Plover Requires Another Well, Current Drilling Ceased

MEO Australia Limited advises that the joint venture partners have decided to cease the current re-drilling of the Plover formation and bring forward the production testing of the Epenarra Darwin formation in the Heron-2 well to later this week. Importantly, this is due to technical issues encountered with the sidetracking of the well and not because of a changed view of the potential of the Heron North Plover sands, which would be revisited with a separate well.

Pre-drill, the primary objective and most significant hydrocarbon resource potential to be tested by Heron-2 was the Darwin formation. The production test to confirm this potential is now imminent. The results of Heron-2 drilling, electric log and core sample interpretation of the Darwin formation confirm strong indications of a significant gas accumulation.

The well is currently being plugged back to just below the Darwin formation at 3,200 meters. A production packer will be set in the 9 inch casing at 3080m, the production test string will be run and the well is scheduled to be perforated and flowed later this week.

With regard to the Plover formation, a sidetrack was undertaken and drilling of the 6 inch hole had commenced. However, on Sunday Jan. 14, after drilling into the Elang shale unit, approximately 3 meters horizontally away from the previous borehole at 3,967 meters, the drilling bit became stuck when the now unconsolidated shale unit collapsed around the drill string.

It is apparent that the rapid reduction in pressure (drawdown and other operations) during the open-hole production testing of the Elang/Plover formation caused a collapse of the Elang shale unit into the well. This prevented the deeper Plover sands contributing to the flow and appears to have disturbed the shale formation in the vicinity of the original wellbore.

Contrary to the joint venture's pre-drill expectation that the Plover sands of Heron North would most likely contain low quality, high CO2 gas, Heron-2 has provided sufficient log data to indicate that in fact a higher quality and more valuable hydrocarbon resource may be present warranting further production testing. However, the joint venture believes it would be neither prudent nor economic to attempt to continue re-drilling and testing of the Plover formation in Heron-2 in such close proximity to the original wellbore. Therefore, in order to properly appraise the Heron North Plover sands, a new well will be required.

Heron-2 is being drilled by Seadrill's West Atlas jackup rig contracted to MEO for two firm wells. The Heron-2 well is designed as a vertical well to penetrate and production test the Epenarra Darwin Formation and the deeper Elang/Plover Formation of the Heron North structure.

The Heron-1 well drilled by ARCO in 1972 intersected a 52m gas bearing column in the Darwin Formation (a fractured carbonate reservoir) within the 1,200 square km mapped closure of the large Epenarra structure. Heron-1 also reached a gas charged zone in the deeper underlying Elang/Plover horizon, which is a secondary objective for the Heron-2 well.

The participants in the well and permit are TSP Arafura Petroleum Pty Ltd (MEO subsidiary) with 45%, Oz-Exoil Pty Ltd (MEO subsidiary) with 45%, and Petrofac Energy Developments Oceania Ltd with 10%. Xtract currently holds approximately 15.7% of the issued capital of MEO.

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