Ann: Galoc Phase II Drilling Update Number 6 , page-3

re: Ann: OEL: Galoc Phase II Drilling Update ... When they drilled Galoc phase 1, the 2 wells (G3 + G4) took 3 months (with a week typhoon delay) to complete (excluding testing) including a 3000m pilot vertical well sidetracked from G4 to test the reservoir. This also included time to take 38m of core samples + 5 fluid samples.

The G3 + G4 testing was completed 6 weeks later in Feb 08 with G3 at 5395bopd & G4 at 6465bopd restricted. Of course back then they had a lot of infrastructure to put in place before production could start. This was further delayed by typhoons which damaged the subsea moorings. In fact production didn't start till 8 months later in October, some 6 months later than forecast.

Many remember the long wait, especially as the GFC set in at the same time. However in Oct they announced flows of 20,000bopd being produced, unfortunately at GFC prices.

With the current drill, they don't need to do the testing that was previously done, nor do they need to drill a 3000m pilot well to test the reservoir. They are drilling into P1 reserves. And of course the previously time consuming infrastrucure is already in place, infact recently upgraded.

I thought the share price of both Nido & Otto would have taken off by now with the almost tripling of production rates not far off. This extra production will be cream as most of the production costs are fixed. Maybe the market remembers the delays of phase 1, but as I wrote above, I believe much of the risk has been taken out of phase 2. For sure a typhoon may delay things a week but so far the drill is going flawlessly, on time - on budget and oil is over $100 a barrel.

I fully expect results to surprise as did Galoc phase 1. Phase 1 had a total of 2900m of horizontal production completion, Phase 2 will have up to 4000m so it is certainly possible we could get flows above Phase 1's 20,000 bopd.