Melbana Energy Limited

The Plover re-drill was abandoned after the sidetrack hit unstable Elang shale, which collapsed and stuck the bit at 3,967m. A separate new well is needed for the Plover. The Epenarra Darwin production test is brought forward to later this week.

drilling result

Heron-2 testing resumed after Cyclone Helen. Only the 15m Elang sand flowed gas, about 6 MMscf/d, dry and high in CO2. Blockage and mud-loss treatment appear to have stopped the Plover flowing. MEO plans a sidetrack to redrill the Plover, then test it and the Epenarra.

flow test result

Heron-2 began flowing gas to surface from the Plover, but a prolonged clean-up is needed because lost drilling mud and loss-circulation treatment impaired the formation. The well was shut in for Cyclone Helen, and MEO called a trading halt until 8 January. No flow rates or gas quality are reported yet.

flow test result

Logs show Heron-2 has drilled 202m of Plover with about 164m of gross sandstone that appears gas charged, with no CO2 recorded and 5-10% porosity. Partners approved a barefoot production test of the Plover, due the week of 31 December. The gas-water contact (4,260m) has not yet been reached.

drilling result

MEO placed 50 million shares at A$1.25 to raise A$62.5m before costs, heavily oversubscribed. Funds go to production testing, about 800 sq km of new NT/P68 3D seismic (March 2008), Northwest Shelf seismic, LNG and methanol project studies, and contingency. Earlier funds already covered dry-hole costs.

capital raising announcement

Partners approved a production test of the Epenarra Darwin Formation in Heron-2, citing gas saturation over 50m of Facies C (3,109-3,159m), no CO2 in mud gas and 5-12% porosity. It follows the 27 Nov logs. The test can only occur after drilling, and possible testing, of the deeper Plover.

well test result

Heron-2 logs through the Darwin Formation preliminarily indicate Facies C is gas bearing, and 18 side-wall cores were taken. Partners are reviewing the data before deciding on flow testing. MEO says it still cannot confirm gas quality or a recoverable resource until gas is recovered.

drilling result

Heron-2 hit the top of the Darwin Formation at 3,062m, 62m higher than predicted, with elevated gas readings in the mud. MEO calls this encouraging but says it cannot yet confirm gas quality or a recoverable resource. Logging and testing are still needed.

drilling progress report

MEO farmed into three Northwest Shelf permits (WA-359-P, 360-P, 361-P) operated by Cue, earning 60% and becoming operator by funding seismic; up to 70% if it funds a well. Targets the Zeus prospect, with 5-15 Tcf in-place potential per MEO. Drilling likely 2009.

farm in farm out agreement

MEO says a substantial shareholder sold about 3.5m shares on market and refused to state its intentions. The company is worried about the share price impact and has begun a strategy to ensure any offer for the company reflects full value. Seller not named.

price query

Heron-2 spudded late on 12 October 2007 in NT/P68 (MEO 90%, Petrofac 10%). The 30-inch casing is set at 108m; planned depth is 4,300m, testing the Epenarra Darwin Formation and deeper Elang/Plover. Heron-3 horizontal well follows depending on results.

drilling spud

The Commonwealth environment department ruled the 2007 NT/P68 drilling campaign is not a controlled action, so no further environmental assessment or ministerial approval is needed and drilling can proceed as scheduled. Clears a regulatory step before Heron-2.

regulatory community update

Petrofac Resources farms into NT/P68 for 10% by funding 25% of 2007 appraisal well costs, with an option to reach 15% and to join the LNG/methanol projects. Alongside, a placement of 41.25m shares at A$1.00 raised A$41.25m, plus a share purchase plan. Follows the earlier partner talks.

farm in farm out agreement

Early 3D interpretation shows a flat event on Heron North and South, possibly a gas-water contact. Estimated gas column exceeds 350m and P50 gas in place rises 65% to 5.5 Tcf. Combined with Epenarra, resources exceed 11 Tcf. Unproven until appraisal drilling.

resource reserve update

CSIRO and IPSA studies of Heron-1 rock samples indicate Epenarra gas likely has high condensate (~100 bbl/MMscf) and low CO2 (1-3%), seen as suitable for LNG. This supports earlier modelling, but Heron-2, scheduled for September 2007, must confirm it.

resource reserve update

The Federal Government granted Major Project Facilitation status to the Timor Sea LNG Project and renewed it for the Tassie Shoal Methanol Project (first granted December 2001). Both already hold environmental approvals. It helps with government approvals but does not fund or secure gas supply.

regulatory community update

Placed 25 million shares at 48c to raise A$12m before costs from institutions, managed by Tolhurst Noall and WH Ireland. Funds go to long-lead items for the three-well NT/P68 program in the second half of 2007. This dilutes existing holders.

capital raising announcement

A study by consultant IPSA suggests Epenarra could hold at least 650 million barrels of in-place condensate, with 120-300 bbl/MMscf yields. P50 gas in place stays at 5.6 Tcf. Refines the earlier condensate estimates (about 675m bbl at 120 bbl/MMscf) with a consultant-backed range.

resource reserve update

Letters of intent secure the West Atlas jack-up rig for a minimum 12 months, shared with Coogee Resources. It is due at Heron-2 in August 2007 to drill two firm wells (Heron-2, Blackwood-1) plus an option for a third. This resolves the open rig thread.

contract award

A wetness study estimates Epenarra condensate-to-gas ratios of 120-300 barrels per million cubic feet. Using 150 and the 5,620 Bcf mean gas, in-place condensate is about 800 million barrels. This adds a liquids upside to the prospect; the Heron-2 rig is still being secured.

resource reserve update

PGS Australia awarded the Epenarra 3D seismic contract, expanded from 410 to 500 sq km, starting 13 September 2006. The Blackwood 2D survey slips from September to late October. Drilling still planned for late 2007; Epenarra mean gas resource stays 5,620 Bcf.

contract award

MEO places 10% of its shares with Cambrian at 22.5 cents (about $3.16 million), plus a 1-for-4 rights issue at 22.5 cents (about $8.7 million), totalling about $13 million. It funds 3D seismic over Epenarra, and MEO keeps 100% of NT/P68 instead of farming out. Drilling is planned for late 2007.

capital raising announcement

Share trustee sold 8 million shares via Patersons to raise $1.6 million for MEO as capital, with no new shares issued (still 140,450,105). Working capital rises to about $2.6 million while MEO pursues a farmout of NT/P68.

capital raising announcement

Methanol Australia (MEO) assigned its May 2006 Stena Clyde rig slot to Santos, which will reimburse MEO's third-party costs. No NT/P68 drilling is required in 2006. Santos will try to provide a replacement slot before end-2007, giving time to shoot 3D seismic first.

drilling scheduled