Ann: Annual General Meeting Presentation 2019, page-259

mayor,

You asked the forum a few months ago, regarding the funds on Buffalo. I was the one who informed you, it was redirected to Dorado and referred you to the Dec quarterly.

A few things you guys don't know.

1. The $20M raised is NOT enough to drill a hole at Buffalo on our own - certainly not enough to start production,

2. We do NOT have a permit to "Extract" oil from the Timor Gov at Buffalo. In oder to get this permit, we have to submit a detailed plan (refer to FEED at Dorado),

3. Once we decide to go into production at Buffalo, we have to go all in - ie. spend an enormous amount of money (over USD $100M). You can Not just spend $50M and stop. Here is why:
a. The platform need to be refitted and that cost $M and they have to be leased for a number of years (not a number days) and if we don't use it, we have to pay out the contract, and that will cost many $M. Further, the cost on FPSO and subsea equipment will be similar.
b. We can NOT just drill one well for production - we need to have the other two wells drilled, in order to inject water or gas into the
reservoir to optimise extraction, otherwise the flowrate of oil will drop off significantly, and that means
c. We need a detailed plan and understanding of oil migration, porosity, permeability and pressure within the reservior (this is why JV spent over USD $250M at Dorado this year and another $100M next year, conducting all sorts of scientific tests),
d. We need to a detailed plan on abandonment and estimate its costs.

These are some of the things I can think of. Its a sunday morning.

Any way, I raised the point that we actually know more about the sands at Dorado than we do at Buffalo last week and if we were to drill a production well, we should be drilling at Dorado, and asked why isn't the JV drilling a production well at Dorado next year, and instead will spend another $100M doing FEED, in the hope someone would ask the company why?

Apparently no one did.

Any way, I guess the point I am trying to make is, we can't go into production at Buffalo in a haphazard way. If we did this, it will cost a many $M and will likely we will damage the Buffalo oil reservoir. We need to have a detailed understanding of the reservoir at Buffalo, as we are trying to do at Dorado. At the moment, all we got for Buffalo are reprocessed 3ds - we don't have all the scientific data that previous operator (like BHP) has.

Like you, I am frustrated to see the SP being pushed back on a daily basis. On paper at least, I am down by the value of a new house in Melbourne. And I wish something could be done immediately to burn the shorter. But I am also mindful of a knee jerk reaction from the company that could lead to the decimation of our share price. Refer to FAR as an example I previously made of bad decisions and its share price plummet.


If you, feather and Windsor want further explanations on why we are Not taking 100% risk at Buffalo, just give the company a call on Monday.

Any way, its time to enjoy my holidays.