QUARTERLY REPORT FOR THE PERIOD ENDING 31 DECEMBER 2006

EXPLORATION AND DEVELOPMENT

AUSTRALIA
USA

AUSTRALIA

EP 413/L14
ONSHORE NORTH PERTH BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 5%

EP 413 covers an area of 548 square kilometres and is situated in the North Perth Basin 7 kilometres to the south of the giant 400 billion cubic feet Dongara Gas Field.

EP 413 contains Victoria Petroleum's onshore North Perth Basin oil producing asset, the Jingemia Oil Field contained within Production Licence L14.

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 kilometres to the north east and the Roc Oil Cliff Head Oil Field, 15 kilometres to the west in the adjacent offshore permit WA-286-P.

The 2002 discovery well for the Jingemia Oil Field, Jingemia-1 intersected an oil column of between 29 and 33 metres in good reservoir quality Dongara Sandstone at 2,414 metres, confirmed by subsequent wire line logging and production testing.

Following the completion of Jingemia-1 as the first producer on the field at rates of up to 4,000 barrels of oil per day, six other wells development wells were drilled. Three wells were oil producers and three wells were water injectors drilled for reservoir pressure maintenance.

Currently oil production comes from Jingemia-4 and Jingemia-10 with oil production peaking in early 2006 at 5,200 barrels of oil per day.

To maintain oil production at high levels and to counter natural decline and operational challenges, Jingemia-8 was drilled in August 2006 to access bypassed up dip oil and to return production to 4,400 barrels of oil per day in the third quarter 2006. Jingemia -8 successfully intersected a 27metre oil column, was completed and placed on production in late October 2006 after a production test at a rate of 3,520 barrels of oil per day.

The results of the production tests of Jingemia-1, Jingemia-4, Jingemia-10 and Jingemia-8 strongly support the premise that a proved and probable recoverable oil reserve in the range of 4.4 to 4.8 million barrels fro the Jingemia Oil Field may be present. Additional development drilling on the 3D seismic data recorded in January 2005 and production history to meet these higher reserve numbers.

Your company considers 90% of these reserves are located within the EP 413 Jingemia production licence L14.

Total gross production from the L14 portion of the Jingemia Oil Field during the quarter was 190,091 barrels of oil at an average of 2,066 barrels of oil per day (117 barrels of oil per day net to Victoria).

Oil produced from the Jingemia Oil Field is being trucked to the BP Kwinana oil refinery 360 kilometres to the south.

Adjacent to the Jingemia Oil Field discovery, additional prospects, such as Drover and Moorba have been mapped and form attractive oil and gas 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 and is planned for drilling in mid 2007.

The Jingemia oil discovery is of considerable value to Victoria Petroleum as it elevated Victoria Petroleum into the ranks of Australia's oil producers and the excellent operating margins provide an associated quality cash flow.

Origin Energy is the Operator of EP 413.

WA 254 P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 9.31% (Part 2), 6.17% (Parts 1, 3 & 4)

The permit was renewed on 12 June 2006 for a further term of five years and comprises four graticular blocks of 324 square kilometres in area on the Legendre Fault Oil Field trend in the offshore Carnarvon Basin.

The permit contains Victoria Petroleum NL's first offshore oil discovery, Sage-1, drilled in April 1999 in the Sage Block 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 8.3 and 13.4 million barrels. The potential also remains for a future Sage Oil Field development and tie-in to any nearby development in WA-254-P Part 2 or adjacent permits, should a significant discovery be made in those areas or with the continued maintenance of current high oil prices.

Within the permit, the Operator Apache Energy has delineated the Doumonte Prospect, Hellybelly, Dr Zeus and Janus prospects as promising candidates for further exploration.

The Duomonte Prospect is the most advanced being a possible candidate for drilling in early 2007. The oil potential of the Duomonte Prospect ranges from 20 (mean) to 44 (P10) million barrels of recoverable oil, if oil is present. Target is the Legendre Formation sand at 2,500 meters depth in a faulted horst block on the high side of the regional Rosemary Fault. The prospect lies approximately 26 kilometres from the Woodside operated Legendre Oil Field.

The Dr Zeus Prospect is a mature M. Australis prospect with structural closure that is interpreted from seismic data to have the potential for a recoverable oil target in the range of 23 (mean) to 52 (P10), million barrels of oil, if oil is present. The prospect lies approximately 23 kilometres from the Woodside operated Legendre Oil Field.

The drilling of the Little Joe Prospect in the adjoining permit WA-208-P with 35% of the prospect lying within WA-254-P will be watched with interest when drilled by Santos, the operator for WA-208-P, possibly in the second half 2007.

Santos a participant in the Little Joe Prospect, is reported to be targeting an oil leg with estimated potential in the range of 26 to 50 million barrels of oil, if oil is present, following the drilling of a 76 metre gross gas column at Hurricane-1 during the first quarter of 2005.

The drilling of up to three wells is anticipated to take place in the permit in late 2007.

Apache Energy N.L. is the Operator of the WA 254 P Joint Venture.

WA 261 P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 12.5%

WA-261-P covering an area of 341 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 50 million barrel Stag Oilfield, currently producing approximately 10,000 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 oil 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 Oil Field 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 underlying Athol sands provided encouragement for the presence of further potential Athol sand oil pools in the permit to the east in the Hestia (formerly Vesta) Prospect.

The Hestia Prospect buttress-stratigraphic trap lies southward of the Ceres-1 location and south westwards of Gats. The C halosa sand only is targeted in the prospect which ranges in size from 11.5 (mean) to 23.2 (P10) million barrels of recoverable oil, if oil is present.

The primary target reservoir at Hestia-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 15 kilometres to the west.

The deeper Mungaroo Formation sands may form an additional potential target with the potential for a cumulative target of up to 50 million barrels of recoverable oil, if oil is present.

If the drilling evaluation of the Hestia Prospect planned for mid 2007 is successful, any subsequent Hestia field development could be tied back to the facilities of the nearby Stag Oil Field which Apache operates and has a majority interest.

Success at Hestia-1, located about half way between the Chamois Oil Field and the Stag Oil facilities, 22 kilometres to the north east, should also 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 Hestia oil discovery.

Apache Energy is the Operator of the WA-261-P Joint Venture.

WA-340-P
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 20%

Operator Strike Oil N.L. continued seismic studies on the permit to upgrade four Jurassic to Cretaceous age structural stratigraphic leads. Seismic was carried out in December 2005 over the Sherlock 23 million barrels (mean) to 45 million barrels (P10) of recoverable oil, if oil is present) and Peawah 8 million barrels (mean) to 14 million barrels (P10) oil recoverable, if oil is present) prospects to bring these prospects to drill status for possible farmout and drilling in 2007.

Strike Oil NL is the Operator of the WA-340-P.

EP 325
OFFSHORE CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 36.1%

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 up to 19 billion cubic feet Rivoli-1 Gas Discovery is ideally located.

To further define the potential size of the Rivoli Gas Field and associated Rivoli Trend, a 79 kilometre seismic survey was carried out in December 2005.

The seismic data is being processed and interpreted along with further engineering and economic studies to determine the feasibility of development of the Rivoli Gas Field trend to supply natural gas to Exmouth and the region as well as the exploration potential of a deeper underlying prospect, Rivoli Deep.

The permit was renewed during the year for a further five years from March 2006.

Strike Oil N.L. is the Operator of the EP 325 Joint Venture.

