Janovice Gas Field (60% interest)
Production was maintained throughout the quarter at a rate of about of 35,300 cubic meters per day (1.25 million cubic feet per day).
The gas price in the Czech Republic remains healthy and Ja3a continues to provide a solid cash flow. Current operating revenue (net of direct production costs and before tax) is estimated at AUD $2 million in the 2007 calendar year for the Ja3a well.
Krasna Oil Field (75% reducing to 50% after payout)
On 18th December 2006 the field was shut for the winter during which time the data from the long-term test of KS4 will be integrated in to the reservoir model in order to understand better the field and its performance.
After performance as at this date, it is very doubtful if Krasna facilities will be put into production this year.
Raskovice - Moravka (60%)
Integration of the geophysical and geological interpretations of the permit was completed and a number of exploration tools are under consideration for the next stage, which is to build on the initial seismic reconnaissance grid. The operator is preparing a program to drill at least one exploration well late 2007.
Mosnov, 90% interest (contributing 100%)
As previously announced the Mo-1 Skotnice well was spudded on November 28th 2006 at a location between the depleted Kremlin gas field to the north and the Priobor-Klokocov Field to the south. It is reported that the latter produced 23 billion cubic feet of gas between 1945 and 1984 at rates of up to 5 million cubic feet per day. The Skotnice prospect was defined by 28 coal exploration holes, 0.5 - 1 kilometer apart and the target was Tertiary sandstones in a potential trap at a depth of about 400 meters and sandstones within the Carboniferous section not far beneath. The location is very close to and updip of a coal exploration hole from which a gas flow of 80,000 cubic meters (approximately 2.8 million cubic feet per day) was recorded in 1961, some two years after it had been drilled.
The well reached the final total depth of 430m on December 8th 2006 and although only minor shows of gas were recorded while drilling, the analysis of the wireline logs indicated the presence of a 3.2m gas column in a good quality Miocene sandstone reservoir with up to 17% porosity. Measurements of plugs from the core in the Miocene Karpat reservoir indicate porosities in the range 12 - 25% and permeabilities of 600 - 2 300 millidarcies, yet no flow was measured when the section was tested and this remains the case. It is not clear why such a reservoir failed to produce a flow. It may be due to damage to the formation while drilling and/or while cementing the production string; it may also be due to inadequate perforating.
Following receipt and recommendations of a technical report prepared by the Operator, the company expects to do remedial work in the next quarter.
Morava, 90% interest (contributing 100%)
The Morava project is located near Hodonin in the northern part of the Vienna Basin, a prolific oil and gas producer. Hodonin is the regional center for oil and gas production.
Two potential hydrocarbon prospects have been identified. The first is Neogene in age and is an extension of the Vienna Basin from which oil and gas is produced. The target is principally oil. The second trap is in the flysch sequence of the Magura Nappe. It is deeper, larger in size, is higher in risk and is more likely to contain gas.
Two well locations have been identified and are subject of a feasibility study. Depending on the outcome of the study, the first well could be drilled in the third quarter of 2007.
Roznov, 90% interest (contributing 100%)
The permits cover an area of prospective sediments in a variety of potential traps on a faulted margin. The most exciting are a series of features on the basin slope.
Differences between local and regional planning requirements, highlighted by the feasibility study carried out early in 2006 are not yet resolved and have delayed progress in the area where the largest features are located.
The Operator is still attempting to solve the problem of the differences between the local and regional planning requirements. Meanwhile the Company has authorized a pipeline feasibility study to small structure (Zar 1) and subject to a satisfactory outcome of this study, it would be proposed a drilling program would commence early 2008.
The Company is presently looking at a number of opportunities in other parts of Europe that could further enhance and increase shareholder value. Any proposed transactions the Company intends to pursue will seek shareholder approval (as appropriate).
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