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PAPUA NEW GUINEA
AUSTRALIA
NEW CALEDONIA
USA
MIDDLE EAST
KESTREL ENERGY, INC.
PPL 106 - Papuan Basin, Papua New Guinea
Victoria Petroleum Interest (Direct and Indirect, after farmout) - 5.46%
Preparations for the drilling of Tumuli-1 continued and by the end of the quarter were well advanced. Farmin agreements were also executed with Woodside Petroleum Limited, Bligh Oil and Minerals NL, Trans-Orient Petroleum Limited and Farpuri (PNG) Ltd and have been submitted to the PNG authorities for approval. These farmins have resulted in a 5.46% interest in Tumuli-1 and PPL 106 (and its successor, PPL 213) for Victoria Petroleum NL, through its direct interests in Victoria Exploration (PNG) Pty Ltd and indirect interests in Kestrel Energy, Inc and Farpuri (PNG) Ltd
Exploration work in PPL 106 during the quarter by the Operator Santos, continued to be focused on the interpretation of the Karuka Seismic Survey over the Tumuli Prospect. The results of the Karuka Seismic Survey indicate the Tumuli Prospect has a most likely case potential to contain 352 million barrels of oil up to a maximum of 882 million barrels of oil, if oil is present.
The Tumuli Prospect is a major target for drilling in the eastern portion of PPL 106 and is planned to be drilled in late March 1999 to a total depth of 2150 metres following the January-February 1999 drilling of Stanley-1 in PPL 157 to the south. Victoria Petroleum N.L. will have a 5.46% near free-carried interest through the drilling of Tumuli-1.
PPL 202 - Papuan Basin, Papua New Guinea
Victoria Petroleum Interest (Direct and Indirect) - 11.3%
The PPL 106 Joint Venture consortium was granted PPL 202 in March 1998. The permit is immediately to the south of PPL 106 and covers an area of 3,831 square kilometres.
Interpretation of the existing 1989 seismic data in PPL 202 and PPL 157 to the south, have confirmed the presence of an Elevala type prospect at the Toro Sandstone horizon for the Stanley Prospect. In addition to containing an Elevala type Toro sandstone target, a shallow Paleocene / Upper Cretaceous sandstone target has been identified for the Stanley Prospect from the seismic mapping.
Encouragement for the oil prospectivity of the shallow Paleocene target is provided by the strong, untested oil shows seen in Paleocene sands in Kiunga-1, 24 kilometres to the southeast of the Stanley Prospect. The Paleocene formation has produced oil at rates of 1,610 barrels per day in the Puri-1 well 250 kilometres to the east.
A separate Paleocene structure, the Champion Prospect, has been mapped in PPL 202 on trend and four kilometres northwest of the Stanley Prospect with an interpreted potential to contain up to 385 million barrels of oil, if oil is present.
The Stanley Prospect is significant to PPL 202 as approximately 20% of the 955 million barrel Stanley Prospect is present in PPL 202, providing a nett target in PPL 202 of 175 million barrels of oil, if oil is present.
Stanley-1 commenced drilling in mid-January 1999 in PPL 157, 608 metres east of the PPL 157/PPL 202 permit boundary. The drilling results of Stanley-1 will provide an effective free-carried drilling test of the approximately 20% portion of the Stanley Prospect that extends into PPL 202 at no cost to the PPL 202 Joint Venture in which Victoria Petroleum N.L. has a 11.3% direct and indirect interest.
Following the drilling of Stanley-1, the drilling rig will move to PPL 106 to drill the Tumuli Prospect.
Victoria Petroleum N.L. has a 10.5% direct and indirect interest in the predominantly offshore Carnarvon Basin Permit EP 325, following farmout to Petroz N.L.. EP 325 covers an area of 2,461 square kilometres in the Exmouth Sub-basin of the central Carnarvon Basin and contains the Rivoli Gas Field.
Exploration in EP 325 has focused on the western area of EP 325 where several prospects and leads including White Opal, Cooper and Whalebone have been interpreted as present by the previous Operator, Mobil Exploration and Production Pty Ltd.
The White Opal Prospect, in the north western part of EP 325 is interpreted from seismic data to have the most likely case potential to contain up to 247 million barrels of oil or 880 billion cubic feet of gas in the target Triassic sands, if hydrocarbons are present. An onshore drilling location for the Triassic White Opal Prospect has been defined, with the drilling of White Opal-1 to a depth of 2,900 metres planned for the second half of 1999, subject to environmental and government approvals.