EP 443 & EP 434
CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 88.8% (EP 433); 69.6% (EP 434)

EP 433 and EP 434 previously EP 41 parts 1 and 2 respectively, cover an area of 387 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, currently in commercial production as Rough Range-1B, lying within EP 432 provides evidence for the presence of oil in the area.

Victoria Petroleum retains a 10% interest in two prospects within EP 432, a 69.6% interest in EP 434 and 88.8% interest in EP 433.

Current exploration activity is focused on the offshore portion of EP 433, following up potential oil and gas bearing prospects on tend and to the south west of the Rivoli Gas Field.

These prospects and their hydrocarbon target potentials are Rivoli South West (20 BCF) and Champion West (11 million bbls/21 BCF), if oil and gas are present.

Victoria Petroleum NL is the Operator of the EP 433 & 434 Joint Venture.

EP 359
CARNARVON BASIN, WESTERN AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST- 63.3%

EP 359 covers an area of 1,511 square kilometres situated in the Carnarvon Basin predominantly onshore on the Cape Range Peninsula and partially offshore in the Exmouth Gulf.

In September 2006, Victoria Petroleum and the EP 359 Joint Venture entered into a farmin agreement with Phoenix Resources PLC ("Phoenix") whereby Phoenix can earn a 50% interest in EP359 by paying 100% of both an Airborne geophysical and ground soil geochemical survey and exercising an option to drilling one well in the first half of 2007.

In the event Phoenix exercise its option to drill the well, Victoria Petroleum N.L. will have a 31.65% free carried interest through the drilling of the well to a capped cost of $1.5 million.

Significant hydrocarbon soil geochemical anomalies with associated seismic features have been identified by Empire Oil & Gas NL along the Rough Range - Bullara Trend within EP 359, as the Whaleback, Farnham, Anagonda and Sextant prospects and leads.

The up to 35 million barrel Paterson North, up to 20 million barrel Wogatti and up to 20 million barrel Cape Range East oil prospects, if oil is present, have been identified by Empire Oil & Gas NL as potential drilling targets in EP 359 for the Phoenix earning well.

The recommencement of production of oil at Rough Range at rates of up to 250 barrels of oil per day by Empire Oil NL in August 2005 in EP 432 immediately adjacent to EP 359 has highlighted the viability of even small fields in this region to be economic, given the strength of Australian oil prices.

Empire oil & Gas 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 4,746 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 operator ship for free carrying Pancontinental Oil & Gas N.L through the drilling of the first well in the permit.

Victoria Petroleum NL 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 following renewal of the permit and receipt of the necessary environmental and EPA government approvals and farm out.

Victoria Petroleum NL is the Operator of the EP 406 Joint Venture.

SOUTH AUSTRALIA

PEL 86, 87, 89, 94, 104, 111 AND 115
COOPER/EROMANGA BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM NL INTEREST - 40%

Victoria Petroleum now has the largest gross acreage position of 24,640 square kilometres 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 50,684 square kilometres.

With the 50% exploration success rate for the four well drilling program carried out in 2004 on Victoria Petroleum's South Australian Cooper Basin permit PEL 115, plus the current industry exploration success rate of 45% in the South Australian Cooper/Eromanga Basin for the ex-Santos acreage, exploration success is anticipated for the remaining late 2006/ early 2007 five well drilling program in permits PEL 104, PEL 111 and PEL 115.

The discovery of the Mirage and Ventura Oil Fields in late 2004, the current combined Mirage and Ventura oil fields gross production of 260 barrels of oil per day is a good sign for further commercial exploration success in PEL 115.

With the South Australian Cooper Basin as an immediate "core area" of exploration focus for the Company, a further 12 wells are planned to be drilled over the next 3 years, in addition to the planned six well firm permit commitment drilling program commencing in late 2006/early 2007.

The eighty prospects and leads identified to date in permits PEL 104, PEL 111 and PEL 115 provide an extensive range of drilling opportunities over the next three years.

With some twenty wells planned to be drilled in the next twelve 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 continue to enjoy exploration success in the forthcoming early 2007 drilling program in PEL 104/111/115. The September 2006 Growler-1 oil discovery in PEL 104, the first well drilled by Victoria Petroleum in PEL 104, is a particularly encouraging start.

Over the next six months, five exploration wells are planned to be drilled in PEL 104/111/115.

PEL 104

PEL 104 covers an area of 1,068 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 Santos operated 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 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 three wells have been drilled in the permit by the previous permit holder, Santos and partners, with two wells with interpreted by passed gas pay and the other well with oil shows.

A 150 kilometre seismic program to define drilling locations was acquired in February 2004.

Preliminary mapping of this new seismic data and reprocessed seismic data indicate some twenty nine prospects and leads with Jurassic and Permian target horizons, with the chance for a major Permian stratigraphic pinch out trap in the western portion of the block.

For these prospects and leads, an unrisked cumulative maximum (P10) recoverable oil and gas potential for the Birkhead/Hutton, Tirrawarra and Patchawarra targets of up to 30 million barrels of oil and 58 billion cubic feet of gas is interpreted, if oil and gas are present.

The Growler Prospect commenced drilling in September 2006 and rewarded the faith in the oil potential of the western apart of PEL 104 with an oil discovery in the Jurassic Birk head sands. On drill stem test, 32 barrels of oil were recovered over a two-hour flow period from a 19 metre gross oil column. Growler-1 was completed for a clean up flow and Extended Production Test in November 2006 to be carried out in February 2007.

The Growler Prospect as currently mapped has the potential to contain up to 4 million barrels of recoverable oil, if proved by testing and subsequent development drilling.

The Growler oil discovery is particularly significant as it is provides encouragement for the presence of a new area of oil production potential in the western part of PEL 104 and the adjacent PEL 111. Additional to the Growler Prospect, another three Jurassic prospects have been mapped in PEL 104 and form future attractive drilling targets.

One of these targets is the Wirraway Prospect, mapped as having the potential to contain up to 8 million barrels of oil, if oil is present is planned to be the next well to be drilled by Victoria Petroleum and its partners in PEL 104 in early March 2006 as weather conditions allow.

A further indication of the high prospectivity of PEL 104 for oil and gas subsequently proved by the Growler oil discovery, is provided by the successful farm out to industry participants of Victoria Petroleum's 80% of the cost of the first three years work program of 150 kilometres of seismic and two wells to provide Victoria Petroleum with a 40% near free carried no cost interest through the drilling of Wirraway-1.

Further support for the gas prospectivity of the southern part of PEL 104 was provided by the 2006 gas discoveries in the adjacent Great Artesian Oil and Gas Pty Ltd operated permit PEL 106.

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 1,178 square kilometres. The permit surrounds the Santos operated Charo Jurassic Oil Field production licences. The February 2004 seismic survey in PEL 104 was extended to include PEL 111 to define potential drilling locations for the several leads and prospects interpreted as present in the permit adjacent to the Charo oil discovery.

Preliminary mapping of the February 2004 seismic data and reprocessed seismic data in 2005 has identified at eleven leads and prospects, with an unrisked cumulative maximum (P10) recoverable oil and gas potential for the Birkhead/ Hutton, Tirrawarra and Patchawarra targets of up to 40 million barrels of oil and 39 billion cubic feet of gas, if oil and gas are present.

Additional seismic data of 30.8 kilometres was acquired in September 2005 to further define a drilling location for the Ascender Jurassic oil prospect, up dip and 16 kilometres to the south west of the Jurassic Charo Oil Field.

The Ascender Prospect has the potential to contain up to 9 million barrels of oil, if oil is present.

