confused financial position, page-6

Hi callent

Cash value to MEO is $US39m plus an extra US$31.5m if and when A#1 comes good.

The total risked farmin value PBR have put on 50% WA-360-P is 31.5(cash) + 7.5(back costs) + US$41(first well) = $80m.

MEO have re-invested US7m of this to gain a further 5% equity from MOG (12% less, pro rata, than PBR paid for their 50% equity)

The unrisked farmin value is:

80(risked above)+31.5(bonus)+124(2 further wells) = US$235.5m

This is from the farmin agreement:

http://www.meoaustralia.com.au/icms_docs/68717_MEO_Executes_binding_farm-in_agreement.pdf

'Key terms of the farm-in agreement include:
- Petrobras to earn 50% equity in WA-360-P by funding 100% of the first well to a cap of US$41m (MEO retains 20% interest)
- Upon receipt of all regulatory and Australian Government approvals, including Foreign Investment Review Board approval, Petrobras will pay MEO a cash bonus of US$31.5 million and reimburse MEO's share of the past costs of approximately US$7.5 million
- In the event of a successful discovery, Petrobras will carry MEO's share of the cost to drill and test two follow up wells in the Permit to a cap of US$62 million per well, together with payment of an additional US$31.5m cash bonus in January 2011
- MEO to remain Operator until the completion of the first well after which Petrobras has the option to assume Operatorship.'

So MEO will receive US$39m from PBR within a month. Plus they are free carried on the first well up to US$41m. As MOG were already free carried fo the first well then MEO will still have nothing to pay.

In the event of success at Artemis#1 MEO will receive a bonus $US31.5m plus a free carry on two further wells up to US$62m per well.

As MEO has bought an extra 5% from MOG since this agreement they will have to participate in 5% costs of the next two wells. After this it will be 25%.

Won't it be great if we can get to the stage where we are paying 25% costs.

#:>))