The 1 trillion cubic feet Macedon Gas Field, 22 kilometres to the north, the 20 billion cubic feet Rivoli Gas Field, 18 kilometres to the south and the Leatherback Triassic oil discovery, 22 kilometres to the north-east respectively of the White Opal Prospect are encouraging for the presence of further Triassic gas and oil fields in the area.
The February 1999 drilling of the Triassic Chelonia Prospect, 8 kilometres to the east of EP 325 in the adjacent permit EP 342 by Apache Energy, may have a positive impact on the prospectivity of the White Opal Prospect.
Chelonia-1 is targeting a Triassic fault block, similar to the White Opal fault block, that has been seismically interpreted to have the potential to contain up to 150 million barrels of oil, if oil is present
The company, through a farmout to Petroz N.L., will have a 10.5% direct and indirect near free-carried interest through the drilling of White Opal-1 through its direct 10% interest and its shareholding in Kestrel Energy, Inc
EP 359 - Carnarvon Basin, W.A.
Victoria Petroleum N.L. Interest (Direct And Indirect) - 20.1%
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.
Melanie-1 was drilled to a total depth of 1422 metres in July 1998, with a minor gas show observed in the target Birdrong Sandstone. A strong gas show was observed in an underlying thin Jurassic limestone stringer. The gas shows in Melanie-1 are encouraging for the future gas prospectivity of this area of EP 359. Evaluation of the future exploration potential of EP 359 will continue to determine future possible drilling locations in EP 359.
EP 41, Parts 1 and 2 - Carnarvon Basin, W.A.
Victoria Petroleum N.L. Interest - 90%
EP 41 covers an area of 794 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, lies within EP 41 Part 3, adjacent to EP 41 Part 1.
The most recent exploration activity in EP 41 was the Rough Range East seismic survey carried out in mid 1995. Incorporation of this seismic survey into the existing seismic and geology data base of EP 41 indicates modest reserve size prospects are present on the Rough Range fault trend and its extension into the Exmouth Gulf. Further interpretation of the data is planned to determine future possible drilling locations in EP 41, Parts 1 and 2.
Victoria Petroleum N.L. is the Operator of the EP 41 Joint Venture.
WA-254-P - Offshore Carnarvon Basin, W.A.
Victoria Petroleum N.L. Interest (Direct and Indirect) - Part 2 (7.1%), Parts 1, 3 & 4 (4.6 %)
Victoria Petroleum N.L. has a 7.1% direct and indirect interest in the Part 2 Sage Block and a direct and indirect 4.6 % interest in the remaining area of WA-254-P.
The permit comprises four non-contiguous graticular blocks covering 322 square kilometres on the southern extension of the Legendre trend which contains the Legendre and Talisman Oil Fields. Three prospects and six leads have been interpreted as present in the permit.
Exploration during the last quarter has focused on the seismic definition from 3D seismic data of the Sage and Argos Prospects and the Taurus, Sirius and Erebus leads.
The Sage Prospect in WA-254-P Part 2, lies 35 kilometres south of the 150 million barrel Wanaea Oil Field, and 4 kilometres to the north-east of the Saffron-1 oil and gas discovery in WA-1-P held by BHP / Woodside / Santos / Apache.
The Sage Prospect is interpreted as a potential updip oil accumulation to the 9 metre interpreted residual oil column in Rosemary-1 and is interpreted to have the potential to contain up to 33 million barrels of oil in target Cretaceous and Jurassic sands, if hydrocarbons are present. The Sage Prospect is considered mature for drilling, and is planned to be drilled in April 1999.
Within WA-254-P Part 3 the Argos Prospect, on trend and 4 kilometres southwest of the Legendre Oil Field, has been interpreted from recently acquired 3D seismic as a prospect mature for drilling
The Argos Prospect is interpreted from the 3D seismic data to have the potential to contain up to 17 million barrels of oil in target Cretaceous sands, if hydrocarbons are present. The Argos Prospect is planned to be drilled in May, 1999.
Encouragement for the future gas and oil exploration potential of WA-254-P is provided by the recent Reindeer and Caribou Gas Field discovery, estimated to contain 400 billion cubic feet of gas. The Reindeer Gas Field discovery, 7 kilometres to the east of WA-254-P, Part 1, has identified a new Lower Jurassic and Triassic gas play which may be present in WA-254-P. The commercialisation of the Legendre Oil Field following its extension with the recent Legendre South-1 oil discovery provides an opportunity for the commercial development of any Sage or Argos oil discovery made, with production a possibility as early as 2000/2001.
WA-261-P - Offshore Carnarvon Basin, W.A.
