Bounty Oil Farms Out Stake in Sydney Basin

Bounty Oil & Gas has agreed to farm out a further 50% interest in PEP 11, its offshore Sydney Basin permit, to UK company Electro Silica in return for Electro Silica funding 100% of the costs of drilling an exploration well within the permit. Electro Silica has previously committed to fund a 1500 km 2D seismic program in PEP 11 to earn a 25% interest. Bounty will be free carried through both the seismic, which is scheduled for the first quarter of 2004, and the drilling, which is tentatively scheduled for late in 2004. By funding both of these programs, Electro Silica will earn an aggregate 75% in PEP 11.

"This is a very important step in the exploration of this permit," said Bounty Managing Director Tom Fontaine. "We will be acquiring seismic in the permit early next year to finalize our drilling location and plan to drill as soon as possible after that. Electro Silica has already committed to the seismic and has now agreed to fund the drilling, subject to Bounty completing marketing studies and on the selection of a suitable company to act as a production operator in the event of a commercial discovery.

"Bounty is in discussions with a number of parties in this regard. We are now seeking an alliance with an experienced offshore production operator who would join us should a commercial discovery offshore Sydney be made. We expect to make our selection very soon. In the meantime we are continuing to develop our plans to drill the first exploration well in this exciting permit."

PEP 11, in the Offshore Sydney Basin, is situated immediately adjacent to the heavily populated and industrialized central coast of New South Wales, Australia. No drilling has taken place in the basin, despite a significant number of wells drilled in the adjacent onshore Sydney Basin, which have flowed gas or encountered oil shows.

Covered by permit PEP 11, a 200 kilometer long, 8,267 km 2 permit, the Offshore Sydney Basin is a significant under-explored exploration area; with large scale structuring and potentially multi-Tcf gas and condensate-charged Triassic and Permian reservoirs. Mapped prospects and leads are generally located less than 50 kilometers from Australia's largest energy market, the Sydney-Wollongong- Newcastle greater metropolitan area - a population centre of approximately 5 million people.

Bounty has identified a large target located in the northern sector of the permit in an average of 125 meters of water. This structure is situated on the crest of the Offshore Uplift on a thrusted anticline. With a closure of over 120 km 2 , the feature has potential to hold up to 1.2 Tcf of recoverable gas.

Bounty has completed reprocessing of seismic and aeromagnetic data to mature the mapping in the area. In addition, the prospectivity of the northern sector of the permit has been further enhanced by the confirmation of the presence of apparent hydrocarbon seeps. Originally detected on 1996 satellite imagery, a repeat analysis of 1998 and 2001 images again identified apparent seeps directly over the main prospect. The total depth of a well to test this prospect would be approximately 1,500 meters.

Interests in PEP 11 are: Bounty Oil & Gas as operator with 25% and Electro Silica with 75% (subject to farm-in).