Additional Jurassic prospects Warhawk, Liberator and Gannett have been interpreted as potential drilling targets.

The Birkhead sand oil discovery at Growler-1 in PEL 104, the adjacent permit to the south is considered to have significantly upgraded the chances for exploration success in the western part of PEL 111.

The Catalina Prospect is mature for drilling. The proposed Catalina-1 will test the Catalina Prospect, interpreted from seismic data to have the potential to contain up to 14 billion cubic feet of gas, and 1 million barrels of oil, if oil and gas is present in target Permian Patchawarra Sands. The Catalina Prospect lies six kilometres to the north of the Santos group Fly Lake-Brolga Gas Field.

It is intended to drill two wells in PEL 111, Ascender in second quarter 2007, with Catalina drilling in mid 2007, in keeping with the permit's firm work commitment, subject to Joint Venture approval.

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 1,116 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 several leads and prospects with the potential to contain commercial recoverable reserves of oil and gas, if oil and gas are present. The proximity to infrastructure suggests that the economic viability of any exploration success is assured.

Five prospects with commercial petroleum potential and interpreted unrisked recoverable oil reserves in Jurassic and Permian targets, if oil is present, are ready to drill immediately.

A four well drilling program commenced in late August 2004 going through to mid December 2004. The first well, Hornet-1, defined by 3D seismic, encountering gas in the target Permian sands. Hornet-1 has been cased for production testing when a gas market has been identified.

Exploration drilling activity continued in the south-western part of PEL 115 with Ventura-1, where oil recoveries were made in the primary and secondary target sands, the Murta and Namur, with the Namur recovering oil at up to 352 barrels of oil per day.

Canberra-1 followed, testing a high risk but potentially high reward Permian sand stratigraphic gas trap, but hydrocarbons were not encountered.

The fourth well in the 2004 drilling program, Mirage-1, recovered oil from the Murta Formation on drill stem test.

Mirage Oil Field - PPL 213

Following on from the completion of the Mirage-1 and Ventura-1 oil discoveries for commercial oil production in mid January 2005, the PEL 115 Joint Venture commenced an Extended Production Test (EPT) in late April 2005 on Mirage-1 with a free flow rate of 274 barrels of oil per day. Subsequently a production licence, PPL 213 was granted over the Mirage Oil Field in August 2006.

Mirage-1 is currently producing on optimised beam pump operation at a rate of 260 barrels of oil per day following the initial "clean up" production rate of 372 barrels per day over the perforated 16 metre interval from 1,320 metre to 1,336 metres. Production rates on pump of up to 480 barrels of oil per day have been achieved during the year, since continuous production commenced on July 27, 2005.

An initial review of the Mirage-1 well 2D seismic geophysical mapping and production test data provides an interpretation for the Murta Formation of a net pay of 6 metres over a gross oil column of 17 metres with the Mirage structure mapped as full to spill point.

The interpreted recoverable oil reserve for the Mirage Oil Field using this information is a range of recoverable oil reserves from a mean of 1.3 million barrels up to a maximum of 3.6 million barrels.

The interpretation of the 3D data set suggest that Mirage-1 could be part of a larger feature covering approximately 20 square kilometres that includes the Lightning and Jindivik prospects five kilometres to the north east. Such an area has the unrisked possibility of containing up to 23 million barrels of oil in place, subject to the presence of suitable Murta sand reservoir.

Further exploration drilling was carried out first quarter 2006 to confirm this possibility with the drilling of three Mirage development wells and the drilling of the Lightning-1 and Jindivik-1 exploration wells.

The three production wells, Mirage-2, 3 and 4 drilled on the Mirage Oil Field in 2006 to increase oil production and cash flow were brought on production in December 2006.

Appraisal of the Mirage Oil Field commenced with Mirage-2 well located approximately 500 metres north east of Mirage-1.

The well commenced drilling on 31 January, 2006 and reached a total depth of 1,655 metres on 16 February, 2006. The objective Murta Formation exhibited oil shows and two cores were cut from 1,322 to 1,337 metres. The well was cased ready for production and is currently awaiting pumping equipment to determine the productivity of the well.

Mirage-3 located 400 metres north of Mirage-2 commenced drilling on 27 February 2006 and reached a total depth of 1,661 metres on 10 March 2006. The well had oil shows in the Murta Formation and a subsequent Drill Stem Test (DST) over the interval 1,317 - 1,300 metres recovered 27 barrels of oil over a two-hour period. The well was cased ready for production.

Mirage-4, located 700 metres south east of Mirage 1, commenced drilling on March 19, 2006 and reached a total depth of 1,447 metres on 30 March 2006. The well-encountered oil shows in the Murta Formation and a DST over the interval 1,319 - 1,330 metres recovered 3 barrels of oil cut mud. The well was cased for production.

In August 2006 fracture stimulation of Mirage-3 and Mirage-4 was performed to hopefully enhance production from the initially modest unstimulated flow rates observed during their respective open whole drill stem test. Both wells were tied into the Mirage Oil Field production facilities in late November 2006 contributing a combined production rate of 70 barrels of oil per day to the Mirage/Ventura production facilities.

Results of the Mirage Oil Field Phase 1 Appraisal Program

The three well appraisal program has confirmed the existence of oil saturated Murta Formation over the four wells drilled to date. Each of the wells appear to have a common Lowest Known Oil (LKO) which, after examination of 3D seismic date set coincides with the current 'spill point' mapped for the Mirage structure.

The LKO, when extrapolated onto depth mapping of the 3D seismic data, indicates that there is the possibility that a closed area of some 20 square kilometres exists broadly to the east of the current producing Mirage Oil Field.

This area has been termed the "Greater Mirage-Lightning" structure. Initial evaluation of the oil bearing nature was provided by the drilling of the Lightning-1 and Jindivik-1 wells. Lightning-1 drilled in April 2006 encountered oil shows in the Murta and recovered two barrels of oil cut mud on test. The well was cased and suspended as a potential Murta oil well subject to further evaluation.

Jindivik-1 drilled in May 2006 recovered a small volume of water currently interpreted to be associated with the oil water contact at the Jindivik location and was plugged and abandoned.

Lightning-1 is interpreted to prove the existence of oil in the Murta horizon as is present at Mirage and it can be extrapolated that the Murta Formation in the whole area of 'Greater Mirage' could be oil saturated and have the possibility of containing up to a maximum unrisked 23 million barrels of oil in place, subject to suitable Murta reservoir sand development. Further analysis and study is required and is currently in progress as the drilling program has shown a highly variable Murta reservoir from good reservoir at Mirage-1 to poor reservoir at Jindivik-1.

The "Greater Mirage-Lightning" area drilling results may represent a considerable recoverable reserve net to Victoria's 40% working interest. If the "Greater Mirage-Lightning" field is proven, then it is likely an ongoing development program over several years will be required to fully exploit the reserves.

With the successful Mirage three well development program and the subsequent fracture stimulation operation and the placement of the Mirage-3 & 4 development wells on artificial lift with beam pumps, gross oil production for the Mirage Oil Field is currently at 270 barrels of oil per day. Further development drilling is being considered for mid 2007 to increase production from the Mirage Oil Field.

Ventura Oil Field - PPL 214

Extended Production Testing of the more modest reserve but commercial Ventura-1 oil well commenced September 2005 with the installation of a surface pumping unit providing production of 160 barrels of oil per day. Subsequently a production licence, PEL 214 was granted over the Ventura Oil Field in August 2006.

