A MESSAGE FROM ANDY WHITTLE
Dear Fellow Shareholder MAGELLAN (PALM VALLEY AND DINGO GAS FIELD) PURCHASE, OIL PRODUCTION FROM SURPRISE AND GAS FROM PALM VALLEY, ENCOURAGEMENT AT MT KITTY-1, DRILLING IN GEORGINA, STAGE 2 OF SANTOS FARMOUT EXERCISED, FUTURE SEISMIC AND DRILLING PLANNED. Central’s ninth year since listing on the ASX has been challenging both financially and operationally for the Company in light of the generally poor share price performance of small to medium market cap oil and gas exploration companies listed on the ASX. As a Board we are very aware of the market and our financials and have not gone to shareholders to seek additional funding during the past financial year despite the difficult times. We did however place 100 million shares with large domestic institutions raising $10 million to part fund bringing the Surprise oil field into production and we have recently secured a further placement of $6 million. In September 2013 the Board decided to consolidate our share registry on a one for five basis. I believe we have stabilized our share registry, are now more likely to gain institutional support in future capital raisings and this has made our shares more attractive to the bigger end of the market. The Board is confident that we are on the way to building a successful oil and gas company which is being positioned to capitalize on the opportunities that are opening in the gas markets on the eastern seaboard. The predicted gas shortfalls are well documented and we believe current fields and future discoveries in Central’s acreage will be key to meeting the market. I joined the Board in April 2012 and was appointed Chairman in April 2013. Over the past year we negotiated and completed the purchase of Magellan’s Amadeus Basin assets which include the Palm Valley and Dingo gas fields. This landmark purchase was paid for with shares and a cash component fully funded by Macquarie Bank, thereby moving us to a producer of both oil and gas. This was a very significant turning point for our Company. The required permits and pipeline licence to Alice Springs have been granted to allow Dingo Field development to commence. The field development program is on track with first production expected to begin by mid 2015. Dingo is entirely funded with facilities from Macquarie Bank. It is not often that a super-major (company) like TOTAL will farm-in to acreage of companies like Central and fund grass roots exploration. We are very excited to have them as partners and have benefited from their global knowledge in our frontier Southern Georgina Basin acreage. We operated the 2D seismic that was successfully completed during the year. We have commenced and are operating the drilling program which will hopefully find targets rich in unconventional shalegas worthy of flow testing. Mt Kitty-1 was drilled during the year by SANTOS as part of its Stage 1 farm-in program to our Amadeus basin acreage. The well encountered gas which was confirmed on wireline test and shown to contain significant Helium. Evaluation of the potential of the fractured reservoir is still ongoing. SANTOS then exercised its right to proceed to Stage 2 of its Amadeus farm-in which will result in a further 1,300 km of 2D seismic being acquired in the Southern Amadeus area estimated to cost $12 million and earning SANTOS a 40% participating interest. During the year we surrendered the four permits we held in Western Australia on trend with Surprise as part of our formal high-grading process. This decision was based on geological and geophysical studies that we conducted in house using new aeromagnetic and gravity data that indicated the Surprise play did not extend as far west as we originally thought. We hold areas with significant intra-field and near-field gas potential associated with Palm Valley and Dingo and other prospectivity in held acreage which we believe will provide us with an opportunity to supply into the east coast gas market shortfall. Central also still holds extensive exploration acreage that we believe has considerable future exploration potential. For example we hold most of the Wiso Basin and our explorationists are enthusiastic about this area following some recent inhouse work. Whilst production from the Surprise West oil well is below initial expectations we are firm believers in further developing the oil potential of the Amadeus Basin, but the advent of a gas market will lead us into the future.
Mr A. Whittle Chairman Melbourne, 30 September 2014
"Dear Fellow Shareholder, This last year I am sure will be remembered as the year in which Central Petroleum turned the corner.
The Company is now poised to unlock the undoubted shareholder wealth that has been latent for so long. Santos has committed to Stage 2 of the Farm-in for the Southern Amadeus Joint Venture. Drilling at Mt Kitty has proved that the Southern Amadeus is hydro-carbon charged and has helium to contribute handsomely to the economics of development. The drilling for the Southern Georgina joint venture with Total has also commenced. Underpinning this exploration, Central became both an oil and gas producer by April this year. Oil is being produced at Surprise and gas is being produced at Palm Valley as a result of the acquisition from Magellan Petroleum. The Dingo Field is being developed with the first gas expected to flow next year. Central reacquired the retention leases at Ooraminna. At each of Palm Valley, Dingo and Ooraminna, Central has an interest in the under-explored acreage surrounding those discoveries. As the Company’s operations expanded, so too has our commitment to the economic future of the Traditional Owners. Within 3 months of the Company becoming both an oil and gas producer we have over 30% of our production workforce sourced from the local traditional owners. Whilst aggressively growing oil production, exploration continues to be a cornerstone of our business strategy, and our progress over the past 12 months has positioned the Company to take advantage of one of the most exciting (and energy market transforming) infrastructure opportunities within Australia. We are now seeing a real opportunity to transition from a small company with enormous exploration acreage within a constrained domestic gas market, to a company with enormous acreage capable of supplying a large domestic market when that market is facing a gas shortage. We believe this will have once-in-a-generation change in Australia’s domestic gas market, making for a more deep, liquid and transparent pricing gas market which can only serve to benefit Australia’s gas users. There has been substantial public commentary about the looming eastern seaboard gas shortage in the near future (3-5 years), initially in the financial press but now in the front pages of the mainstream press and government talking points. The size of this problem means that the nation has no “silver bullet” solution. The national interest requires a lifting of the exploration moratorium in NSW and Victoria, increased contribution from the Bass Strait and the Cooper Basin, shale gas exploration, and for the Northern Territory supply to be connected to the eastern seaboard, optimally through Moomba. Further, the addition of multi-sourced aggregated 6 trains of LNG to the Eastern Seaboard demand profile combined with new and diverse gas resources within the NT create the economic conditions conducive to a major micro-economic reform of the energy sector leading to the advent of a deep and liquid gas market. In the past the absence of a deep and liquid market was a major barrier to the creation of a spot market. Without a spot market, an explorer on discovery required to enter into a bilateral contract with a user or an aggregator. To get such a contract, the explorer had to prove up sufficient reserves to cover the whole of the contract which required capital to be expended prior to the entry into sales negotiations. With a deep and liquid market Australia can create a National Balancing Point - an Australian benchmark like the “Henry Hub”. The benefit for the exploration sector of such a development coupled with a pipeline from Alice Springs to Moomba, cannot be overstated. The barriers to entry to the gas market for gas explorers – so high for so long – would be dismantled immediately. The ensuing competitive forces create the right climate long term for Australia to have an internationally competitive efficient gas market to the benefit of both gas consumers and suppliers. Most importantly for explorers, access to market would no longer have to await the accumulation of sufficient reserves to enable a bilateral long-term contract as the spot market would be able to consume any initial supply. As a gas producer with significant reserve growth potential, Central is now positioned to be involved in causing this critical piece of Australian energy infrastructure. Whilst we have no aspirations to own such a pipeline this has been a priority for your Company. We are hopeful that our nation has the political will to embrace this huge productivity enhancing step. Central will obviously benefit from such a development but so will the nation. Our focus to date is to position your Company to take advantage of this nation-building reform.
Richard Cottee Managing Director, Brisbane, 30 September 2014 5tial of the Amadeus Basin, but the advent of a gas market will lead us into the future."
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