Elk-1 Update

Notes from the conference call:

Elk-1:

• Limestone reservoir
  
• very high pressure encountered in late May.
  
• TD at 1850m
• Temp: 186; P: 3580 psi
  
• DST2: has downhold gauge. limited flow rate of 21.7mcfd, causing only 2psi pressure drop for latest test
• Ran image logs, results being analyzed in Australia service company
• To complete well by running 5in casing.
• To test the well over longer-time.
  

Current Interpretation:

• Significant finding;
• Porosity: 1-1.5% fracture, Matrix: 8% in nearby cores
• z value: .8 for the field
  
• GOR: 5bbl/mcbf
  
• closure size: 32 to 100 sq. km, (gross?) thickness 600m.
• Reasons to believe there is oil: 16km away a well was oil. Mouse1/2 live oil recovered. All oil fields in area has gas cap. Age of HC maturation. gravity?

Next appraisal well:

• To be drilled down-dip in adjacent fault block believed to be in pressure communication with Elk-1;
  
• To sput in January
  
• To know more about size, continuity and deliverability e.g., the GWC and/or OWC.
  
• Aireborne gravity survey indicates another structure along the trend. Seismic to be conducted.
  

LNG Planning:

• LNG: 4-5 TCF reserve minimum, or double that for single train.
• 680(?) mcfd train capacity. deliverability is key.
  
• Merill Lynch negotiation: 5-10 TCF as the base case(?).
• How much a purchaser would pay: no comment. pre-Elk-1: 130mm+/tcf?