Magellan Petroleum Abandons Kiana-2

Magellan Petroleum's subsidiary, Magellan Petroleum Australia Limited reports that DST 3 conducted over the Patchawarra Formation interval 1878 to 1892m in Kiana-2 recovered 60 barrels of muddy water and 4 barrels of mud, with no hydrocarbons. As a result of this DST and further wireline log evaluation it is concluded that the Kiana oil field does not extend west of a fault traversing between the Kiana-1 and Kiana-2 locations. Kiana-2 was designed to obtain more information on the areal extent of the Kiana oil field by testing a sub-culmination approximately 600 m to the west-southwest of Kiana-1; future development plans will now focus on the area east of the fault.

Two additional DSTs were conducted in the well: DST 1 conducted over the interval 1116-1127 meters recovered 6 bbls of muddy water and DST 2 conducted over the interval 1409.5-1419.0 meters resulted in no flow to surface and no recovery in the drill pipe.

Kiana-2 will now be plugged and abandoned and Rig 3 will move to the Keeley-1 location, approximately 8 km to the west-northwest.

Under the terms of a farmin agreement with Great Artesian Oil and Gas, Ltd, MPAL will participate in the upcoming drilling program in PEL 107. MPAL will fund 60% of the Keeley-1 and Cabbots-1 drilling costs in order to earn a 30% interest in any subsequent production licence in the event of a commercial discovery. By participating in these two wells MPAL will earn a 20% interest in permit PEL 107 and it will participate in Talia-1 at its 20% working interest in the permit.

Keeley-1 is an exploration well that will test a combined Permian anticlinal closure and stratigraphic trap in the southern Patchawarra Trough in PEL 107. The Keeley prospect is considered prospective because of its similarities with the Raven gas field, located 10 km to the northwest. The Keeley prospect is a robust closure. Volumetric estimates put its potential mean recoverable reserves at approximately 10 bcf of gas. It has a maximum potential of approximately 29 bcf of gas if stratigraphic trapping is also involved.

The primary reservoir objectives in Keeley-1 are the Patchawarra Formation reservoirs, similar to those which produce gas at Raven and in which gas has been discovered in the recent Udacha-1 and Middleton-1 wells. Keeley-1 will take about 16 days to drill and is planned to have a total depth of approximately 3023 m. Subject to completing current operations at Kiana-2, the well is expected to spud early next week.

Interests in Kiana-2 and Keeley-1 are as follows:

Magellan Petroleum Corporation 30.0%
Beach Petroleum Ltd (Operator) 40.0%
Great Artesian Oil and Gas Limited 30.0%