The Ventura-1 well flowed clean 54 degree API oil at rate of 84 barrels of oil per day on a ½ inch choke during the "clean up" production test phase from an interpreted net pay of 2 metres over the perforated oil column interval of 1,365 metres to 1,376 metres in the McKinlay/Namur.

The Ventura-1 well commenced 24 hour operations on 11 October 2005. The well is currently producing 29 barrels of oil per day.

The interpreted recoverable oil reserves for the Murta McKinlay/Namur formation of the Ventura Oil Field using this information range from a mean recoverable reserve of 150,000 barrels of oil up to a maximum of 640,000 barrels of oil.

For the Mirage and Ventura oil fields a cumulative mean unrisked potential of up to 1.4 million barrels of recoverable oil has been interpreted from the current seismic and production data.

Exploration

Exploration in the first quarter of 2006 has focussed on the northern part of PEL 115 in the Nappacoongee High area and the southern part of PEL 115 in the Burruna - Lightning structural high area.

PEL 115 - Northern Part

Interpretation of an extensive reprocessed seismic and well control data base in the northern part of PEL 115 has generated the Jurassic Tomcat and Skyhawk oil prospects and the Permian Delta, Hurricane, and Harrier gas prospects.

The Tomcat Prospect is interpreted from seismic data to have the potential to contain up to a total 6 million barrels of recoverable oil, if oil is present in the Jurassic Namur Sandstone formation in an upthrown fault trap on the southern flanks of the Nappacoongee High.

Confidence in the oil potential of the Tomcat Prospect was provided by the interpreted oil water contact observed in the down dip Santos drilled Wilpinnie-3 well which free flowed 785 barrels of oil per day on test before going to water. A maximum of 4.2 million barrels of recoverable oil potential is mapped as present in PEL 115, if oil is present.

As the Tomcat Prospect is interpreted as being shared with the adjoining permit PPL 93 held by Santos and partners, the PEL 115 parties entered into a farmout agreement with PPL 93 parties, whereby the PEL 115 parties would earn a 50% interest in the Tomcat Farmout block of PPL93 by paying 100% of the cost of Wilpinnie-4, 200 metres up dip from Wilpinnie-3 and proving commercial production greater than 50 barrels of oil per day from Wilpinnie-4.

The PPL 93 parties under the terms of the Tomcat Farmout agreement also have an option to farmin to the portion of the Tomcat Prospect in PEL 115 following the drilling of Tomcat-1 in PEL 115.

Preparations for the drilling of Wilpinnie-4 on the Jurassic Tomcat Prospect with a target recoverable reserve potential of up to 6 million barrels of oil, if oil is present, commenced in December 2006 with site preparations for Wilpinnie-4 being carried out in the adjacent permit PPL 93 by Santos.

Wilpinnie-4 was drilled in early January 2007 by Santos under the terms of the Tomcat Farmout agreement with the discovery of an 18 mete gross oil column, 5 metres up dip to Wilpinnie-3. The results of the drilling of Wilpinnie-4 were as follows:

Wire Line and Test Results Summary

Initial analysis of the wire line logs, side wall core, FMT data and fluid samples indicates an oil zone of gross 18 metres in the mid Namur sandstone over the interval 1,476 - 1,494 metres RKB with an interpreted oil water contact at 1,494 metres RKB.

DST-1 (1476m to 1487m RKB) recovered approximately 24 barrels of oil during the main four hour flow period. This influx equates to a flow rate of 144 BOPD. The packer seat was lost during start of main flow period.

DST-2 (1468m to 1489m RKB) Tool plugged immediately upon opening. Misrun

Repeat formation testing near the base of the interpreted oil column at 1,493m recovered a sample of oil and mud filtrate.

Core-1 (1472m to 1487m RKB) was cut in the primary objective the Jurassic Mid Namur Sandstone and exhibited good oil shows and fluorescence in the mid Namur Jurassic sands.

Wilpinnie-4 was cased and suspended as an oil production well for completion and production testing in the near future as weather conditions allow.

The PEL 115 parties are preparing a drilling location up dip to Wilpinnie-4, Tomcat-1 for drilling in PEL 115 in the second quarter of 2007, as weather conditions allow.

The Skyhawk Prospect is mapped as a down thrown fault trap on the northern side of the Nappacoongee High with the unrisked maximum potential to contain up to 37 million barrels of recoverable oil, if oil is present. Twenty three million barrels of recoverable oil potential is mapped as present in PEL 115, if oil is present.

PEL 115 - Southern Part

In the southern part of PEL 115, interpretation of the 3D Mirage acquired in late 2005 defined the Lightning and Jindivik prospects.

The Jindivik and Lightning structures lie to the east of Mirage. Jindivik is approximately 2 kilometres to the north-east while Lightning lies about 3 kilometres to the east.

The Lightning Prospect was drilled in April 2006. Oil shows over the 14 metre interval 1,317 to 1,331 metres were encountered in the Murta. An open hole drill stem test over the interval 1,312 to 1,325.6 metres recovered 1.9 barrels of oil cut mud.

A deeper Permian Patchawarra target did not contain any hydrocarbons.

The recovery of oil from the Murta in Lightning-1 is encouraging for the presence of the interpreted Greater Mirage Murta oil pool.

The well was cased and suspended for future fracture stimulation of the Murta oil zone and subsequent production.

The Jindivik Prospect was drilled in May 2006. A small amount of water was tested from the Murta oil show. The well was plugged and abandoned.

Victoria Petroleum's 40% interest in the Mirage and Ventura Oil Fields provided a net share during the quarter of 117 barrels of barrels of oil per day from gross oil production for the quarter of 27,081 barrels of oil.

In these times of strong oil prices, this oil production provides a good cash flow.

Victoria is also pleased that the Mirage Oil Field appears to a have a recoverable oil reserve range potential of 1 million up to 3.6 million barrels of oil, a field size on the high side of the range of oil fields discovered in the southern part of the South Australian Cooper Basin by the other successful oil explorers and producers, Santos Limited, Stuart Petroleum Ltd and Beach Petroleum Ltd. Following the Mirage and Ventura Oil Field discoveries, Victoria Petroleum is confident that further oil discoveries will be found on this highly prospective Murta oil trend in the southern part of the permit by the 2006 exploration drilling program.

This Murta oil trend extends from west to east, through the Ventura-Mirage-Lightning-Murta structures into the Voodoo-Coobowie High area. Seismic reprocessing is planned for this trend to determine possible future exploration drilling targets.

The additional stratigraphic Murta potential in the greater Mirage-Burunna-Lightning structure, if proved by further drilling, will provide additional potential reserves.

Victoria Petroleum has achieved a 100% oil discovery success rate with the first well in the 2007 drilling program in the permit adjacent to PEL 115. This is a highly satisfactory exploration success rate in keeping with the phenomenal South Australian Cooper Basin "new players" overall exploration success rate of 45%.

Victoria Petroleum N.L. and its partners look forward to further exploration success in the first half of 2007 in keeping with the 50% exploration success rate for the permit achieved in 2004.

Victoria Petroleum NL is the Operator for PEL 115.

PEL 86, 87, 89

These permits cover a total of 13,566 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 under explored but prospective Eromanga Basin sediments. Drilling density is low with only three wells having been drilled, one with recorded oil shows. Data review of the sparse seismic and well control in these permits continues.

Victoria Petroleum NL is the Operator for PEL 86, 87, 89.

