Nexus Encounters Gas Sand in Gippsland Basin's Longtom-4 Well

Australian-Canadian Oil Royalties Ltd. has announced that Nexus Energy Limited, the operator of VIC/P54 including the production license VIC-L29 advised that the Longtom-4 development well in the Gippsland Basin, offshore Victoria, reached a depth of approximately 8,530 feet.

The Longtom-4 development well has encountered the first gas sand of the Admiral formation as anticipated. Intermediate wireline logs are now being run. Upon completion of these wireline logs, the next operation will be to run 10 ¾ inch casing. Intermediate wireline logging results will be announced after the completion of data acquisition and interpretation.

After casing the current hole section, well operations will include drilling and logging of the pilot hole, followed by the drilling, completion and production testing of the horizontal section of the well. Longtom-4 is then planned to be suspended as a future gas producer, awaiting connection to the pipeline later this year. ACOR owns a 1/20th of 1% ORRI under VIC/P54 (VIC/L29).

Longtom-4 is being drilled by the West Triton jackup rig and is the second development well for the Longtom gas project. The Longtom-3 well, drilled during the third quarter of 2006, is ready for commercial production with no further rig intervention required. The flow capacity of Longtom-3 alone is expected to be sufficient to supply the anticipated maximum contract rate requirements for the Longtom field. Timing of a planned third development well will depend on the results of Longtom-4 and the field’s production performance over time. The current plan assumes this well will be drilled two to three years after project start-up.

Gas produced from the Longtom wells will enter a new 12 inch pipeline and will be transported from the field to the end of Santos' existing Patricia-Baleen pipeline, approximately 11.8 miles away. Nexus will construct this pipeline and the associated control lines and equipment. The raw gas will then continue along the Patricia-Baleen pipeline to shore where it will be processed at Santos’ existing onshore gas plant. Santos will install new equipment at the plant capable of processing the Longtom gas. This will primarily involve facilities for the stripping of condensate from the gas and the subsequent stabilization, storage and export of the condensate.

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