Carnarvon Updates on Phoenix Permits

Carnarvon reported updates on its Phoenix permits.

Phoenix Permits WA-435, 436, 437 & 438-P (Carnarvon 50%)

Three wells have been drilled to date in WA-435-P. Minilya-1 (drilled by BOC in 1974) encountered good reservoir sandstones but was drilled outside of closure (based on later seismic data) and encountered no hydrocarbon accumulations. The next well, Phoenix-1, drilled by BP in 1980 to a total depth of 4,880 meters, encountered a 767 meter gross gas section in Middle Triassic low-porosity reservoirs (up to a possible 110 meter net gas-bearing sandstone reservoir). Due to inadequate pressure control equipment the well was not tested. The follow-up well Phoenix-2, drilled by BP in 1982, was drilled to the northeast of Phoenix-1 and encountered a gross 678 meters of gas-bearing section in lower porosity Middle Triassic reservoirs. The well was not tested. The poor gas market and low gas prices at the time resulted in no further appraisal work being carried out in the area.

The presence of gas columns in Phoenix-1 and Phoenix-2 indicate that there is an active Triassic petroleum system in the area which is encouraging for further work. Water depth is shallow, being approximately 100 meters deep at the Phoenix wells. The permits are located close to the coast being approximately 150 kilometers from the gas pipeline at Port Hedland making commerciality of a significant gas discovery possible.

Carnarvon has identified eight large leads and prospects with multi-Tcf potential of recoverable gas. The gas discovered in Phoenix-1 and -2 wells was never tested so it is unknown whether commercial flow rates can be obtained in that part of the permit. However, from regional well data (e.g., in Keraudren-1) reservoir quality is known to improve to the south of the Phoenix wells.

An exploration program comprising an 1,100 km2 3D seismic survey and a 430 km 2D seismic survey is expected to commence in July 2010, and a 15,850 km2 aeromagnetic survey is expected to commence early next month. These new data will enable evaluation of the identified prospects and leads at a cost net to Carnarvon of approximately A$3 million. Computer processing and interpretation of these data is expected to be completed during Q4 2010.

Once the interpretation is complete, Carnarvon intends to farm out a portion of its interests for a financial carry through an exploration drilling program yet to be defined. Drilling will commence as soon as possible after this farm-out.
Permit WA-443-P (Carnarvon 100%)

No previous drilling has taken place in the WA-443-P block. One large Middle Triassic prospect has been interpreted, the Jaubert Prospect, which is a faulted anticline closure. The structural form and size of the prospect are comparable to the Phoenix group of potentially large gas accumulations. Carnarvon has secured this new permit with a firm program over three years to reprocess and interpret 1,400 km of 2D seismic. Geological and geophysical studies will also be carried out in conjunction with similar work in the Phoenix permits.