Austral Pacific Begins Cardiff-2A Sidetrack Operations

Austral Pacific reports that during the recent cementing of the 7" liner in place across the Kapuni Formation interval in Cardiff-2, a failure occurred at the liner hanger assembly near 4,000m (13,000 feet). As a result, the lower section of the hole is no longer accessible, and the joint venture participants have now agreed to deviate a Cardiff-2A well out of the present wellbore near the 3,000m (10,000 feet) depth level and drill it as a vertical well to a target depth near 4,850m (16,000 feet). Austral holds a 25.1% interest in the joint venture and will not be carried with respect to its share of the costs of this deviation well.

The deviation well is expected to provide an intersection of the Kapuni Formation in Cardiff-2A offset approximately 175m (600 feet) from the Cardiff-2 intersection, and in a similar geological setting on the Cardiff structure. The Cardiff-2A operation is scheduled to take approximately six weeks from present in order to case off the Kapuni Formation in preparation for production testing. Austral as operator of the joint venture was pleased that the joint venture participants were unanimous and prompt in their approval of this course of action, which reflects the promising results obtained from electric logging in Cardiff-2 as previously advised.

At the nearby Cheal-A production site, jet pump production test operations on Cheal-A4 and Cheal-A3X are scheduled to commence within a few days.

Since December 20th, 2004, Austral warrant-holders have exercised some 2 million warrants which had been issued by Austral in various 2004 transactions including the New Zealand public offering, the private placement of convertible notes and the special class share exchange. Exercise proceeds received over this period are approx NZ$3.7m (US$2.5m). All previously outstanding Austral warrants have now been exercised or have expired. On December 9th, 2004 Trans-Orient Petroleum Ltd. exercised 836,845 Series A warrants of Austral, which together with another 382,750 warrants exercised by it on December 23rd, gives Trans-Orient an 8.76% shareholding in Austral.

Austral Pacific now has a total issued capital of 18,554,953 common shares and cash reserves of order NZ$16.5 million / US$11.5 million.