Ann: Operations Update - Gurvantes XXXV, page-10

Take heart pwi33, I am with you as IMO it is difficult to understand undersaturated coals without a considerable amount of practical experience in the field combined with theory.

Coals tend to lose their original saturation from factors such as uplift, faulting Etc. and undersaturated coals are common.

Undersaturation IMO is the norm rather than the exception.

The high 2C certification focusing on the upper seams is a pointer good saturation, say 90%.

The graph below is taken from the published Model is controlled by a set of slide bars in the parent screen as shown in the screen shot below it.



An estimate of a 7month desorption delay has been used in the Modeling exercise and its economic impact on monetization of the gas down the pipe to China or from power generation has been taken into account but is not significant.

The 7-month desorption delay estimate could well be conservative.

The associated undersaturation has been taken into account in the Model by adjusting the initial desorption pressure estimate & abandonment pressure estimate sidebars on the associated desorption curve which controls the expected extractable PJ/Sq.KM.

The dotted blue and green lines in the above graphs represent a benchmark taken over a large number of wells in the Bowen Basin.

As things stand IMO:

The water rates are in the sweet spot where depressurization well below the desorption pressure has been achieved with water flow rates and pressure communication between the 3 pilot wells indicates good permeability.

The model presently has the well spacing set at 590M which again may be conservative.

There is always considerable variability in well performance in just about every CFM gas field and it is always good to see the first pilot performing as expected.

I am pretty comfortable with the deal done with Talon.

Best Regards

OGP