Ann: Vali-1 ST1 Update, page-13

Hi RED328,
The important insight gained at Vail-1 regarding the likelihood of Vali to flow gas at commercial rates after fracture stimulation (standard practice for Cooper Basin wells), is that the Joint Venture wisely ran MDT's (Modular Formation Dynamic Tester) during the final wireline logging run. This tool is run downhole on wireline and tests whether the reservoir will flow gas or not. If gas flows into this tool from the formation while the tool is open, this is a good sign. And gas did flow from the reservoir into the MDT tool at Vali 1 from the Patchawarra Formation (and others), which is the primary target of the frac. job. What we do not know, is how quickly the gas flowed into the MDT tool; the quicker gas flows from the reservoir into the MDT tool, the better the reservoir quality and hence the greater the chance for commercial flow rates on test after fracture stimulation. The Vali Joint Venture will know how fast the gas flowed into the MDT tool, but they have not shared this with the market.......

Remember, in the Cooper Basin, companies generally have to fracture stimulate reservoirs like those drilled at Vali-1, to enhance their capacity to flow at commercial rates. Without this stimulation, the well will likely flow at non-commercial rates. Hence Vali-1 is being fracture stimulated. Reservoirs with good quality sands, have good flow characteristics and therefore do not need to be fracture stimulated. Vali needs stimulation and therefore there remains the risk that it may not flow at commercial rates.

Frac. jobs do fail, companies do get it completely wrong. That said, given that MDT's in Vali-1 proved that gas will flow into the well bore, before fracture stimulation is a good sign. And both VEN and MEL management seem pretty confident that Vali will flow at commercial rates and they have more information then we shareholders do.

The map below shows gas production around Vali. Some good results to the west of Vali as you can see. But then there are wells like Kinta-1 just north of Vali that found gas, but it flowed at rates too small to measure because of poor reservoir quality / low permeability. Also note the Santos Crowsnest 1 well (4 production wells) drilled by Santos some 10kms west of Vali. It flows at good rates 5.6mmscf/day and it was possibly fracture stimulated but I do not know that for sure.





Map below showing number of production wells in fields west of Vali (Crowsnest, Bow, Beckler)





Kind regards OldGeo