PEL 88
COOPER/EROMANGA BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 10%

Victoria Petroleum NL has a 10% interest in Petroleum Exploration Licence PEL 88 covering an area of 5,002 square kilometres.

The oil shows observed in wells drilled within the permit, such as Eucalyptus-1 along with the adjacent Santos James Oil Field oil flows provide encouragement for the potential for commercial reserves of oil to be discovered in the prospects present in the permit.

The Santos James Oil Field discovery well, James-1, reported a combined oil flow rate of 3,210 barrels of oil per day from Triassic Sandstones, a target in the southern part of PEL 88.

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.

Very large structures associated with the Haddon Downs surface anticline in the north of PEL 88 are also of exploration interest, with the potential to contain significant recoverable oil reserves, if oil is present.

Following on from the July 2004 133 kilometre 2D seismic survey, the Kitson Prospect was drilled in May 2005 in the northern part of PEL 88 without encountering hydrocarbons in the target Jurassic.

Exploration focus in the permit then shifted to the south where the Geordie Prospect and the Transit Prospect were mapped as drilling targets in the southern part of PEL 88, primarily due to their close proximity to the James Oil Field area.

Geordie-1 was drilled in February 2006 to a total depth of 2,476 metres. Minor oil shows were observed and the well plugged and abandoned.

The Transit Prospect is interpreted to have the potential to contain a mean recoverable 13 million barrels of oil, if oil is present in Jurassic and Triassic targets.

Victoria Petroleum remains confident that an oil pool with be discovered in PEL 88 with more drilling.

Cooper Energy N.L. is the Operator for PEL 88.

PEL 94
COOPER/EROMANGA BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 15%

PEL 94 covering an area of 2,710 square kilometres lies in the southern part of the Cooper Basin adjacent to PEL 113 containing the Harpoono Murta Oil Field.

Current exploration in the permit is focussed on the northern part of the permit adjacent to the southern part of PEL 113 containing the recent Harpoono-1 Murta Formation oil discovery by Stuart Petroleum and Cooper Energy.

The Harpoono Oil Field lies on the northeast-southwest trending Dunoon Horst, which straddles the border of PEL 113 and PEL 94. Recent exploration success in the Harpoono-2 and 3 step out wells provides encouragement for hydrocarbon prospectively in the adjacent PEL 94.

A 3D seismic survey was acquired over the Dunoon Horst in August 2005 and determined the Tunkallila and Telowie prospects with a cumulative unrisked potential to contain up to 13 million barrels of oil, if oil is present, as suitable for drilling.

It is anticipated that weather conditions will allow the drilling of theses two back to back wells to commence in mid February 2007.

Beach Petroleum Limited is the Operator for PEL 94.

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 NL 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 794 (ex ATP 589P)
COOPER / EROMANGA BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTERESTS:

ATP 794P (Part 1) - 60%

ATP 794P (Part 2) comprised of:
BARCOO BLOCK - 35%
SPRINGFIELD AND REGELEIGH BLOCK - 24%
BRIGHT SPOT BLOCK - 15%
BARCOO JUNCTION BLOCK - 12%

Victoria Petroleum NL has varying interests in ATP 794P, in accordance with the relevant farm outs in ATP 794P which covers an area of 15,301 square kilometres in the southwest Queensland portion of the Cooper / Eromanga Basin. The permit was granted for a 12 year term from 1 November 20005.

This Cooper / Eromanga Basin Permit is adjacent to the 9.4 million cubic feet per day Bunya-1 gas discovery and the 4 million cubic feet per day Thylungra-1 gas and condensate discovery.

Significant Jurassic oil potential has been interpreted to be present in ATP 794P based on the oil shows in the numerous wells drilled in the permit and the extensive seismic data grid.

Several other prospects and leads identified in ATP 794P (2) on the Canaway Ridge have been identified as potential drilling targets.

Victoria Petroleum N.L. has entered into a farmin agreement with Bow Energy Ltd. whereby Bow Energy will earn a 25% interest in the Barcoo Block of ATP 794P by free carrying Victoria Petroleum N.L. for its 35% interest through a program of 500 kilometres of seismic reprocessing and the drilling and testing of a well within twelve months of the granting of ATP 794P.

As part of Bow Energy's farmin to ATP 794 Part 2, Bow has assumed the role of operator for ATP 794 and is carrying out this role in an exemplary manner.

Banff-1 was selected by Bow Energy Ltd to be the Bow earning well and drilled in late September 2006 without encountering hydrocarbons.

The presence of the southwest Queensland to Mt. Isa gas pipeline adds to the strategic exploration value of the acreage position that Victoria Petroleum NL holds in this area of the Cooper/Eromanga Basin.

This Queensland permit along with the significant interest held by Victoria Petroleum NL in the South Australian portion of the Cooper/Eromanga Basin makes Victoria Petroleum NL a significant player in the newly resurgent Cooper/Eromanga Basin.

Bow Energy Ltd is the Operator for and ATP 794P, Part 1 and the Barcoo, Springfield, Regeleigh Blocks and Bright Spot blocks of ATP 794P, Part 2.

ATP 736P, ATP 737P, ATP 738P
COOPER/EROMANGA BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 80%

These permits are subject to native title and will be granted following a successful conclusion of Right to Negotiate agreements with traditional owners.

ATP 752P
COOPER/EROMANGA BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 25%

Permits ATP 736P, ATP 737P, ATP 738P, ATP 752P covering an area of 11,600 square kilometres, 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. This strategy has been successfully achieved.

Following the granting of ATP 752P for a 12 year term on 1 August 2006, a permit considered to be very prospective for the discovery of oil and gas, planning for a program of seismic reprocessing, acquisition and exploration drilling commenced.

Permit ATP 752P, ex-Santos released acreage is comprised of the Barta Block in the north and Wompi Block in the south.

Victoria Petroleum N.L. entered into a farmin agreement with Bow Energy Ltd. whereby Bow Energy earned a 30% interest in ATP 752P by free carrying Victoria Petroleum N.L. for its 50% interest through a program of 500 kilometres of seismic reprocessing and the drilling and testing of a well.

As part of Bow Energy's farmin to ATP 752P, Bow has assumed the role of operator for the permit and is carrying out this role in an exemplary manner.

Subsequent to the Bow Energy farmin, Avery Resources has farmed into ATP 752P.and will provide Victoria Petroleum with a 25% free carried interest through 100 kilometres of new 2D seismic and the drilling of 5 wells made up of three wells in the Wompi Block and two wells in the Barta Block.

Bow Energy Ltd is the Operator for ATP 752P

Wompi Block

Geophysical mapping of the southern part of ATP 752P, the prospective Wompi Block, indicates the presence of ten low risk prospects and leads adjacent to very high flow oil fields with a cumulative unrisked P10 recoverable potential of up to 31 million barrels of oil, if oil is present. Adjacent oil flow rates of up to 3,112 barrels of oil per day have been recorded by Santos.

Three wells with a cumulative unrisked maximum target of up to 13 million barrels of recoverable oil, if oil is present, Marracoonda-2, Nora-1 and Gamma-1 are to be drilled in the first quarter 2007.

Marracoonda-2 commenced drilling in early 2007 and encountered oil shows in the target basal Birkhead sands with the recovery of a minor amount of oil and filtrate on drill stem test. Evaluation of the oil shows and drill stem test results has been suspended until weather conditions allow the resumption of operations at Marracoonda-2.

Barta Block

The Barta Block is considered particularly prospective as it lies between the Triassic sands 4,200 barrels of oil per day James Oil Field 15 kilometres to the west and the Jurassic sand 897 barrels of oil per day Cook Oil Field on the permits eastern boundary.