Victoria Petroleum N.L. Interest - 3.16% (Direct and Indirect)
WA-261-P covering an area of 299 square kilometres is located immediately to the south and adjacent to the Apache Energy / Santos Limited Permit, WA-209-P containing the 45 million barrel Stag Oil Field. The Stag Oil Field commenced production in June 1998 with planned production of 25,000 barrels of oil per day.
Several leads and prospects with targets at the same producing horizon as the Stag Oil Field and deeper Jurassic, Triassic and Permian structural targets are seismically interpreted to be possibly present in WA-261-P.
Further seismic analysis is planned for 1999 to define a possible drill inventory for drilling a well in the year 2000.
Apache Energy is the Operator of the WA-261-P Joint Venture.
ATP 333P - Bowen Basin, Queensland
Victoria Petroleum 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 four wells drilled on the Reids Dome Gas Field up to December 1994.
Following the experimental twenty five kilometre seismic program carried out in June 1994, interpretation has shown that seismic has the potential to delineate the gas bearing sands of the Reids Dome Gas Field.
A 25 kilometre seismic survey to extend the seismic coverage and to define additional shallow gas sand drilling locations was carried out in July 1995 and indicates the potential for a shallow gas reserve of up to 20 billion cubic feet of gas if gas is present. An analysis of the results of the only deep well drilled on the Reids Dome, Reids Dome-1 drilled to 2760 metres in 1954, indicates that additional significant gas potential of up to 330 billion cubic feet of gas may be present in the Reids Dome structure, if gas is present.
A further two to three shallow wells, or one deep well, are planned for drilling in the second half of 1999, subject to farmout.
The Reids Dome Gas field lies 60 kilometres from the Roma-Gladstone gas pipeline and requires an indicated minimum gas reserve of 10 billion cubic feet of gas to be economic.
ATP 465P - Bowen Basin, Queensland
Victoria Petroleum N.L. Interest - 20%
Future exploration in ATP 465 will focus on delineating the gas potential of the Cherwondah Anticline in the deeper Permian sands of the Gyranda Formation, the potential of horizontal drilling to enhance gas production rates in the Triassic tight-gas Clematis sandstones and the coal-bed methane potential of the north-eastern area of the permit adjacent to the adjoining CRA Peat Gas Field.
ATP 471 P - Weribone Block - Surat Basin, QLD
Victoria Petroleum Interest - 20.65%
The Yarrabend No.5 gas well remains suspended with the Joint Venture considering a completion and testing program in the near future.
ATP 560P, Eromanga Basin, QLD
Victoria Petroleum Interest (Direct and Indirect) - McIver Block - 46.3%
McIver-1 was drilled in May 1996 to a total depth of 1405 metres to test the McIver Prospect situated on the Canaway Ridge. Excellent reservoirs were drilled in the target Hutton and Basal Jurassic Sandstones, but hydrocarbons were not encountered. Further evaluation of the remaining prospects and leads in the McIver Block is planned.
Victoria Petroleum N.L. is the Operator for the McIver Block.
ATP 560P, Eromanga Basin, QLD
Victoria Petroleum Interest - Ueleven Block - 17 %
Ueleven-1 was drilled in November 1997 to a total depth of 1189 metres. Excellent reservoirs were drilled in the target Hutton sandstone but hydrocarbons were not encountered. Further evaluation of the remaining prospects and leads in the Ueleven Block is planned.
Lakes Oil N.L. is to Operator for the Ueleven Block.
ATP 574P - Bowen Basin, QLD
Victoria Petroleum Interest - 75%
The permit contains the shut in Conloi Oil Field. Significant deeper gas potential is considered present in the deeper Triassic and Permian Sands and is currently being evaluated.
ATP 589P - Cooper/Eromanga Basin, QLD
Victoria Petroleum Interest (Direct and Indirect) - varying 15-60%
The ATP 589P 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 OCA 4 million cubic feet per day Thylungra-1 gas and condensate discovery.
In late 1997, under the Icon Oil N.L. ATP 589P Farmin, Icon Oil drilled Springfield East-1, Regleigh North-1 and Brightspot-1. The drilling resulted in a non commercial gas discovery at Springfield East-1 which flowed gas at a rate of 200,000 cubic feet per day from a Permian Sandstone.
Although the gas flow from Springfield East-1 was non commercial, this result is considered encouraging for the Permian gas potential of this area of ATP 589P.
Significant Jurassic oil potential has also been interpreted as present in ATP 589P in the Barcoo Junction area, based on the oil shows seen in the numerous wells drilled in the permit.
Barcoo Junction-2 was drilled in June 1996 to a total depth of 2620 metres to test the Barcoo Junction Prospect in the north-western area of ATP 589(1). Barcoo Junction-2 was prognosed prior to drilling as an updip test of the oil and gas shows observed in the Hutton and Basal Jurassic sands in Barcoo Junction-1, drilled in 1980.
