ferret's stock to watch: mosaic oil nl

Ferret's Stock to Watch: MOSAIC OIL NL
08:44, Friday, 29 October 2004


A SMALL GAS/OIL PRODUCER SHOWING PROMISE IN QUEENSLAND

Sydney - Friday - October 29: (RWE)
*************************************

OVERVIEW
********

Emphasis on energy and demand for natural gas is becoming a prime
mover in the search for expanding local producers.

One company that fits this category is the hard working Mosaic
Oil NL which seems seriously under-rated by the market.

It's had a couple of hiccups in the last year or two but has
never wavered from becoming a prolific and profitable oil and gas
operator mainly in the highly prospective region of southern Queensland.

Earlier this week the company announced production had exceeded
all previous company benchmarks and the quarterly gas sales were almost
equal to last year's total gas sales.

When all payments are received for production, Mosaic's revenue
for the period exceeds $3 million - a company record.

Oil production was 13,636 bbls (11,535 bbls in June quarter),
gas production 639,973 GJ (218,254 GJ) and LPG production 905 tonnes
(476 tonnes).

The company says it is focused on its Queensland assets because
the existing infrastructure shortens development time of new projects.

In addition, the gas and oil prospects are sufficiently large
to have an impact on shareholder value.

Energetic managing director Howard Brady told the Ferret the
company's strategy was going well and it was only a matter of time in
completing more producing gas wells.

"The market hasn't really appreciated what's happening here - so
watch this space."

Directors point out that "Mosaic has spent several years
exploring for and finding significant gas reserves in southeast
Queensland.

"We are now in the development and commercialisation phase for
those discoveries.

"In this regard our priority is to drill development wells when
we have firm contracts for sales from those proven gas reserves.

"Given the high oil price, we are presently looking at all
potential oil reserves, whether in old wells or in discovered
reservoirs that require further technical and development work,"
directors added.

Mosaic will continue to develop its substantial lease holdings in
Queensland while monitoring any potential developments in Mosaic's
present interests in the North West Shelf and Papua New Guinea.

SHARE PRICE MOVEMENTS
*********************

Shares of Mosaic yesterday traded at steady at 21c. Rolling high
for the year has been 26.84c and low 14.5c.

BACKGROUND
**********

Mosaic Oil NL, an oil and gas explorer listed on the Australian
Stock Exchange on February 23, 1989.

It has mainly concentrated on the Surat Basin in Queensland
although has interests on the North West Shelf of Western Australia and
Papua New Guinea.

Production interests are mainly located in the Surat/Bowen Basin
in south east Queensland.

Mosaic's production licenses cover the Churchie Gas Field (49pc),
the Silver Springs Area (100pc), the Waggamba Gas Field (100pc), the
Downlands Oil and Gas Field (83.3pc) and the Downlands East Gas Field
(71.2pc).

The company lists small producers including the Fairymount
(100pc) and Riverslea (10pc) Oil Fields and the Major Gas Felid
(16pc).

On the North-West Shelf the company holds WA-208-P (7.46pc)
located between the Cossack and the Legendre oilfields.

The permit holds a number of prospects ranging in potential
size from 50 million barrels of oil (mmbo) to 500 mmbo.

The company says the next exploration well in WA 208 will be
drilled in 2005 or 2006.

Mosaic holds a 28.6 per cent interest in the Kimu retention
license, which is operated by Oil Search Limited.

On the technical side the gas recovered from Mosaic's areas in
Queensland is a 'wet' gas and is often valued at more than double the
more regularly discovered 'dry' gas.

This is because the gas contains light oil and LPG that can be
sold separately.

Unlike Cooper Basin gas, Mosaic's Queensland gas has no carbon
dioxide or sulphur.

In addition, the associated oil is very light, high grade and is
sold at a slight premium to the world oil price because of its quality.

CEO Dr Howard Brady has gone on record as saying the new gas
province Mosaic has discovered in Queensland has company-making potential
and now dominates our business plan.

The company is focused on Queensland because it already has a
large acreage position and under-utilised infrastructure.

All our gas/oil targets are within 30 kms of our substantial
infrastructure.

On the website Mosaic claims to be the the first company in
Australia to drill a reservoir zone with pure nitrogen.

This was done by the large US services company Halliburton.

The technology is frequently used in North America in areas where
it is thought that drilling muds may invade rock strata and block gas
production, or where it is thought the use of air could lead to down-hole
fires in coal seams.

Since Mosaic's first use of nitrogen in 2002, the technique has
also been successfully used by Origin Energy.

In such wells a hole is drilled to just above the target zone
using normal drilling muds and the hole then cased with 7 inch casing.
The reservoir is drilled out using nitrogen gas that is pumped down the
well at high speed both to cool the drilling bit and bring rock chips to
the surface.

This type of drilling is 'live' and gas and oil may be produced
while drilling continues.

ENDS

Copyright © 2004 RWE Australian Business News. All rights reserved.

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Cheers,

Fig Jam

I don't hold MOS