Within the Barta Block, the Yanbee-1 well is interpreted from wire line logs to have untested oil zones in the Jurassic Murta, Hutton and Poolawanna sands. Yanbee-1 will make an attractive exploration target when exploration drilling can commence in the permit, as the Hutton sand flowed 897 barrels of oil per day in Cook-1, 2 kilometres to the east of ATP 752P.

Geophysical mapping of the northern part of ATP 752P, the Barta Block, indicates the presence of ten high oil flow potential prospects with a cumulative P10 recoverable oil reserve potential of up to 35 million barrels, if oil is present.

A 3D seismic survey in conjunction with the adjoining Santos Cook oil field 3D will commence on the Barta Block in October 2006 to further define the interpreted extensions of the Cook Field into the Barta Block.

The Up dip Yanbee Prospect with an interpreted potential to contain up to 8 million barrels of recoverable oil in multiple horizons, if oil is present, is the largest prospect and will be most likely proposed for drilling as one of the first two wells in mid 2007 along with the Vancouver North Prospect with its potential target of 7 million barrels of oil, if oil is present.

Bow Energy Ltd is the operator of ATP 752P

PL 231
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 40%

PL 231, (previously ATP 333P) covers an area of 231 square kilometres on the western flank of the Bowen Basin in Queensland. The Reids Dome Gas Field is situated within PL 231 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.

The 1993 appraisal well in the Reids Dome Gas Field, drilled by Victoria Petroleum, Aldinga North-1, flowed gas at a rate of 1.2 million cubic feet per day.

Victoria Petroleum has assigned operatorship of the PL 231 Joint Venture under the Farmin Agreement with White Sands Petroleum (WSP). Under the farmin agreement WSP will drill the Primero-1 well to 2,700 metres in the northern part of the Reids Dome twinning the original shallow gas discovery well, AOE-1.

Victoria Petroleum has a 40% free carried interest through the drilling and testing of the well.

WSP commenced the drilling of Primero-1 in late June 2006. Early exploration success was encountered in July 2006 with Primero-1 testing a gas flow of 2.8 million cubic feet per day from a shallow gas sand at 150 metres.

Drilling of the deeper target which encountered numerous oil and gas shows in the original heavily mud invaded AOE-1was carried out. Additional gas zones have been intersected in the Reids Dome Beds around 1500 metres.

With the completion of drilling at Primero-1 following the resumption of operations in the future, an extensive testing program will continue to determine the reserves of the Reids Dome Gas Field both at the shallow and deeper horizons with a view to the potential commercialisation of the gas field, subject to sufficient gas reserves being proved.

White Sands Petroleum Ltd is the Operator for PL 231.

PL 171
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 20%

PL 171 replacing the previous ATP 465P covers an area of 173 square kilometres within the central portion of the Bowen and Surat basins in Queensland.

Queensland Gas Company Limited (QGC) has drilled two Coal bed 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 coal bed methane production.

Lawton-1 had similar results, in which a flow test of the interval 129-378 metres produced gas at rates up to 19,400 cubic feet / day.

Current results indicate the Walloon Coal Measures of PL 171 have the potential to contain 350 billion cubic feet of recoverable Coal bed Methane gas reserves.

Interest in methane gas produced from coal deposits is increasing in Australia, particularly in the Bowen Basin. PL 171 is adjacent to the Peat Coal bed Methane field, which is now producing sales gas into the pipeline linking it to Brisbane markets.

The Permian Triassic gas potential of the Cherwondah Anticline as seen from the gas flow of 250,000 cubic feet of gas per day from North Cherwondah-1 is the subject of a farm out entered into with White Sands Petroleum. Under this farm out, White Sands Petroleum proposes following the drilling of Reids Dome to re-enter the well and horizontally drill the target Triassic gas sands to earn a 60% interest in any Production Licence granted over the Sub Jurassic section.

Victoria Petroleum will have an 8% free carried interest through the drilling of this well, a test of the ability of horizontal drilling to increase gas flow rates in the known gas bearing Triassic sands.

Roma Petroleum NL is the Operator of the PL 171 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.

Mosaic Oil NL is the Operator of the Weribone Block.

ATP 574P
BOWEN BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 18.75% (Walloon Coals); 30% (Base Walloons to Base Jurassic); 75% (Triassic-Permian)

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.

QGC's independent expert's 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 has an 18.75% interest in the Walloon Coals.

Within the Base Walloons to Base Jurassic section of the permit, North Giligulgul-1 was drilled in February 2004 by Oilex N.L. under a farmin agreement with Victoria Petroleum, which provided Victoria Petroleum with a 30% free carried interest.

Minor oil shows were encountered in the target Jurassic Precipice Sandstone and the well was plugged and abandoned.

During 2005 the JV partners entered into a partial farm-out of the Jurassic portion of the permit with White Sands Petroleum Pty Ltd (WSP) to do a work over on the Conloi-1 oil well. The farm-out covers a small area of 40 acres (16.2 ha) centred on the Conloi-1 well to earn 60% of our interest. The farm out involves a work over of the Conloi-1 well and is aimed at reperforating the formerly producing interval to gather pressure and fluid data that will be an important data point for the assessment of the remainder of the blocks oil potential.

In the event that there is no production, the well will be plugged and abandoned at no cost to the JV. Operations to prepare the Conloi-1 well for re-perforating over the oil bearing Jurassic oil sequence commenced in July 2005 and have been subsequently suspended until the appropriate work over equipment is available. Operations by WSP are planned to resume in 2007 following the completion of operations at North Cherwondah-1 in the adjacent permit to the north.

Victoria Petroleum NL retains a 70% interest in the deeper Triassic and Permian sequence in the permit where a major structure with significant Permian gas potential is interpreted.

Victoria Petroleum N.L. 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 - 24%

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.

Evaluation of potential drilling targets continued during the quarter.

Bow Energy Ltd. is the Operator of the ATP 593P Joint Venture.

ATP 608P
SURAT BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST, 29.688% (Rookwood Block); 24% (Remainder)

ROOKWOOD BLOCK

The permit covering an area of 3,281 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.

Victoria Petroleum N.L. entered into a farmin with Oilex N.L., whereby Victoria Petroleum N.L received a 29.69% free carried interest through the drilling and completion of Rookwood South-1.

The interpreted untested Boxvale sandstone oil zone in Rookwood-1 was confirmed by the successful drilling of Rookwood South-1 in September 2004 by Oilex N.L.

A Drill Stem Test in the Boxvale Sandstone recovered oil in the pipe at an interpreted rate of 352 barrels of oil per day. Rookwood South-1 was completed for production testing in late November 2004.

A subsequent four well appraisal drilling program indicated that the Rookwood Oil Field is probably limited to the area surrounding Rookwood South-1 and restricted to a 2 metre sandstone unit at the top of the Boxvale Sandstone.

Oilex as Operator commissioned a reservoir and production engineering work to determine the potential sustainable production of the Rookwood Field, including any remedial action that may be taken to improve production flow rates. Poor seismic data coverage over the area limits the benefit of further mapping of the Rookwood Field.

The current production rate from Rookwood South-1 well is approximately 12 barrels of oil based on 14 hours of pumping every 2-3 days. Reservoir pressure continues to decline at a rate conforming to prediction. To the end of June 30, 2006 the field has produced 9,724 barrels of oil. All of the oil produced is currently being sold to Inland Oil Refinery.