Barcoo Junction-2 encountered good oil shows in the target Hutton and Basal Jurassic sandstones.
Further geological and geophysical evaluation of the well results of Barcoo Junction-2 to determine the significance of the oil strong shows encountered in the Hutton and Basal Jurassic sandstones, indicates Barcoo Junction-1 and Barcoo Junction-2 were drilled out of depth closure. The Barcoo Junction North Prospect has been interpreted to be updip of Barcoo Junction-1 with the potential to contain up to 36 million barrels of oil in the target Hutton and Basal Jurassic sandstones, if oil is present.
Subject to farmout, Barcoo Junction North-1 is planned to be drilled in the first half of 1999.
The Moothandella-4 Westbourne Prospect has been seismically identified to have the potential to contain up to 23 million barrels of oil in interpreted Westbourne channel sands, if the sands and oil are present.
The Trinidad North Prospect situated on the northern portion of the Canaway Ridge, has been seismically interpreted to have the potential to contain up to 19 million barrels of oil in target Hutton and Basal Jurassic sandstones in an anticlinal structure, if oil is present.
Several other prospects and leads have also been identified in ATP 589P (1) including the Sedan Prospect to the north of Brightspot-1.
The continuing Jurassic oil and Permian gas discoveries in this area of the Cooper / Eromanga Basin confirm the strategic exploration value of the acreage position that Victoria Petroleum N.L. holds area of the Cooper / Eromanga Basin.
Victoria Petroleum NL is the Operator for the Barcoo Block of ATP 589P.
ATP 593P - Surat Basin, QLD
Victoria Petroleum Interest - 60%
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 potential reserves calculated at 84 million barrels, if hydrocarbons are present.
Interpretation of the existing seismic data in ATP 593P identified the Heather Downs and Heather Downs West Prospects, as Hutton/Precipice sandstone four-way dip-closed structures updip to the strong residual oil shows in the Hutton/Precipice sandstones in Don Juan-1 and in Flaneur-1, 25 kilometres to the north.
Heather Downs-1was drilled in July 1997 on the Heather Downs Prospect to a depth of 835 metres, with a residual oil show observed in a basal Birkhead sandstone. Significant updip potential is considered present, with the Heather Downs Prospect interpreted to still have the potential to contain up to 20 million barrels of oil, if oil is present.
An updip test of the Heather Downs Prospect is planned for the second half of 1999, subject to farmout and rig availability.
Victoria Petroleum N.L. is the Operator for ATP 593P.
ATP 608P Surat Basin, QLD
Victoria Petroleum Interest - 34.22% in Rookwood Block; 60% in Remainder
Victoria Petroleum N.L. was granted this permit and Operatorship on 30 November, 1994 and prior to farmout held a 60% interest in the whole permit. The permit is located on 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.
Tarmoola-1 drilled in December 1995 encountered an excellent Boxvale Sandstone target reservoir section without any hydrocarbon shows and was plugged and abandoned.
Future exploration will focus on the definition of those structures in the permit most likely to have been sited on past oil migration pathways.
EPP 24 - Otway Basin, SA
Victoria Petroleum Interest - 6.67%
EPP 24 contains the Troas gas discovery of up to 418 billion cubic feet of gas. Several other major structures remain untested in EPP 24. A 314 kilometre seismic program was carried out in December 1997, and is currently being interpreted by the Operator, Boral Energy.
Victoria Petroleum N.L. considers the offshore Otway Basin to have all the parameters to be a future major oil and gas province.
PEL 57 - Otway Basin, SA
Victoria Petroleum Interest - 10%
Interpretation of the 16 kilometre Mulcrest Seismic Survey, carried out in the first quarter of 1998 indicates the Mulcrest Prospect may have a potential target size of up to 120 BCF of gas. Further seismic is planned for 1999 to determine a possible drilling location on the Mulcrest Prospect.
The ongoing gas discoveries by Boral in the adjacent Katnook-Haselgrove area to the north of PEL 57, confirm the hydrocarbon potential of this portion of the onshore Otway Basin.
PRA 436; New Caledonia
Victoria Petroleum N.L. Interest - 50%
Victoria Petroleum N.L., by paying 50% of the October 1995, 49 kilometre seismic program over the Gouaro Anticline, has the option to earn a 50% interest in PRA 436 by paying 50% of the cost of drilling a well in the fourth quarter of 1998.
The Gouaro Anticline is a surface anticline estimated from seismic interpretation of the 1995 Gouaro seismic data to have the most likely case potential to contain 592 billion cubic feet of gas or 295 million barrels of oil up to a maximum of 1.5 TCF or 1 billion barrels of oil, if hydrocarbons are present.
