dear mr chairman

Dear Mr Chairman


Congratulations to all concerned on the latest announcement, a situation that we have all been waiting a long time for. Credit where credit is due.

First ever horizontal well completion producing
oil in central Australia

First significant oil flow from an onshore
discovery well for almost five decades in the
Northern Territory

Not to take anything away from other hard working and loyal employees and the management team, it is clear that the discrete drilling expertise of Dalton Hallgren has been instrumental in ensuring that the Company brought home a successful well. Money well spent in my opinion.

It has been a long time coming, but it looks as if we are now at a pivotal time in the companies history and to paraphrase that well know speech of Sir Winston Churchill

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”.


Or as Neil Armstrong said “ the Eagle has landed”.


Clearly the commercial success of Surprise-1 Re-entry (Horizontal) now will provide cash flow within a reasonable time, I suspect 6 months maximum to get Oil out and to a railhead.

That cash flow will no doubt be of great interest to financial lenders and potential joint ventures, plus relieve pressure on the company.

This latest news will no doubt restore some credibility to the tarnished reputation of the management team and give some confidence to the market,

However I suggest that will be fleeting if management do not follow up with a specific and focused plan of action of the next 12 months.

But more importantly if they do not notify the market over the next 2 months of certain discrete factors.

So what is it that the market would like to see happen now to give confidence and reassure the market that management is focused and organised?.

Mr Chairman, I suggest the following is the minimum over the next 2 - 4 months.

1) An announcement (within the next 2 weeks) that the current Hunt rig is being retained (or other appropriate rig has been engaged) informing the market that as soon as practical after the wet season (April or May 2012) that a second hole will be drilled some kilometres away in the Surprise location, adopting a similar drilling (Horizontal) style to Surprise well, but this time with the proviso that the drilling pipes are set up in such a manner as to allow several different horizontal directions to be undertaken from the one vertical.

2) Notification that each of the 4 directors have made application (or have been allocated) their full entitlement of $15,000 with the Share Purchase Plan (or some other amount if reduced by over subscription)

3) A further announcement (within the next 5-6 weeks) that Central have entered into a JV with a company of repute, and that any associated drilling in relation to that JV will commence within 6 months.

4) An announcement that listing on the TSX will occur (and actually does occur) by no later than the end of March 2012.

5) An announcement (within the next 12 weeks) that Central have signed a firm and binding contract with a transportation company to transport the recovered oil to the appropriate location, coupled with notification that a binding contract has been entered into with a buyer of our oil.

6) An announcement (within the next 18 – 26 weeks) that Central has contracted to purchase a drilling rig which would start drilling later in 2012 or early 2013. (dependent on weather) coupled with the fact that the company has entered into a contract for the next 3 + option for a further 3 years that the rig be leased to a professional drilling company (who will supply the labour etc) with the specific provision that Central has the first right of call on the rig.

7) An announcement that Central has put in place a line of credit or some other financial accommodation at attractive rates.

It is axiomatic that Central (and the Oil exploration industry in general) had great difficulty in locating a suitable rig, and Central were indeed fortunate to obtain the Hunt rig.

There were those that said it was an inappropriate rig to use.

That may have some merit, but when one is out in the middle of the Pacific Ocean clutching to straws to stay afloat, and a tramp steamer passes by, one does not say

“I will wait for something more comfortable thank
you“

The Hunt rig saved Central from a position of probably not being able to drill surprise this year and it has brought home the bacon.

Without that rig, (Or some other appropriate Rig) the SPP would have failed, the company would have had serious cash problems and serious difficulties in being able to obtain funding from outside sources.

It would probably have been back to the “Bonds issues” something that many shareholders found expensive and unpalatable and destroyed confidence in their investment.

It would in my humble opinion be a voyage into lunacy to release the rig and hope to get it or another back later in 2012.

Adopting the maritime metaphor it would be, rather like being saved by the tramp steamer and then within sight of land jumping over board into a shark infested sea and saying to the captain,

“thanks for the ride we will wait here now for
another ship”

We do not know if we can get another rig and or when we might get one. It may in all reality be late 2012 or early 2013.

A time frame that is simply too far away and more importantly too uncertain as to outcome especially in circumstances where Centrals main priority must be to monetise and maximise the Oil we have located at Surprise.

I am aware that recently some 12 brand new drilling rigs were landed in Australia and all were contracted to a major oil exploration company before they even hit our shores.

There is a gigantic shortage of rigs for drilling in Australia and that will continue for several years to come particularly those that have specific hook rates that we need to drill deep holes.

I know for a fact that drilling companies have clients waiting in line to hire the rigs and are now charging higher rates due to law of supply and demand.

If Central allows the Hunt rig to be released, without another suitable rig already contracted for some time in the second quarter of 2012, then I suggest that management would need to start looking for new employment.

Now that we have proven a commercial Oil well, our main focus must be to maximise on that success and duplicate and expand, to the point where we start to become cash flow positive.

I am well aware that Central is an Oil exploration company, but it has now turned the corner into becoming a producer of Oil.

That needs to be it main focus for at least the next 6 months.

We are never going to have enough reports, seismic or otherwise, where management says, we are confident of what we have in our 240,000 square kilometres.

The company’s priority must be increasing share value as quickly as possible so that it removes the potential for smaller but more aggressive corporate raiders to make a hostile take over bid.

The company is in an extremely venerable position at the moment. It has a depressed share price, proven resources and will soon produce commercial oil.

An attractive target for those who have the wherewithal.

Management has this opportunity to focus and make decisions that are astute.

Sufficient leeway has been given by shareholders. I doubt that they will be as forgiving in the future if sensible and pragmatic decisions are not made now.

In fact I could confidently predict a mutiny.

Camdenbob