STRATTON BLOCK

An independent geophysical and geologic review of ATP 608P commissioned by Oilex has identified structural prospects on ATP 608P to the southeast of the Rookwood Block. The Pinnacle Prospect complex had been identified as a mapped structure with a closure of about 8.4 km2. A smaller prospect named Pinnacle on the broader Pinnacle structure was a clear follow up target to any success at West Pinnacle-1.

Bow Energy N.L. entered into the permit with a 20% interest obtained from Oilex N.L. to participate in the drilling of West Pinnacle Prospect-1

West Pinnacle-1 was drilled in October 2005 to a depth of 1,595 metres without encountering any hydrocarbon shows in a poorly developed primary target reservoir.

The Stratton Block has several other prospects and leads including the Stratton North Prospect located up dip from Stratton-1. Stratton-1 had excellent oil shows over a Jurassic aged Basal Evergreen sandstone which appears not to have been properly tested at the time of drilling.

Bow Energy Ltd. is the Operator for ATP 608P.

ATP 805P
SURAT BASIN, QUEENSLAND
VICTORIA PETROLEUM N.L. INTEREST - 15%

ATP 805P covers an area of 555 square kilometres in the western Surat Basin.

Two previously drilled wells within the ATP 805P area, Donga-1 and Donga-2 had small oil recoveries in Triassic aged sandstone above economic basement, indicating that oil has migrated into the permit. The Riverslea Oil Field is located adjacent to the area and the recent Rookwood Oil discovery is located to the northwest in the immediately adjacent permit ATP 608P.

Victoria Petroleum earned a 15% interest in the permit by contributing to the cost of Donga-3 drilled in October 2005.

Donga-3 was drilled to a depth of 1,630 metres and from a drill stem test of the Moolayember oil sand at a depth of 1,580-1,582.5 metres recovered 23 barrels of light 45oAPI oil and 39 barrels of drilling mud filtrate and water.

The Donga-3 oil discovery was brought into production on a long term test in February 2006. Following this test to determine from the pressure decline curve and the production rate the potential reserve volume and the sustainable production rate the well was shut-in. Results to date are being evaluated.

The average daily rate of production was 20 barrels of oil per day during the 30 day production test with 601 barrels of oil produced from Donga-3.

The Donga Prospect is interpreted from current seismic data to have the potential to contain between 0.7 and 0.9 million recoverable barrels of oil, with 8 to 9 wells required to drain the Field.

Donga-4 was drilled in the fourth quarter 2006 and intersected the oil sands of the Donga Oil Field. Evaluation of the well and its contribution to the Donga Oil Field reserves is in progress.

Bow Energy Ltd. is the Operator for ATP 805P.

PEL 57
OTWAY BASIN, SOUTH AUSTRALIA
VICTORIA PETROLEUM N.L. INTEREST - 10%

Victoria Petroleum NL has a 10% interest in PEL 57, which covers an area of 407 square kilometres in the onshore Otway Basin, adjacent to the Origin Energy operated Katnook/Hazelgrove producing gas fields.

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.

A geochemical survey was carried out in early 2006 and has delineated several anomalous areas coincident with seismically mapped structures. A well is planned to be drilled in the second quarter 2007 after farmout.

Lakes Oil N.L. is the Operator of the PEL 57 Joint Venture.

UNITED STATES OF AMERICA

TEXAS

FLOUR BLUFF GAS FIELD DEVELOPMENT PROJECT
ONSHORE GULF COAST BASIN
VICTORIA PETROLEUM N.L. INTEREST: 12.5 - 16.67%

Victoria Petroleum NL through its wholly owned Denver based subsidiary Victoria Petroleum USA, Inc. ("Victoria Petroleum") in early December 2004 entered into a Purchase and Sale Agreement to acquire a 12.5% Working Interest "WI" (8.75% Net Revenue Interest "NRI") in the relatively low risk, large, Flour Bluff Gas Project, onshore/offshore Gulf Coast, Texas, USA.

The Flour Bluff Gas Project is located adjacent to Corpus Christi in Nueces County on the Gulf Coast, South Texas. Project leases are some 41 gross square kilometres (10,200 acres) in extent encompassing both adjacent onshore and offshore production units within a larger Area of Mutual Interest.

The exploration and development program commenced in early February 2005 has increased production and enlarged the current Flour Bluff Gas Field 92.5 BCF (billion cubic feet) Proved, Probable and Possible (3P) reserve base of 96.9 billion cubic feet equivalent (BCFe) to an estimated total potential of 210 BCFe from multiple gas bearing sands between 1,980 and 3,500 metres in the large regional structure that underlies the Flour Bluff Gas Field leasehold sands.

During the October 2005 quarter, Victoria Petroleum N.L. through its USA subsidiary continued its participation in the first phase of the redevelopment of the old giant gas field at the Flour Bluff on the southern outskirts of Corpus Christi, Gulf Coast, Texas. The three fields (west Flour Bluff, East Flour Bluff and Pita Island) are estimated to have produced between 1.2-1.3 trillion cubic feet of gas and 60 million barrels of oil (mainly as condensate) from more than 40 separate reservoirs in the Oligocene Frio Formation, mostly in shallow depths above 6,800 feet (2,100 metres) at collective production rates of up to 110 million cubic feet of gas per day.

The initial first phase Flour Bluff Gas Project development program from February 2005 to January 2006 was completed with the drilling of EFB E-10, EFB D-19, D-24 wells and the Petty #2 frac.

Production at 5 million cubic feet per day at the end of the first year of development operations, January 2006, was in line with the independent expert Ryder Scott development plan schedule for the project.

The Phase 2 development program will commence with the drilling of Flour Bluff-1 on the West Flour Bluff Gas Field, planned for the second half 2007. Flour Bluff-1 is the first well of an 8 to 9 well program over the next 18-24 months targeting 48.9 billion cubic feet gas equivalent of proved, probable and possible (3P) recoverable reserves. By the end of the development program, production from the field could be up to 20 million cubic feet per day. The commencement date of the drilling program and the rate of drilling is influenced by the availability of drilling rigs and partner approval.

GAS PRODUCTION/CASH FLOW

Gas production is currently 2 million cubic feet a day equivalent.

Total field output of 40 million cubic feet per day equivalent is planned for 2009 based on the current Ryder Scott estimated production profile.

With development success at Flour Bluff, Victoria Petroleum N.L will be well positioned to benefit from gas sales to meet the strong US domestic demand for natural gas, now and into the future.

The Flour Bluff Gas Project has all the hallmarks of being a significant cash flow generator for Victoria Petroleum NL in the U.S.

The acquisition of the interest in the Flour Bluff Gas Project is a continuing part of Victoria Petroleum's strategy to build up low risk oil and gas development projects in the energy hungry U.S.A. oil and gas market.

As part of this strategy the Flour Bluff Gas Field Development Project joins the Eagle Oil Development Project in California as a potentially very significant US project for Victoria Petroleum NL.

TEXAS
MARGARITA GAS EXPLORATION PROJECT
ONSHORE GULF COAST
VICTORIA PETROLEUM N/L/ INTEREST: 37.5%

Project Margarita, is the first Project of the Wandoo Joint Venture consummated in December 2005. Twenty five leads and prospects have been recognised in prospective stratigraphic/structural settings at various depths ranging from 1,000 to 4,000 metres in 428km2 of onshore Gulf Coast, 3D seismic.

