Perth Basin Drilling Program Recommences

The L1/L2 joint venture has agreed to commence the final component of Phase 1 of the exploration drilling program in the L1/L2 licenses. The first oil prospect, Kingia 1, will be drilled by the Century 24 drilling rig after it completes the Eremia 2 horizontal development well. This will be in late December or early January.

Two additional exploration wells have been agreed to follow Kingia 1, with a location agreed by the joint venture for the Xyris 1 gas exploration well to the east of Hovea, and a further location to be agreed as the program progresses.

The final component of Phase 1 of the exploration drilling program will involve the drilling of Kingia 1, Xyris 1 and a yet to be determined oil exploration well. Phase 1 also includes the re-evaluation of the existing seismic data on the Licenses, the interpretation of the Hibbertia 3D seismic survey, the acquisition of the Denison gravity survey, and preparation for the possible acquisition of a 3D seismic survey (the Denison 3D) which, subject to Joint Venture and Government approval could commence in first Quarter 2004.

Phase 2 of the program would be the acquisition, processing and interpretation of the Denison 3D seismic survey followed by a drilling program utilizing the results of this survey.

The Kingia prospect is one of several that have been identified in the area that will be covered by the proposed Denison 3D seismic survey. In general, it would be preferable to drill wells after the 3D survey has been acquired, however, the potential reserves in the Kingia structure, and the valuable regional stratigraphic information that will be obtained from the well, justify drilling of the prospect as part of the Phase 1 program. Obtaining these drilling results now may also help tailor the Denison 3D seismic survey acquisition area.

The proposed total depth of the well is approximately 2400 meters and it is expected to take 20 days to drill. Depending on the initial results of the well it may be deepened to test the High Cliff Sandstone reservoir in this area. Depending on the actual time taken to drill the Eremia 2 well and completion of the necessary regulatory approvals, Kingia 1 is expected to spud in late December 2003 or early January 2004.

The joint venture has also agreed to drill the Xyris 1 gas exploration well to the east of Hovea in the area covered by the Hibbertia 3D seismic survey. A further exploration well, targeting oil in the Jingemia-Eremia-Hovea fairway, is also under consideration by the joint venture. Additional technical work including detailed review of the gravity survey data is to be undertaken before this location is agreed. Further exploration wells for both gas and oil will be considered as the program progresses and the results of the first 3 wells are known.

The joint venture will take a considered and technically robust approach to the forward drilling program, balancing its objectives of achieving both an operationally efficient continuous drilling program and of enhancing its gas and oil reserves base in a cost effective manner.

Current Drilling Program

The Century 24 drilling rig has recently completed the Hovea 9 and 10 wells. Hovea 9 was an appraisal well which successfully delineated the southern end of the Hovea Field and confirmed the southern extent of the oil pool.

As planned, Hovea 9 was then sidetracked to the Hovea 10 bottom hole location approximately 360 meters to the west of the Hovea 9 surface location. Hovea 10 has now been completed as a water injection well to provide pressure support for the Hovea and Eremia Fields. The Hovea 10 well has achieved its objectives with excellent water injection parameters being seen on test.

The Century 24 drilling rig is now being moved to the Eremia 2 surface location and this well is expected to commence this week. Eremia 2 will initially be drilled as a pilot hole to establish the structural elevation of the reservoir in the Eremia Oil Field to the east of Eremia 1, and then a subsequent horizontal section will be drilled which will provide the principal drainage point for the Eremia Oil Field. Further details on this project will be made available at the time the well is spudded.

Participants in L1 and L2 (excluding the Dongara, Mondarra and Yardarino fields), are ARC Energy as operator with 50% and Origin Energy with the remaining 50%.