Pancontinental Highlights Quarterly Operations

Pancontinental Oil & Gas NL has provided the following operations update to shareholders for the quarter
ending June 30, 2008.

Highlights for the quarter

  • Kenya L-8 and L-9 - oil seepage evidence interpreted from sea floor, coinciding with prospects mapped from seismic.
  • EP-104 onshore Canning Basin - Stokes Bay 1 testing set to resume.
  • East Africa onshore - negotiations commenced for two new exploration licenses.
  • Namibia offshore RL-1/2007 - Consortium Agreement signed with Key Petroleum, RL to convert to Petroleum Agreement.

KENYA - Offshore blocks L-8 and L-9 PCL – 50%

Results of a satellite oil slick survey received from operator Origin Energy Limited (ASX: ORG) show sea-surface evidence of hydrocarbon seepage from the sea floor in Blocks L-8 and L-9. The slicks seen in L-8 are the largest and highest ranked for all of offshore Kenya and coincide with several main prospects mapped from
seismic.

The largest is the Mbawa Prospect, covering approximately 360 square kilometres (km²) at the Jurassic level and approximately 140 km2 at the shallower Tertiary level. In the Mbawa Prospect at an intermediate Tertiary/Cretaceous level, Origin has calculated potential exceeding 5 billion barrels oil-in-place or 7 trillion cubic feet gas-in-place. The Nanaa Central Prospect has also been calculated to have similar potential.

The satellite survey gives considerable encouragement to the company’s interpretation that a working petroleum system may be present in its Lamu Basin acreage. Only drilling and extensive further work can establish the size and commercial value of any oil or gas discovery.

Pancontinental has an agreement with Origin whereby Pancontinental will retain a 25% interest in an exploration well and any hydrocarbons discovered in L-8 or L-9, with Origin paying 100% of drilling costs.

KENYA - Offshore block L-6 PCL – 40%

Airborne gravity data and seismic data acquired under farm-in by Gippsland Offshore Petroleum Limited continued to be interpreted and mapped during the quarter. A number of prospects and leads with significant speculative oil and gas reserves potential have been identified. The joint venture (JV) is continuing with planning for future activities and firming up a target for drilling.

MALTA - Offshore Area 5; Area 4, Block 3 PCL - 80% (reducing to 28.0% after seismic and one well)

The JV, including farminee Anadarko Petroleum Corporation, has been making plans for the renewed exploration of the area. These will be discussed with the government of Malta in the coming quarter. The company remains confident that the main prospects and leads identified have very significant potential. These are in the same geological province as the very large oil and gas fields offshore Libya and Tunisia.

Activity over the area is currently suspended, pending discussions between Malta and neighbors Libya and Tunisia.

NAMIBIA - Reconnaissance License RL-1/2007, Offshore Walvis Basin PCL – 100%

During the quarter Pancontinental signed a Consortium Agreement with Key Petroleum Limited for petroleum exploration offshore Namibia. Under the agreement, Key will pay Pancontinental, on fulfilment of a number of obligations, up to A$100,000 in respect of past expenditure and will share in certain future costs.

Pancontinental and Key have been conducting studies of existing data from the area and the JV believes that the area holds a significant exploration opportunity.

Pancontinental has applied for a Petroleum Agreement (PA) and Exploration Licence (EL) over part of the area of the existing Reconnaissance Licence (RL) and the two companies have agreed that each will be a 50% participant in any successful award. Any PA and EL is subject to negotiations with the Ministry of Mines and Energy of Namibia.

Pancontinental anticipates commencing such negotiations in the coming quarter.

MOROCCO – Mediterranee Est Block (Application), Offshore Morocco PCL – 100% (diluting to 80%)

The JV is awaiting the formal issue of the RL by the Minister. There has been no further progress since the last report.

AUSTRALIA – EP-104 / R1 Onshore Canning Basin Pancontinental Oil & Gas NL – 10%

Studies carried out by the operator Arc Energy Limited on behalf of the JV have helped to characterize the Nullara potential and have identified trends which could be followed in the event of testing success in Stokes Bay 1.

Subsequent to the end of the quarter, Stokes Bay 1 was inspected and opened to assist in the design of a definitive testing program. Upon installation of the well head and pressure gauges, the well head pressure was 1200psi. On opening, the well flowed gas for approximately six minutes before slugging mud and gas with flow
ceasing after some 30 minutes.

After an overnight shut-in the well head pressure was 250psi with no significant flow. The well has now been shut-in and the crew has demobilized. These results are very encouraging with the gas flowing either from the Laurel gas sands below the 7 inch casing shoe or from the Nullara reef section. Plans will now be made for a definitive test of the reservoir. The extent of a hydrocarbon accumulation (if any) can only be determined by further work and testing.

AUSTRALIA – EP-424 Offshore Carnarvon Basin PCL – 25%

A variation to the permit terms has been requested from the Department of Industry and Resources under which the drilling of one well is now required by 13 April 2009. The JV awaits the outcome. Amplitude Versus Offset seismic analysis over the Baniyas Prospect shows a seismic anomaly which could indicate the presence of gas-over-oil or gas-over-water in the prospect, although other interpretations (including rock property changes) cannot be ruled out.

The Baniyas prospect is on-trend and has strong similarities to the Roller, Saladin and Skate oil fields in the neighbouring permit areas. Baniyas is estimated to have potential for Pmean prospective resources of 26 million barrels oil and 56 Bcf gas (34 Barrels of Oil Equivalent). These prospective resources are of a speculative nature until the prospect has been evaluated by drilling.

AUSTRALIA – EP-110 Onshore Carnarvon Basin PCL -25%

This permit is operated in conjunction with EP-424. The parties in EP-110 have identical equities to those in permit EP-424. An application to renew EP-110 was submitted to DOIR in July 2006. No response has been received to date. There was no activity during the quarter.

AUSTRALIA – EP-406 Offshore Shark Bay, Carnarvon Basin PCL – 5%

Progress is awaited regarding permission to explore this area, which is subject to a Marine Park and World Heritage Listing.

NEW VENTURES

During the quarter, Pancontinental commenced negotiations for two new onshore exploration licenses in Africa and applied for certain specific new projects offshore Australia. The company continues to review Australasian, Mediterranean and African onshore and offshore opportunities.


 

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