Historic production and plays in the project area and environs are Frio and Vicksburg sands at less than 1,800 metres depth. Deeper Yegua and Wilcox sands between 1,800 and 4,000 metres are under explored and only 4 wells deeper than 2,400 metres have been drilled in the area of seismic coverage and were drilled pre 3D seismic.

Several low risk Frio shallow targets around 1 BCF recoverable with attractive economics have been identified.

A number of deeper targets have high impact Wilcox sands targets with 100 to 208 BCF gas potential.

The Wilcox targets are on the same trend where Strike Oil has recently enjoyed exploration success to the north east of the Margarita area.

During the quarter proposed land acquisition by leasing and further reprocessing of the 3D seismic coupled with screening by a new airborne TEM system for ranking and high grading prospects was undertaken.

Drilling commenced in December 2006 on the first well in the six well, back to back drilling program on low risk shallow prospects with cumulative recoverable reserve potential of 1 to 3 billion cubic feet of gas, if gas is present. This shallow drilling program will be a precursor to the commencement of a drilling program planned for June 2007 on deeper prospects with much larger potential recoverable gas reserves in the range of 60 to 200 billion cubic feet.

CALIFORNIA
SAN JOAQUIN BASIN
VICTORIA PETROLEUM N.L. INTEREST: 3.75-20%

With the current price of oil around US$60 per barrel (Australia $82 per barrel) and the price of gas in Southern California in excess of US$6.00 per thousand cubic feet (Australian $7.89 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 Eagle, San Antonio, and Vallecitos areas.

Eagle Oil Pool Development Project
Victoria Petroleum N.L. Interest - 20%

Within the prolific oil and gas producing San Joaquin Basin of California, centred on Bakersfield, Victoria Petroleum holds a 20% interest in the Eagle North-1 appraisal well that commenced drilling early January 2006 on the Eagle Oil Pool Development Project.

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.

A 14 kilometre seismic strike line was shot over the Eagle Oil Pool in May 2004 and has further defined the up dip extent of the Eagle Oil Pool and the Eagle North-1 drilling location.

The Eagle drilling results to date and the new strike line 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. For a successful horizontal well, flow rates of up to 1,000 barrels of oil per day are anticipated.

The indicated potential recoverable reserve of up to 34 million barrels of oil and 58 billion cubic feet of gas for the Eagle Oil Pool make the Eagle Oil Pool an attractive development target.

With the new seismic data, the completion of the drilling engineering program for Eagle North-1 and the August 2005 signing of a rig contract, drilling of this 400 metre step out appraisal well is planned for late November / early December 2005.

At Eagle North-1, an initial vertical "pilot" well was drilled to a depth of 4,200 metres with wireline logs confirming the presence of oil bearing sand at 4,080 metres. Production casing was then run and the well production tested for five days with the recovery of approximately 2 litres of crude oil and no water. The failure of the perforating guns to perforate the lower Mary Bellocchi Gatchell Sand or a local low permeability zone may have contributed to the low oil flow. Following production testing, several sidetracks were required to build a medium radius curve to allow 4 ½ inch liner to be set into the top of the lower Mary Bellocchi oil sand. A 300 metre horizontal well commenced drilling with good oil shows encountered over 177 metres of the lower Mary Bellocchi oil sand until drilling operations stopped at 4,386 metres.

The horizontal well bore was then partially cased and a test attempted without success due to the mechanical failure downhole.

The production test is being carried out over 177 metres (580 feet) of the lower Mary Bellocchi Gatchell oil sand in the horizontal well bore over the interval from 4,209 - 4,386 metres (13,810 - 14,390 feet).

The interval being tested consist of 72 metres (235 feet) of lower Mary Bellocchi Gatchell oil sand cased behind the 4-1/2" liner from 4,209 - 4,291 metres (13,810 - 14,045 feet) and the 105 metres (345 feet) of open hole lower Mary Bellochi oil sand from 4,281 - 4,386 metres (14,046 - 14,390 feet) which is being tested as a barefoot completion out of the base of the 4-1/2: liner at 4,386 metres (14,045 feet).

A deep workover rig arrived on location in late September 2006 to resume testing of the well as the oil sand remains untested. It was not possible to retrieve the unfired casing guns in the cased hole. The well has been suspended and left in a condition satisfactory for a future re-entry and side track to allow the oil zone behind casing to be retested.

Victoria Petroleum is now evaluating re-entry of the existing well or a new well to redrill horizontally the Gatchell oil zone known to be oil productive at the adjacent Mary Bellocchii-1 well, 150 metres to the southeast. Subject to the availability of a suitable drilling rig and partner approval, operations could commence in late second quarter 2007.

In the event of significant oil production rates, a 3D seismic survey will be acquired to determine the location of an indicated nine further development wells.

Victoria Petroleum N.L. is the operator for the Eagle Oil Pool Development Project.

San Antonio Prospect Development Project, Salinas Basin
Victoria Petroleum N.L. Interest - 5.5%

West San Antonio Project
Victoria Petroleum NL Interest - 5%

In 2003 Victoria Petroleum N.L. 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 in 2003 and resulted in the San Antonio-1 well being placed on pump production on 1 August 2003 with the well producing an initial oil flow of 135 barrels of 38º API oil per day from a total fluid production of 300 barrels of oil and water per day.

Oil production was subsequently suspended during 2003 after a decline in oil flow to a non-commercial rate at 2003 oil prices. With the current high oil prices, the Operator, Trio Petroleum is now carrying out a further stimulation program over the oil bearing Monterey Shale horizon and recommenced intermittent oil production in April 2006. Subsequent to this event, oil production has been suspended. The operator has proposed the drilling of an additional well on the San Antonio Project in the second quarter of 2007.

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.

Any 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.

Fairgrounds Prospect
Victoria Petroleum NL Interest - 15% wi

Victoria Petroleum N.L. particpated in the drilling of the Fairground Prospect in September 2006 in the Kern County Fairgrounds, Bakersfield. The well encountered oil shows while drilling in the target Miocene sands over four discrete intervals providing a cumulative interval of 8 metres of potential oil pay in good sand reservoir over the interval from 1,562 - 1,582 metres with accompanying good drilling break and gas show.

The well was subsequently drilled to its total depth of 1,667 metres,wireline logs run to evaluate the oil shows and the well was cased for cased hole production testing. The well has not produced any significant oil flow on production testing during the quarter and it is anticipated the well may be declared non commercial.

Trio Petroleum is the operator of both San Antonio projects and the Fairgrounds Prospect.

Vallecitos Oil Field Development Project
Victoria Petroleum N.L. Interest - 22.5%

Victoria Petroleum N.L. 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 late 2007 following a possible 3D seismic survey in mid 2007. In the event of the discovery of the oil and gas reserves, production from the new development wells can be tied very quickly in to the existing oil production facilities of the Vallecitos Oil Field.

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. The Hal Oil Field is currently producing 10 barrels of oil per day. A development well to drain an additional possible 500,000 barrels of recoverable updip oil reserves is being considerd for mid 2007.

OTHER ASSETS

SAMSON OIL & GAS LIMITED
VICTORIA PETROLEUM N.L. INTEREST - 5.3%

Victoria Petroleum N.L. has a 5.3% interest in Samson Oil & Gas Limited an ASX Listed Company which is an active oil and gas development and production company with its producing properties in the Rocky Mountain region of Wyoming, Oklahoma and New Mexico.

Cash and Current Investments of Victoria Petroleum N.L.

Cash and current investments as at December 31, 2006 of $9.3 million to fund planned exploration and development drilling activities, as follows:

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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