Beach Joins Santos-led Cooper Oil Program

Economic oil reserves in under-explored areas of far southwest Queensland are to be targeted in a significant new drilling campaign announced Thursday by Beach Petroleum Limited.

Beach's heightened interest in the province is part of its new involvement in the Cooper Oil Program (COP) led by Operator, Santos Limited.

The announcement also coincides with a more aggressive exploration drive by Beach to build a stronger oil and gas business on the immediate Queensland side of the border with South Australia.

Under the new campaign, at least 24 appraisal and exploration wells will be drilled in the Naccowlah Block during the current quarter as part of the COP, while Beach will independently undertake new exploration drilling in ATP633P, south of the Naccowlah Block and appraisal drilling near its Bodalla Block oil fields to the east of Naccowlah.

The Naccowlah Program itself will cost Beach A$21 million and potentially add a further 1,000 barrels a day to Beach's net production.

Beach Petroleum's current proved and probable reserves are greater than 100 million barrels of oil equivalent and the Company is confident that its activities in the Cooper Basin offer a relatively low risk opportunity to replenish and build these reserves while increasing production capacity substantially.

The schedule is one of the most intensive to be applied to the area and is the first under the Cooper Oil Program to specifically target the highly prospective Naccowlah tenements.

Commenced in 2005, the COP is assigning modern technology and a 1,000 well program to tap economic oil pockets trapped within the Cooper-Eromanga – Australia's largest onshore oil and gas province.

These pockets have historically been ignored in the pursuit of the larger now commercialized fields but early work in the COP initiative has met with measurable success.

"We strongly endorse the thrust of the Cooper Oil Program," Beach Petroleum's Managing Director, Mr Reg Nelson, said.

"It is one of the principle reasons for Beach's successful bid to acquire Delhi Petroleum last year, because it is replicating – on a much larger scale – what we have achieved in the last five years in our Bodalla Block oil fields."

Mr Nelson also emphasized the strong potential of the southwest corner of Queensland.

"This is an area well known to Beach through our 100%-owned Kenmore Bodalla fields, our long-held stake of 6.5% in Naccowlah – now increased substantially to 38.5% through Delhi and our successful eight-year effort to negotiate native title to secure ATP 633P further to the south," Mr Nelson said.

"Naccolwah's potential additional revenue and net margin contributions to Beach are strong," Mr Nelson said.

"Success under the program in itself will contribute meaningfully to our current strategy to build oil production significantly from 2008-2010, but it is only a part of a 100 well plus Cooper Oil Program for this year – and we anticipate that drilling at this level will continue for at least the next few years."

The Naccowlah program will focus on the discovery of new oil pools in both the Murta (Chilla, Pitchery, Naccowlah and Wilson fields) and Hutton (Graham, Naccowlah South and Jackson South fields) reservoirs.

Some further drilling to delineate new fields is likely to follow the initial campaign should this be successful.

The majority of any new production wells would be connected to the existing Naccowlah region processing facilities.

Beach increased its Naccowlah and other Cooper Basin entitlements when it became a partner in the Cooper Basin Joint Venture after last September acquiring Delhi Petroleum Limited's average 21% interest in more than 200 oil and gas fields in the Cooper Basin in a deal worth $590 million.

Maiden ATP633P drilling

Mr Nelson also announced that Beach Petroleum is about to commence drilling in ATP633P, in which Strike Oil has recently taken up a 15% farm-in option.

The block was subjected to a lengthy Native Title approval process that culminated in the award of the permit to Beach in March last year. A significant number of oil prospects and leads are present in the block and both 2D and 3D seismic were acquired last year to evaluate their potential.

The first ATP633P well, the Kewarra-1 oil exploration well, is scheduled to spud late this month. The prospect is defined by the recent 3D seismic and is located approximately 1.5km northeast of the 1989 Gidgee-1 well, which flowed in excess of 1,000 barrels of oil per day. Further opportunities are being evaluated and will be considered for drilling later in the year.

ATP269P drilling

Mr Nelson also indicated that evaluation of 3D and 2D seismic acquired during 2006 in ATP 269P, adjacent to Beach's Kenmore-Bodalla fields, has highlighted several oil prospects that are also being considered for drilling later this year.