This is Mr Lincoln Augustus, first second cousin of...

This is Mr Lincoln Augustus, first second cousin of Holymagiman

My dear Mr Kingcarmello, I see that you are slightly perturbed by the flow rates in Metgascos wells.

The family has sat around and talked about it, and we are most upset that you are most upset. We have therefore got Holymagiman to make us some of his finest Jamicca Numba One Extra Spejil Blend and we have used these to assuage our misery at your discontent.

It surely is a shame that you are not here this morning to join in the commiserations, for we are sure that the Numba One would have totally commiserated you.

So, after much discussion, Uncle Tobias suggested that we pen you these few yords in the hope that you get reassured.

Firstly, we remind you of a fact that Metgasco has stated many times before about the Clarence Morton Basin, i.e.:

1.Coal seams in the CMB do not produce significant quantities of water

2.The water that is produced is of acceptable quality to be re-used


The Clarence Morton Basin appears to be a very different beast from the rest of the coal seam projects in Queensland and New South Wales.

There are massive water disposal issues with most of the other projects in Queensland, and with the Greenies having a bit more power, one should be a bit wary of what demands they may make on the proper and safe disposal of this water.

This is one of the reasons why the family feels a slight tinge of discomfort with Eastern Star Gas, (even though we own all of 52 shares in Eastern Star) as Eastern Star has a lot of issues with water production and its subsequent disposal.

Metgasco has very little water disposal issues as very little water is produced in its wells. You will of course realize that safe water disposal can be costly and cause issues with neighbouring land-owners and me-too politicians out for a vote, so if there is very little water being produced, these issues are circumvented. And this is an important issue, perhaps more important than you or many others realize.

A fact that should be remembered is that the Clarence Morton Basin is very similar to Horseshoe Canyon in Central Alberta.

Metgasco has demonstrated that the basin is gas charged with a coal seam gas resource covering more than 100 km of strike

Metgasco is utilising new technologies from the US - CBM, Shale and Tight Gas to bring the basin into play

Some reminders of our wells:

1.Corella P11 in PEL 16 is flowing at more than 200,000 scfd, and has reached rates of 225,000 scfd. with very low water production of about 58 barrels per day.

2.If you remember, Riflebird E15 in PEL 16 was drilled to total depth of 757 m and short term flow test was conducted immediately after reaching total depth and immediate gas flows to surface were observed. The well has now being set up to run a long term production test.


3.Wyan-E1 is located in PEL 13, approximately 28km south west of the township of Casino and had a flow rate of 175,000 scfd.

4.Orara-E1 well was drilled in January 2009 in PEL 426 . This well was an exploration well designed to locate and evaluate the presence and thickness of the Walloon Coal Measures and the Heifer Creek sandstone in the southern area of the Clarence Moreton Basin. The well was drilled to a total depth of 680 metres and free gas flows to surface of up to 100 Mcf/day were observed flowing to the wellbore.


The company has stated previously that there is a potential for 10 Tcf of coal seam gas resources.

There is also a P50 OGIP of 1.3 Tcf of conventional gas with an upside estimate of P10 of 14.9 Tcf


Now we have previously reminded you about the Horseshoe Canyon Coals in Alberta and their similarity to the Clarence Morton Basin. You will see above that the Metgasco wells are flowing at rates from 100,000 scfd to 225,000 scfd, and these flow rates must be taken in context. Every well that Metgasco has drilled has free flowing gas and very little water.

These vertical wells are relatively cheap to put in, so a whole heap of verticals can be put down to get a very large total gas flow at a low cost. To understand this fully, I would refer you to

http://www.searchanddiscovery.net/documents/2010/80079waffle/ndx_waffle.pdf

so that you can fully understand the significance and what happens as a company drills more and more wells year by year in a low water gas charged environment. Multiple wells in a low water gas-charged basin put the other water filled regions to shame.

Remember the name Horseshoe Canyon when you are feeling a little miserable.

I have included part of the abstract from the above link to show you that Metgasco is in a very good position re its flow rates.:

Albertas first commercial production of CBM was established in 2002 from the Horseshoe Canyon Formation. The coal stratigraphconsists of multiple thin, 1- to 10- foot seams with net coal thicknesses of 25 to 80 feet, occurring at a depth of 1000 to 3000 feet. The play trend covers an area of at least 90 x 300 miles with an estimated initial gas in-place of 147.0 TCF. Currently an estimated 7000+ wells produce from the Horseshoe Canyon, with initial production rates across the trend averaging 100 mcf/d. This dry CBM play requires little to no pumping of water before production.

You see, Mr Kingcaramelo, the coals occur between 330 m and 1000m, with net thickness of coal between 8m to 25m. Which is very similar to Metgasco.

And you can see that as the years go by, more and more wells are put down.

This report is by Trident, and on page 19 of the report you can see that Trident has 750 producing wells.

On page 23 of the report, Trident states that it is producing 123mcfd from its wells. This is 123,000,000 scfd from 750 wells, which works out to 164,000 scfd a well, which puts Metgasco wells right in the ball park.

But so we must reluctantly finish off the last of the Jamaica Numba One as there is much work to be done this Friday morning. We hope we have at least partly answered your questions on the well flow rates, and makes you understand why we think there is grest potential in Metgasco.

Blessing of the Lord
MLA