drilling has commenced, page-8

Here you go TCG, I've cleaned up the formatting....

ASX Companies Announcement Office
13 August 2012

MBAWA DRILLING COMMENCES OFFSHORE KENYA

? Drilling operations have commenced at Mbawa
? Drilling has reached first casing point at 1,519m

KENYA L8 MBAWA DRILLING

Pancontinental Oil & Gas NL (“Pancontinental”) is pleased to announce that operator Apache Corporation, on behalf of the L8 joint venture, has commenced drilling the Mbawa Prospect in Kenya offshore area L8.

The well has reached a depth of 1,519m below the drill floor and casing is currently being set.

Drilling will recommence once the casing operation has been completed.

The drillship Deepsea Metro 1 is expected to spend a total of about 60 days for well operations to reach a total depth of 3,250m subsea in a water depth of 864m, easily within the range of modern exploration and production techniques.

Pancontinental has a 15% “free-carried” interest through Mbawa drilling by Tullow Oil plc up to a “cap” of US$ 9 million (as reduced by other exploration expenditure). After the first earning phase Tullow has an option to earn a further 5% by providing funding on Pancontinental’s behalf to a “cap” of US$ 6 million in any second well.

Pancontinental estimates that Mbawa has maximum potential to contain 4.9 Billion Barrels of oil in placeat the main Tertiary / Cretaceouslevel with significant additional potential to be tested by the well at the deeper Lower Cretaceous / Upper Jurassic level and shallower Tertiary levels. Only drilling is capable of verifying the oil and gas volumetric potential (if any) of the Mbawa Prospect.

Pancontinental has four projects offshore Kenya covering more than 18,000 square kilometres in licences L6, L8, L10A and L10B, with the L8 / Mbawa project being the most advanced and Mbawa being the first prospect to be drilled.

Pancontinental’s CEO Barry Rushworth commented; “We are very pleased that the L8 joint venture has commenced drilling Mbawa, which is the first of a number of Prospects that we have in our Kenyan areas.

We are pursuing what we see as a world-class oil play offshore Kenya. We believe that Pancontinental offers significant investment leverage, and this extends beyond Mbawa to our other Kenyan projects and also to Namibia.

The economics of oil developments are often far better than those for gas, with potential for much earlier cash flow and much lower development costs compared to LNG, for example.

After the recent consolidations relating to Dominion, Ophir and Cove, Pancontinental is one of the few listed companies globally offering significant leverage to two of the most exciting oil and gas regions of the decade, namely East Africa and Namibia.

Apache is now leading the L8 venture in a very aggressive exploration programme and in our other Kenyan blocks L10A and L10B we also have fast-moving activity led by BG Group”.

L8 / Mbawa Joint Venture
The Kenya L8 Joint Venture consortium consists of-
Apache Corporation (Operator) 50%
Origin Energy Limited 20%
Pancontinental Oil & Gas NL 15%
Tullow Kenya B.V. 15%