Sundance Increases Exposure to US Oil and Gas with Continental Resources

Sundance Energy Australia Limited has significantly enhanced its presence in the United States' onshore oil and gas exploration and development sector.

Sundance - which is already developing its Ashland gas project in the state of Oklahoma - has entered a joint venture arrangement giving it exposure to potentially 184,000+ acres of rich oil and gas fields in the state of Montana - in an area north of and adjacent to the prolific Elm Coulee field.

The joint venture is with Oklahoma-based Continental Resources, Inc., one of the largest private oil and gas producers in America (refer to the attached Background Sheet).

The principal aspect of this transaction is an acre-for-acre trade of oil and gas leases between the two companies' primary strategic oil and gas prospects: Continental's Middle Bakken Prospect in Richland County, Montana, and Sundance's Ashland Prospect in Oklahoma's Arkoma Basin.

"The joint venture delivers to Sundance a valuable interest in the highly prospective Bakken play, one of the largest oil field discoveries of recent years in the United States," Sundance's Chairman, Mr. Charles Binks, said today.

"This prolific, over-pressured shale oil reservoir fits neatly into Sundance's ongoing successful strategy to diversify our US assets into additional, lower-risk plays which complement our holdings in the gas rich Arkoma Basin. Equally significant are the immediate flow-through benefits to Sundance from Continental's leadership in the application of new technologies, such as 3D seismic and multilateral horizontal drilling," Mr. Binks said.

"As noted in a recent analysis by US oil industry consultant, Goolsby, Finley & Associates, LLC, the Bakken acreage acquired in this trade lies directly to the north of the prolific Elm Coulee Field which, since June 2000, has produced in excess of 19 million barrels of oil and 10 billion cubic feet of gas from more than 240 horizontal wells".

Sundance's Managing Director, Mr. Jayme McCoy, said that the transaction was a critical step in expanding and diversifying the Company's US holdings, as well as enabling Sundance to strategically align itself with an industry leader.

"The addition of the Middle Bakken play to our portfolio facilitates the Company's ability to leverage across both the oil and gas sectors, and enables Sundance to participate in an emerging but increasingly proven petroleum province in Montana with considerable upside," Mr McCoy said.

"In addition, it enhances our exploration opportunities through continued leasing in both prospects within the newly created 184,000 acre Middle Bakken Area of Mutual Interest ("AMI") and 69,000 acre Ashland AMI."

"It expands our potential profit opportunities across two provinces, rather than one, in partnership with one of the most experienced and fastest growing operating companies in the energy-hungry US market."

"Sundance and Continental are committed to maximizing drilling activity in both prospects. This commitment is underpinned by Continental's current operations in the Middle Bakken Prospect where they are presently deploying four drilling rigs, as well as an aggressive mineral leasing program designed to ensure the continued growth of the acreage position in both the Montana and Oklahoma project areas."

Horizontal drilling experience

Mr. Binks said that Sundance would benefit considerably under the agreement from Continental's wealth of operational experience and expertise in drilling horizontal shale wells.

"Continental's substantial record of achievement in horizontal drilling and completions, in addition to its experience in managing gas gathering systems and gas marketing, provide a tremendous value-add to our Ashland operations where we recently elected to drill future wells horizontally to maximize outputs and revenue streams," Mr. Binks said.

Continental's Senior Vice President, Mr. Jeff Hume, said: "We are excited to have joined with Sundance in the Ashland Prospect, as well as to having brought them into our Bakken play. We foresee exciting times for both of our companies as we move into the future together".

Principal joint venture terms

The principal terms of the Agreement announced today include:

- Oil and gas leases have been traded on an acre-for-acre basis from approximately 56,000 mineral acres owned by Continental in the Bakken play in Richland County, Montana and Sundance's entitlement to 6,000+ acres within its Ashland Prospect in Hughes County, Oklahoma;

- Under the exchange, Sundance Energy will acquire a 100% interest in 3,000+ acres in the Bakken play;

- Sundance will retain a 100% interest in 3,000+ acres in Ashland - representing a 35% direct stake in the Ashland Prospect;

- Sundance will divest its remaining 3,000+ Ashland acres to Continental, which, together with acquisitions by that company of further interests from Deka Exploration, Inc. and Trail Ridge Energy, LLC, will move its interests to 41% of the total 8,600+ acre Ashland Prospect;

- Continental will become the Operator of the Ashland Prospect and will remain the Operator of the Bakken play;

- Continental is purchasing a corresponding 41% interest in three of Sundance's drilled wells, along with a 41% stake in the Ashland gas gathering system for a total sum of approximately US$1.25 million (AU$1.67 million); and,

- Sundance and Continental have established Areas of Mutual Interest in each prospect within which they will share additionally acquired acreage on a pro rata basis.

Immediate work start

Under the new arrangement, there will be an immediate commencement of a new work program on the Ashland Prospect during the first quarter of 2006. This will include a seismic shoot of 23 square miles (59.57 square kilometers) of 3D and 50 miles (80.47 kilometers) of 2D seismic. This shoot is targeted at identification of faulting, which will enhance the placement of up-coming horizontal wells.

It will also help identify structures in the prolific conventional reservoirs both above and below the Woodford and Caney Shales.

Continental confirmed today that it was finalizing arrangements with Bronco Drilling, the Ashland Prospect's current drilling contractor, to provide 2 drilling rigs to the prospect, one of which will be a deeper rig capable of drilling on the eastern half of the Ashland prospect.

The first of these two rigs is expected to arrive next month with the other available by mid-2006.

The first well within the Middle Bakken AMI is projected to spud in the second quarter of 2006.