Austral Carried in US$6 Million Farm-Out

Papua New Guinea: PPL 235

Austral Pacific has now entered into a formal agreement with Rift Oil PLC (a UK company) whereby Rift will contribute the first US$6M of expenditure on the Douglas-1 exploration well in Papua New Guinea (PNG). In return, Rift will earn a 65% interest in Petroleum Prospecting License 235 in PNG's Foreland Basin. Austral Pacific will continue as operator of the joint venture with a 35% interest in Douglas-1 and the PPL 235 license.

CEO Dave Bennett said, "We are delighted to have finalized this agreement, which ensures the drilling of the highly prospective Douglas-1 well this year. The Douglas Prospect is situated in a lightly explored area of the foreland basin, where earlier wells have clearly demonstrated that oil and gas is generated."

The Douglas Prospect is mapped as covering an area of some 15,000 acres (60 sq km), with PPL 235 incorporating this and several other identified drilling targets within a total area of 720,000 acres (2,900sq km). Success at Douglas-1 will enhance the likelihood for further discoveries within the license area.

New Zealand
The Cardiff-2B deviation well is now being kicked off past a cement plug in the Cardiff-2A sidetrack at a depth of 3950m (13,000 feet).

The Cardiff-2A sidetrack drilled to a depth of 4072m (13,360 feet) within the upper part of the Kapuni Formation, with hydrocarbon indications similar to those at equivalent depths in Cardiff-2, before drilling complications led to the plugging back of the Cardiff-2A wellbore. It is anticipated that Cardiff-2B will reach its target depth near 4,900m (16,000 feet) later in February and will be completed for testing.

At the nearby Cheal oil field, Jet Pump Production Test #1 (JPPT#1) in the Mt Messenger pay zone in the Cheal-A4 well has now been completed. Over a 10 day interval of near continuous production during January, the well flowed in a stable manner, and produced a total of approximately 3,000 barrels of oil and 1,500,000 cubic feet of gas.

A larger down-hole jet pump nozzle is now being evaluated, and Jet-Pump Production Test #2 (JPPT#2) is presently in progress.

During the first three days of JPPT#2, the well has averaged rates approximately 40% higher than during JPPT#1. Following completion of JPPT #2, a third nozzle size will be evaluated, then testing will be conducted in a similar manner on the shallower Urenui oil pay in this well. Production testing will then be conducted on both pay zones together. A similar testing program will then be conducted on Cheal-A3X, which has previously flowed unassisted at rates averaging 300 barrels of oil per day.

Of the 2 million New Zealand tradeable warrants issued in January 2004, only 15,500 remain unexercised and have now been cancelled.