agm update

Good morning,

Here is my take on the AGM.

Eromanga Hydrocarbons AGM Nov 28th 2008

Slide 1

• The cost of finding and developing oil at 330 works out to USD50 cents a barrel, average in the US is $USD17 per barrel.
• Highlights low cost and high prospectivity of the region we are in


Slide 2 – No comments

Slide 3 – No Comments

Slide 4

• Production has now stabalised. Company pleased with this.
• Now looking at placing a pump on the well with 20% greater capacity. This should increase production rates. With stimulation should get them up to the 135 bpd in their original assumptions.
• Possibility of gaining even greater production rates by drilling a horizontal well. All options being explored.
• With the drilling of the appraisal well near to the mineral well that was discovered in Sept, the company hopes to firm up the field size and also to get better production rates because part of the reservoir was cemented in with the re-entry of the old well.

Slide 5

• With each well the company can get closer to the 3P number. This is the objective apart from increasing production rates.
• Low capex, with only a 40% share to ERH. Very low cost development, whole field is $10m and ERH shares is as you know 40%. Not a bad proposition.

Slide 6 - PACA 2 Appraisal Development Well

• Highlight for the meeting on this field was that the appraisal well will be underway in the next few weeks and should spud In Jan 2009. Expect higher flow rates..
• )

Slide 7 – Block 430

• The amount of oil in place for the recently announced 430 field size is only related to the amount sitting within Block 430 itself. If you include Block 429, it increases in size by 50%. There is potential for the amount in 430 to increase but this will be discussed after 12th Jan 2009.
• Partners in Block 429 have drilled a prospect in Block 429. They had the same issues drilling and extracting oil from the three zones found in our well. They have now spent the money required to keep their field for further exploration. However, our Executives believe that what has been drilled on 429 is a different structure to the field that ERH have discovered in 430. They are sharing knowledge and hope to leverage off the resources and contacts that Petrobas and Petrogal have.

Slide 8 – Table for 430 Oil in Place

• As discussed earlier, this is only the oil in Block 430. Can go up but we will have to wait until Jan 2009.
• The appraisal well at 430 will better test the lower carbonates ( they’ve learned a lot in regards to how to drill and how to test these sections ) and the basement. They know the surrounding fields produce prolifically from the basement, we will get the oil out.
• Only disappointment here was that the Appraisal well is not due to be drilled until about April/May 2009. A matter of priority.

Slide 9 – Block 430 Location 2

• Disappointment here is the date for drilling. We were originally told that once the rig has drilled two other prospects for other clients it would come to Location 2 within 40 days to drill this prospect. There are a few initiatives going on with Location 2 and they are talking to the relevant authorities about this. Again, low cost exploration well.
• The company states that flow testing 430 first well, and appraising it is of greater priority that drilling the second location, not that they don’t think there are great things to come from it. They are excited about the prospect.

Slide 10 - No comments

Slide 11 – Block 138

• I asked the company why they are drilling Block 138 before the more prospective Block 59. Their comment was that after seismic was shot, Block 138 has turned out to be as prospective as Block 59.
• I asked about the potential to give us Block 59 if drilling is not completed before 12th Jan 2009. Their response:
o They are already speaking to the ANP to make sure that this does not happen.
o They are monitoring progress on 138 very closely with Christian Turner and John Weston both in Brazil at present to ensure things stay on target.
o They are drilling 138 first because it is shallower. According the company’s legal sources in Brazil, they only have to commence drilling to maintain the block, not finish it by 12th Jan 2009. Phil is confident that they will reach target before 12th Jan 2009.
o The company’s legal advice is that having a rig slot, all the civils done in preparation is enough to allow the company to be granted extension should the well not spud before 12th Jan 2009. I am comfortable about this. It was thoroughly discussed.

• The company is showing a timeline for the well to learn from it’s previous reporting mistakes. They want to keep us fully informed of progress and the chart with the actual progress will be included in the weekly reports.

Slide 12 - Block 59

• Nothing to add that isn’t known except that production rates from both 138 and 59 will be in the 0,000’s of barrels per day initially as these are shorter life but high flow rate wells.
• Idea here is that 430/330 give you long life low flow rates and you get the bonus of 138/59 giving you 5-6 years of much higher flow rates to boost income and cash. Very good strategy.

Slide 13 – Indicative Project Schedule

• Was disappointed to see the timeline move to the right on nearly all the drilling but that is oil exploration and development for you.
• Block 59 and 138 in the timeline are the wrong way around.

I had a few questions written down that I wanted answered and I will go through them.

I asked about the 4,000 bpd development plan and when we expected to have that sort of production.

• Phil’s response was that in 6 months they will have this development plan approved by the ANP.
• The actual date of achieving the date for 4,000 bpd is 3-4 years, 2,000bpd at 330 and 2,000 at 430. Not ideal but if you think about it, 3-4 years you could be sitting on a multi dollar stock. You just have to be an investor and not a trader. I am in it for the long haul because from these levels, the rewards are enormous. The fields have been found, they will be proved up and then you have development. Slowly but surely.

Now if 138/59 are found to have oil and they flow at more than 1,000bpd, well then all bets are off and you can expect a rocket under the share price.

I asked about the Flow rate at 430 and why we haven’t been told what it is yet.

• Due to all the technical difficulties in testing the different sections, they only have a flow rate for the top section. They have to work out how to get the oil out of the basement and and the best way to produce two different API oils from the top two sections without giving up the max cash flow from having a API oil in the top intersection.

Someone asked if our JV partner has the funds to complete their share and the answer was yes.

I asked about the Appraisal well updip at 430 and they are excited by this prospect but want to commence the extended production test at the first location as a priority.

I asked about the appraisal well at 330 and whether or not we can expect better flow rates. They said yes. The dynamics of having a new oil well opposed to a 40 years old one will change a lot of characteristics about production from the new well.

All my other questions were answered.

When presenting in New York recently, they were part of two days of oil presentations. They were invited and didn’t have to pay the $30k to present to this prestigious audience. All the other juniors were about shale oil and exploration plays in the US. ERH was the only conventional oil play and they are no longer seen as the exploration play but a resource play. In that we mean that we are in a position to convert resources to reserves by continuous development at our fields. Changes how investors see ERH. The next day investors were talking to Phil about contributing to our success in various forms. So that company has cash at it’s disposal should the need arise.

The company is funded to complete the whole project schedule for 2009.

Another investor asked about the converting shares and what the plans were for calling up funds. The company has no plans to call up the partly paids.

Overall I walked away happier then when I walked in. Believe me I am not one of these people that get bamboozled by a presentation, I take it with a grain of salt. I was not blown away by it all, but have a level of confidence in the management and the company that will ensure I stick with one until the potential is realised.

I look forward to the two wells at 138 and 59 because there is huge potential to get a couple of thousand barrels a day. With a rating of a 30% chance of success,( in the oil game that is 6 times higher than the normal odds place on oil exploration ) I am sticking with it. Yes it had taken longer to get to here than we wished and yes we have been decimated by the Financial markets meltdown.

However, we have a tremendous opportunity to return to investor favour when sentiment returns. Oil will bounce back over time

Regards

Kojasper