Armour Energy Exercises Right to Farmin to PRL2 in Gippsland Basin

Armour Energy Limited (the Company) announced Monday that the Company has exercised a right to farmin to Petroleum Retention Lease 2 (PRL2) in onshore Gippsland Basin, Victoria, Australia held by Lakes Oil NL.

The farmin agreement will give Armour Energy the right to obtain up to a 50 percent working interest in the highly prospective PRL2 as part of a two stage farmin program. Armour Energy may withdraw from the agreement without cost.

PRL2, located in the onshore Gippsland Basin in Victoria, is considered prospective for both tight and conventional gas accumulations and is in close proximity to existing infrastructure and markets.

PRL2 covers several tight conventional reservoirs in the Strzelecki Formation of the Gippsland Basin, onshore in Victoria. The southern half of PRL2 is considered by Armour Energy to be geologically very similar to the highly productive offshore section of the Gippsland Basin.

Numerous wells have been drilled within PRL2 by Lakes Oil in the past and have encountered gas and/or oil. Successful stimulation of the reservoir in vertical drill holes in the Wombat Field, within PRL2, has led to several encouraging flow tests in 2009 and 2010.

Armour Energy holds the view that the presence of gas‐bearing columns in excess of 1,640 feet (500 meters) thick across seven targeted structures in the Strzelecki Formation indicates potential for early definition of commercial reserves of gas. At the Wombat Field alone, four wells have been drilled and 3C Resources of 628 billion cubic feet (Bcf) of gas (2C 329Bcf) were reported by Lakes Oil in 2010.

Armour Energy’s right to farmin to PRL2 arose following the withdrawal (announced by Lakes Oil in August) of Beach Energy Limited (Beach) and Somerton Energy Limited from their Farmin Agreement with Lakes Oil relating to PRL2 (Beach Agreement). Pursuant to a separate agreement between Armour Energy and Lakes Oil dated Dec. 2, 2011, Armour Energy had the right to match the Beach Agreement in the event of a withdrawal by Beach.


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