Novus Farms In to Queensland Blocks

Novus has agreed to farm in to blocks ATP 613P and ATP Application 674P in the Maryborough Basin to the north of Brisbane. Magellan Petroleum Australia Limited is the current operator of these blocks. Several promising gas prospects have been identified in this sparsely explored basin located on the doorstep of Australia's most rapidly growing gas market. Novus has the right to earn a 50% interest in both these blocks through carrying Magellan in the drilling of up to two wells.

The Maryborough Basin is located approximately 200 kilometers north of Brisbane and covers the onshore coastal region between Bundaberg and Gympie. The two blocks Novus is farming into cover most of the basin, and as such this represents a rare opportunity to gain control at an early stage over an exploration play in a frontier region. This strategy is similar to that Novus has applied to the Northern Arabian gas-condensate play in Oman and the Northern Emirates. In earning a 50% interest Novus will retain a large exposure to the upside, but will also be in a position to influence the direction of exploration and will also have room to farm down if this becomes appropriate.

Historical exploration in the basin has been light, with most of this exploration taking place in the 1950s and 60s prior to the advent of modern technology and – just as vitally – today's gas markets. Despite this, drilling of the Gregory River prospect resulted in a gas discovery which flowed gas at a sub-commercial rate. Without the benefit of modern completion and drilling techniques the field was abandoned as uncommercial due to the low permeability of the reservoir and lack of gas market.

Novus and Magellan believe that the technical problem can be overcome through the use of modern techniques, such as air-based drilling which Magellan use in the Amadeus Basin. Air drilling in the nearby Surat Basin has also yielded commercial flow rates for other companies. Other modern techniques, such as stimulation, were also not available in the 1960s. Dr Bob Williams, CEO of Novus, said: "Various facets of this opportunity are attractive – the proximity to an unfulfilled gas market, the presence of a proven gas play, the large acreage position in the basin and the fact that it is in Australia. Combined they are compelling.

"For a number of years now Novus has been searching for an opportunity that would allow it to increase its presence in Australia and that is consistent with its overall strategy. The addition of the Maryborough acreage is yet another step in a process that is continually reducing the political risk of the portfolio through preferential growth in low-risk areas. "Queensland's gas market is growing rapidly and any gas discovery could be commercialized quickly due to the competitive advantage compared to other suppliers inherent in the acreage's proximity to market and existing infrastructure. "It is always good in exploration to have an existing discovery before you start. Given the circumstances here, our challenge reduces to establishing commercial gas flow rates. Magellan have used air-based drilling for many years in the Amadeus Basin with excellent results, and I am looking forward to seeing this and other more recent technology result in the rediscovery of a neglected gas-prone basin."