to be analogous to the target zone in the Kingfisher well. Preliminary results have produced an initial gas flow which Tri-Valley considers encouraging for a commercial gas flow.
Sustainable gas flows from this June 2003 activity will enhanced considerably the industry perceived potential of the Monterey Formation to produce significant commercial flows of gas in this part of the basin in the company's Kingfisher Prospect area and also the adjacent Raven and Condor Prospect areas.
Your company is well positioned in this area of Monterey interest with approximately 8,000 net leasehold acres.
Eagle Oil Pool Development Project
Victoria Petroleum N.L. Interest - 56.1%
During 2001, drilling of the company's Eagle Oil Pool Development Project resulted in the successful drilling of a 271 metre horizontal well bore leg into the Gatchell Sandstone oil reservoir, oil and gas productive at the rate of 223 barrels of oil per day and 0.7 million cubic feet per day in the initial Mary Bellocchi-1 well drilled in 1986.
Well site analysis indicated an interpreted 90 metres of oil pay to have been drilled. Regrettably technical difficulties encountered while drilling have prevented immediate testing of the interpreted oil pay.
With the completion of the drilling engineering program for Eagle-2, drilling of this step out development well, after farmout is planned for first half 2004 as the farmout efforts made during the last quarter have attracted local industry participants to investigate the opportunity to participate in the Eagle Oil Pool Development Project by the drilling of Eagle-2.
The Eagle drilling results to date confirm the Eagle Oil Pool Development Project is essentially low risk in geologic nature with the risks being of an engineering nature associated with deep horizontal drilling. The commerciality of the oil and gas reserves present in the Eagle Oil Pool is dependent on the oil and gas flow rates obtained from horizontal well bores drilled into the field.
The indicated potential recoverable reserve of up to 24 million barrels of oil and 62 billion cubic feet of gas for the Eagle Oil Pool make the Eagle Oil Pool an attractive target.
With the current price of oil around US$30 per barrel (Australia $44 per barrel) and the price of gas in Southern California in excess of US$4.00 per thousand cubic feet (Australian $6 per thousand cubic feet), with a strong likelihood of higher gas prices being revisited in the future, commercial success is most likely for any sustained oil and gas flows discovered in any of the wells in the California drilling program.
In order to maximise your Company's chances of a commercial success, the current California drilling program focus is on "close in" drilling adjacent to proven oil production as in the San Antonio, Eagle and Vallecitos areas.
NON-CALIFORNIA AREAS
Wyoming, Hal Oil Field
Victoria Petroleum N.L. Interest - 100% BPO, 75% APO
Victoria Petroleum NL participated in a low risk oil development workover in Wyoming which resulted in initial net oil production to the Company of 50 barrels of oil per day. A development well to drain an additional prossible 500,000 barrels of recoverable updip oil reserves is planned for mid 2004. .Further low risk development opportunities of this type are being pursued in the area.
Yours faithfully,
JOHN KOPCHEFF
MANAGING DIRECTOR
VICTORIA PETROLEUM N.L.
For information on Kestrel Energy, Inc. U.S. drilling and development activities visit the Kestrel Energy, Inc. website at www.kestrelenergy.com
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