Nexus Energy Spuds Longtom-3 Appraisal Well

Nexus Energy reports that the Longtom-3 appraisal well located in the Gippsland Basin offshore Australia has been spud by Diamond Offshore's semisub, Ocean Patriot.

The Longtom-3 appraisal well is part of a sole risk appraisal program operated by Nexus. Nexus has a 100% interest in the Longtom Gas Project which also includes front end engineering design studies.

A 36" hole has been drilled to 112 meters measured depth. 30" casing is currently being set in the hole. Once this operation is completed a pilot hole will then be drilled to a planned total depth of 3330 meters to intersect the targeted sands. After that the pilot hole will then be plugged back and the horizontal well bore will be drilled through the Longtom gas sands. On the current schedule, it is anticipated that the pilot hole will reach total depth by July 26, 2006.

The Longtom Field lies in the offshore exploration permit Vic/P54, approximately 30km south of the Victorian coast near the town of Orbost. The best estimate of the contingent resource at Longtom is 438Bscf (465PJ sales gas).

In December 2005 Nexus signed a gas sales and processing agreement with Santos for up to 450PJ of gas from the Longtom Field. In light of this commitment, the two companies have now commenced coordinated front end engineering design studies on the project with the aim of being in a position to sanction the project in Q4 2006.

The successful testing of Longtom-3 will mark a major milestone on the way to sanctioning the project. Following the completion of the well, the resource size will be reviewed and the development plan finalized. Nexus expects first production prior to June 2008.

Apache Northwest, which has a 62.5% interest in Vic/P54, has a right to buy back into the field development following the drilling of Longtom-3 by paying Nexus six times the cost of its share of the project, plus back costs associated with its share of the program.

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