Austral Pacific & Genesis Ink Final Cardiff-2 Agreements

Austral Pacific Energy has finalized the commercial negotiations with Genesis Energy for the funding of the Cardiff-2 well which was initially announced on April 29th, as a memorandum of understanding.

Genesis Energy will acquire a 40% equity interest in respect of the Deep Petroleum rights in Petroleum Exploration Permit 38738 and a right to purchase 100 percent of the deep gas reserves by funding the drilling and testing of the Cardiff-2 well to a cap of NZ$15 million (approximately US$9.6 million).

Petroleum Exploration Permit 38738 is in the onshore Taranaki Basin near the town of Stratford. The Cardiff-2 well is to be drilled and tested during fourth quarter 2004, to target the Kapuni Sands reservoir below 4000m (13,000 feet) depth in what is known as the Cardiff Deep gas prospect.

The well is designed to establish producible gas within a structure which, in the event of success at Cardiff-2, might become approximately 1TCF (one trillion cubic feet) of new gas when subsequent development, including further drilling, is completed.

Austral CEO Dave Bennett said, "We look forward to working with Genesis Energy to extract new gas in onshore Taranaki. This is an exciting time for our companies in New Zealand as we aggressively pursue value for our respective shareholders."

Genesis Energy Chief Executive Murray Jackson added, "It is well recognised that there is a need to drill further wells in New Zealand to meet the ongoing demand for natural gas. Genesis Energy is very pleased to be involved in the drilling of Cardiff-2, a well that is specifically targeted at finding new gas."

The application of modern drilling and testing techniques can potentially establish substantial amounts of new gas in the Taranaki Basin. Proximity of the Cardiff Prospect to existing gas infrastructure should result in a fast track development, in the event that commercially recoverable reserves are established.

Genesis Energy with approximately 644,000 electricity and gas customers, is New Zealand's largest energy retailer and requires on-going gas supplies to meet its power generation and retail commitments.

In accordance with the Crown Minerals Act 1991, these agreements are conditional upon Ministerial consent.

On receipt of Ministerial consent, interests in the Deep Petroleum will be: Austral 25.1% (Operator), Genesis 40%, IRM 19.8%, Cheal 15.1%.