Cadart-1 is planned to be drilled to a depth of 1500 metres in June 1999, subject to farmout.
A major ready market for gas of from 6 million cubic feet per day up to 55 million cubic feet per day at very attractive gas prices is available in the adjacent industrial and Nickel refining operations in New Caledonia.
Victoria Petroleum N.L. and Kestrel Energy, Inc. through their respective U.S. subsidiaries each have a 50% interest in the petroleum exploration assets of the San Joaquin Basin Project (SJBP) area, located in the central San Joaquin Basin, California, USA.
Victoria Petroleum N.L. holds a 26.5% interest in Kestrel Energy, Inc. a U.S. Nasdaq listed company.
The petroleum exploration assets in the SJBP area, consists of petroleum leasehold exploration properties in the San Joaquin Basin and a data base including approximately 25,000 kilometres of seismic and well data for 3,800 wells, both analog and digital over the SJBP area of 21,000 square kilometres.
Exploration in the San Joaquin Basin is now focused on structural plays adjacent to wells with oil and gas show or hydrocarbon recoveries. Exploration plays of this type should have a reduced exploration risk compared to the higher risk stratigraphic plays drilled in the past twelve months.
As part of this new exploration focus, the Kingfisher and Raven Prospects have been geologically and geophysically defined to the drilling stage as attractive gas exploration targets.
The Kingfisher Prospect is a seismically defined upthrown fault block prospect with rollover into the fault with an adjacent down dip well with strong oil shows. The prospect is considered to have the potential to contain gas and oil reserves up to a maximum of 78 billion cubic feet of gas and 17 million barrels of oil, if gas and oil are present.
The Raven Prospect is a seismically defined upthrown fault block prospect which is considered to have the potential to contain gas and oil reserves up to a maximum of 62 billion cubic feet of gas and 1 million barrels of oil, if gas and oil are present.
The cumulative maximum gas and oil target potential of the Kingfisher and Raven Prospects is 140 BCF of gas and 18 million barrel of oil, if gas and oil are present.
Drilling of the Kingfisher Prospect is planned to commence June 1999 with the Raven Prospect in August 1999, subject to farmout. In the event of a successful farmout, Victoria Petroleum N.L. plans to have a 10% to 20% free-carried working interest in each of these prospects.
Ongoing geophysical and geological definition of several other major gas and oil prospects is in progress in order a drilling program of up to four wells over the next twelve months will take place in the San Joaquin Basin Project area, subject to rig and lease availability.
Victoria Petroleum N.L. considers it has acquired a significant core position in the San Joaquin Basin which is highly prospective for oil and gas with 11 billion barrels of oil and 10 trillion cubic feet of gas produced to date. The United States Geological Survey has estimated that the San Joaquin Basin has the potential to contain an additional 1.2 billion barrels of recoverable oil.
Entry into the San Joaquin Basin Project area provides Victoria Petroleum N.L. with an interest in an extensive geological and geophysical data base which provides a major opportunity to explore the San Joaquin Basin. Geophysical and geological interpretation of the extensive data base of seismic and well data indicates the presence of at least twelve prospects and leads with a possible target size of up to 200 million barrels of oil and 100 billion cubic feet of gas, if hydrocarbons are present.
As the SJBP partners increase their leasehold position in the basin, some of these prospects and leads may become future drilling targets, subject to lease and rig availability.
Exploration success in the San Joaquin Basin Project drilling program has the potential to significantly increase Victoria Petroleum N.L.'s asset and reserves base as a result of the potential size of the drilling targets selected.
Victoria Petroleum N.L. has actively pursued during the quarter the evaluation of petroleum exploration and development opportunities in the Middle East to add to Victoria Petroleum N.L.'s international exploration profile. This activity is at an advanced stage, with the aim of Victoria Petroleum N.L. to secure areas in the near future which will be candidates for future farmout drilling activity.
Victoria Petroleum N.L., through its wholly owned subsidiary Victoria International Petroleum N.L. holds 26.5% of the Common Stock of Kestrel Energy, Inc.
Kestrel Energy, Inc. is an active publicly listed NASDAQ US oil and gas production and exploration company, NASDAQ code "KEST".
For the quarter ending December 31, 1998, total Kestrel and Victoria Exploration Inc. oil and gas production for the quarter was 18,274 barrels of oil-equivalent for an average estimated daily production of 199 barrels of oil equivalent per day.
Yours faithfully,
JOHN KOPCHEFF
MANAGING DIRECTOR
VICTORIA PETROLEUM N.L.
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