report to 31.12.04 31 January 2005 Page 1 of 3 ASX Companies...

report to 31.12.04 31 January 2005 Page 1 of 3 ASX Companies Announcement Platform (ASX Code: MPO) SYDNEY NSW 2000 QUARTERLY ACTIVITIES REPORT FOR THE QUARTER ENDED 31st DECEMBER 2005 Highlights: • Production and sales continue from the Mungi Coalbed Methane Gas field in Queensland; • Drilling of 5 new CBM wells in Queensland; • Production testing resumes at PEL285 near Gloucester in New South Wales; PROJECT REVIEW Mungi Gas Field, PL94 (25% interest, northern portion) – Bowen Basin, Queensland Molopo’s gas sales in Queensland for the quarter were 62.7 terrajoules (“TJ”). Revenue from gas sales over the period was $149,287. Three new development wells, Mungi 14, 16 & 17, were drilled in November/December and are to be water fracced and tied into the gathering and processing facilities previously installed under the recently completed Phase 1 development programme. Completion of these wells is expected in February 2005. A fourth new development well (Mungi 15) is likely to be a horizontal (SIS) well and is expected to be drilled in March/April 2005. Delays to the Phase 2 program have been a result of rig unavailability. Gas from the new wells will be sold to Origin Energy under an existing gas sales agreement. While it is likely that Origin will act as Operator for the programme, they have no equity participation in the three Mungi fracced wells and are unlikely to have any equity in the horizontal well (Mungi 15). This will entitle Molopo to 50% of the gas from the wells drilled in Phase 2. It should be noted however, that should Origin Energy elect to participate in Mungi 15, Molopo’s interest in that well will reduce to 25%. Gas produced for the quarter was 44,239 gigajoules (GJ) from Molopo’s share of production from eleven wells and associated infrastructure installed during the Phase 1 development programme. In the December month, Mungi gas sales increased due to an increase in the received gas price and additional volumes of gas sold to Origin Energy pursuant to the gas sales agreement. To meet the larger volumes of gas supplied to Origin Energy from December 1 2004, Molopo purchased 23,175 GJ of gas for delivery in December. As Molopo’s share of production from the Phase 2 wells becomes available, the requirement to acquire gas to meet these commitments will decrease. 1
Mungi is independently credited with total reserves of 51 petajoules (“PJ”), of which 25 PJ are in the 2P (Proven & Probable) category, although reassessment of both reserves and Joint Venture estimates are likely as production results from new and existing wells are analysed. Harcourt/Bindaree Gas Prospects - ATP564P (25% interest) Bowen Basin, Qld During the December quarter, the Joint Venture commenced the drilling of the Bindaree 01 and 02 production test wells at the Bindaree Prospect north of the Mungi Field. Both wells are expected to be fracture stimulated in February 2005. The Bindaree Prospect is considered an extension of the Mungi Field and lies on the northern boundary of PL94 between Mungi and Harcourt. Molopo and its Joint Venture partners have applied for a Petroleum Lease (production licence) covering 178km2 to the immediate north of PL94, which encompasses both the Harcourt and Bindaree Prospects. It is expected that the two Bindaree wells will be tied into the Mungi gathering system should the Petroleum Lease be granted and production results warrant. During the quarter, production testing at the Harcourt 2 horizontal (lateral) well was suspended due to restricted access, although the well was recently placed back on line. As it is likely that the well is producing from only one of four possible seams, Molopo has requested the Operator investigate options for lining the accessible lateral in order to evaluate the maximum production from this single lateral. The Harcourt SIS lateral well is located approximately 10km to the north of the Mungi Field. The Harcourt/Bindaree area is credited with total reserves of 63 PJ, of which 24 PJ are in the 2P category. Should Harcourt production testing demonstrate commercial flow rates, the field could be developed as a progressive northern extension of the Mungi/Bindaree Fields. Timmy Gas Prospect - ATP602P (25% interest), Bowen Basin, Qld During the December quarter no production testing was conducted on the Timmy Prospect. The Operator has continued to try and secure a suitable rig for conducting the lining of the two separate intersecting laterals before production testing resumes. This work is expected to be undertaken in the current quarter. The Timmy Prospect covers an area of approximately 17,000 acres and is located to the south of PL94. No reserves have been established at Timmy, but the Joint Venture’s most recent estimate suggests the prospect could contain recoverable gas volumes of up to 137 PJ. Gloucester Basin, NSW – PEL 285 (25% interest & Project Manager) The Gloucester Basin permit is located approximately 100km north of Newcastle and covers an area of 1,308 km² and has over 200km² of prospective coal measures. The initial focus of the two Joint Venture partners is on a 5km2 area referred to as the Stratford Prospect which has an estimated 90 petajoules of gas in-place, During the December quarter, production testing of the LMG03 vertical fracced well recommenced for a 3 week period until pump problems resulted in the well being suspended awaiting a workover rig to run a new pump. This is expected to occur in early February. The well was first temporarily suspended in September when it became apparent that the pressure reduction which had given rise to the onset of gas production in the well had also resulted in gas and consequently water production from a number of old coal exploration boreholes up to 300 metres away. These boreholes were drilled by holders of previous coal exploration titles and, despite not being the responsibility of the Joint Venture, were sealed by it so that production testing could resume. The obvious connection of the coal boreholes to LMG03 over such a short time frame and particularly given the small pressure reduction in LMG03 is an indicator of very good reservoir permeability and connectivity.
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The LMG03 well was completed across four coal intervals representing a net coal thickness of up to 23 metres and was producing in excess of 280,000 cubic feet/day of gas despite the water level only being 80 metres below the surface. The lowermost target seam in this well occurs at 405 metres from surface. Although gas flows from the adjacent boreholes has yielded information about the reservoir which will very likely reduce the number of wells needed to appraise this area in the short term, continued long term testing is still required to confirm the ultimate potential of this well. LMG03 is one of two production wells drilled at the Gloucester Basin permit as part of the Phase 1 work program. The second well (LMG02) was drilled as a horizontal or lateral well generally referred to as a surface to in-seam (SIS). Completion and testing of this well is expected to be completed by 31 March 2005. Interest holders in the Gloucester Basin project are, AJ Lucas Coal Technologies Pty. Ltd, (75% & Operator) and Molopo Australia Limited (25% & Project Manager). Clarence-Moreton Basin, NSW - PEL 13 & 426 (100% interest) During the December quarter, Eastern Star Gas Limited commenced earning an 85% interest in both leases by funding all work commitments for permit years 1 and 2. These commitments principally include seismic reprocessing, reinterpretation and acquisition, with the possible drilling in year 2 of an appraisal well in PEL 426. Molopo will retain a 15% interest. China Liulin, Shanxi Province (50% interest) During the December quarter no work was undertaken on the Company’s Liulin CBM project in China. FINANCIAL ACTIVITIES During the quarter, Molopo issued 1,000,000 incentive options to an employee under the incentive option scheme with an exercise date of 30th April 2007. CORPORATE ACTIVITIES Molopo held its Annual General Meeting on 4th November 2004. Shareholders approved the sole resolution put to them for approval. Yours faithfully, Andrew Metcalfe Company Secretary