Drillsearch: Greater Potential at Western Cooper Gas Project

Drillsearch has reported a significant increase in the Prospective Resource Potential of the Western Cooper Unconventional Gas Project.

Significant Increase in Resource Potential - 360% over previous estimate

The unconventional gas Prospective Resource potential of deep coal seams in the Western Cooper Unconventional Gas Project Area has increased by approximately 360%.

Drillsearch has just completed the second phase of an independent technical review with MBA Petroleum Consultants Pty Ltd (MBA) of the Prospective unconventional gas resource potential of deep coal seams in the Permian and Triassic formations of the Western Cooper Basin. This independent technical review is an extension of the earlier work completed by MBA prior to the award of PELA 513. It should be noted that Prospective Resources are as yet undiscovered and, as such, carry significant risk. Gas content, gas composition (gas may not only be methane) and certain coal parameters are poorly known and require specialist coal seam gas (CSG) sampling and testing, which will be addressed by near future drilling.

On 27 November 2009, Drillsearch previously announced the results of the independent review of the deep coal seam gas potential of the project area. The previous announcement indicated that the unconventional gas Prospective Resource potential was between 2.7 to 5.4 TCF based on a gas-inplace of 10.9 TCF.

"Drillsearch is very encouraged by the results of the independent review for the overall unconventional resource prospectivity of the our permit areas in the Western Cooper," Drillsearch Managing Director, Brad Lingo said.

"Our own exploration drilling in this area has shown that there are multiple, thick coal seams and the well logs has indicated significant gas contents. Previously this has been considered a drilling problem rather than an opportunity worth exploring further."

"The independent review confirmed that these coal seams are extensively distributed throughout our acreage from a detailed analysis of 450 wells in the area and our extensive seismic coverage -- both 2D and 3D -- of the area.

"In September 2008 Santos announced that it was evaluating 5 unconventional gas test concepts in the Cooper Basin and that they had completed a deep coal frac of these same coal seams at a depth of 9,000 feet and successfully produced gas from these deep coal seams to surface at the Moomba-77 well which is right on the edge of our project area."

"We also know that unconventional gas has been successfully produced from similar deep coal seams in basins in the Rocky Mountain region of North America," he said.

Mr Lingo said the independent review provided Drillsearch with a clear road map of where the company needed to focus its efforts to convert this Prospective Resource into Contingent Resources and Reserves.

He said Drillsearch was working closely with MBA Petroleum and AWT to formulate the forward work program to begin the direct evaluation of this resource potential.

"In order to manage the cost of this program, we are looking to integrate this evaluation into the appraisal and development of the conventional wet gas discoveries we have already made in the project area and as part of the exploration program for the conventional 22 wet gas prospects already identified," Mr Lingo said.

"There is a lot of work that needs to be done to establish this Prospective Resource and as commercially viable reserve but to put these potential gas volumes into perspective, a typical single 5 mmtpa LNG train requires 5-6 TCF of gas supply over 15 years. Similar quantities would be required to run a large scale gas-to-liquids plant producing clean diesel. With the potential resources we are trying to prove up from these prospective resources, if these can be successfully established as a commercially viable resource and developed there is significant opportunity for a very big project" Lingo said.

Western Cooper Unconventional Gas Project Area - Resources in the Right Place

The project area covers Drillsearch's permit holdings in PEL 106, 107, 91 and the newly awarded PELA 513 - North, South and Central Blocks. These permit holdings cover an extensive, contiguous area in the Western Cooper Basin covering a total of 4275 km2 (1,056,000 acres) with a core resource prospective project area of 2805 km2 (693,100 acres). Drillsearch operates 78% of the project area and holds 100% interest in 63% of the project area.

The November 2009 report only analysed the Patchawarra Formation deep coal seams and did not include PELA 513 area which was under application as part of the South Australian Government 2009 Cooper Basin Bid Round although Drillsearch had commenced its study of this permit area as part of formulating its bid strategy.

Drillsearch's Western Cooper Unconventional Gas Project Area is well located for future development in close proximity to existing gas pipeline infrastructure.

The main area project area is located within 25-50 km of the Moomba Gas Plant and from this point can access the main gas pipeline network serving most of Eastern Australia.

The potential for the development of this large scale resource also provides a new source of energy and fuel that may be developed to serve the expanding South Australian Mining District with its growing energy demand to serve major mines such as Olympic Dam and Prominent Hill.