ferrets stock to watch: european gas limited

Ferret's Stock to Watch: EUROPEAN GAS LIMITED
09:13, Tuesday, 19 September 2006

A SWITCH TO EUROPE APPEARS TO PRODUCE A LOT MORE GAS

Sydney - Tuesday - September 19: (RWE Aust Business News)
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OVERVIEW
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European Gas Ltd (ASX:EPG) is the result of a complete makeover
from Kimberley Oil NL and today looks a lot more prospective as a gas
explorer in Europe.

Most investors should have been more conversant with Kimberley
because it sharpened its exploration expertise in WA.

Much of its activity was centred in the Canning Basin of WA in
which the company currently operates five oilfields (Blina, Boundary,
Lloyd, Sundown and West Terrace) with a total production of 5,756bbls and
sales of 5451bbls during the fourth quarter of 2005.

In May 2005 the company entered a Memorandum of Understanding
with Golden Dynasty Resource of Canada for the transfer and development
of a significant proportion of exploration permits.

It will retain a 2.5 per cent well-head royalty over the permits.

The company will still retain a number of interests in the
Canning Basin for further development or divestment.

But back in July European Gas began drilling on the 75 per
cent-owned Lorraine Project in eastern France.

The principal target is coal bed methane.

The initial program comprises two vertical core wells enabling
definition of parameters for the two subsequent under balanced lateral
development/production wells.

The program is in preparation for the development of the large
Gas in Place Resource which to date totals 28.1 billion cubic metres
(Bcm) (991.2 billion cubic feet (Bcf) within approximately 7 per cent of
the company's permit and application areas.

The first well was at Folschviller in the Saint Avold block.

Yesterday, European Gas disclosed some preliminary results from
desorbable gas testing from Veine 8 and Veine 9 from the Folschviller St1
well.

Veine 8 and Veine 9 represent the first of four packets of coal
expected to be intersected in the well.

A total of 28 samples from Veine 8 and Veine 9 have been
analysed by Deutsche Montan Technologie of Essen, Germany returning the
following results;

* For Veine 8, desorbable gas content ranged from 6.9 m3/t (244
Scf/t) to 8.1 m3/t (286 Scf/t) which is regarded as being in the medium
range.

* For Veine 9, desorbable gas content ranged from 7.3 m3/t (258
Scf/t) to 14.0 m3/t (494 Scf/t) which is regarded as being in the medium
to high ranges.

Veine 9 gas desorption test work returns highly encouraging gas
content values over the 13.46 metre thick seam.

Continued strong gas readings recorded throughout the inter seam
sediments.

* Second coal packet intersected at 985 metres with net coal of
6.95 metres.

* Net coal to date in Folschviller St1 well totals 23.8 metres.

* Two additional coal packets including two major seams yet to
be intersected.

* Currently running wireline logs prior to coring ahead to total
depth of 1,300 metres.

The second vertical well Diebling St1 is to be drilled at a site
2.1 kilometres southwest of the town of Diebling within the Alsting
block. The planned total depth is 1,500 metres and six major packets are
targeted.

The Westphalian D coal bearing sequence should be reached at 880
metres and coring will be continuous from that point through to TD.

The primary objective is the Westphalian D and C sequences with
approximately 30 metres of net coal targeted in each well.

SHARE PRICE MOVEMENTS
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Shares of European Gas yesterday finished 5.5c higher at 62c.
Rolling high for the year has been 74.5c and low 6.1c. The company has
161.5 million shares on issue with a market cap of $91.25 million.

The information to date conforms to the large number of gas
content measurements performed in the past by Charbonnages de France and
endorses the reliability of this body of information.

The entirety of the Westphalian section drilled to date in the
Folschviller St1 well contains little or no water and Veines 8 and 9 at
this location are characterised as dry coal.

This factor may prove to be particularly important in the
development of future production operations.

The company continues to be considerably encouraged by the
positive preliminary data emerging from the drilling operations.

Veine 9 represents a potentially significant target for
development demonstrating good thickness and strong desorbable gas
contents.

BACKGROUND
**********

European Gas is a hydrocarbon explorer/developer with projects in
western Europe.

The strategy of the company is to develop coal bed methane and
coal mine methane projects, in particular, in France where the company
holds a significant competitive advantage with major holdings under
licence.

The European natural gas market is substantial with advanced
infrastructure, including extensive pipeline networks and a free and
open market.

The company also holds over 30,000 km2 of hydrocarbon
exploration permits and production licences in the Canning Basin.

These assets are currently undergoing divestment.

European Gas is centred on the acquisition, exploration and
development of coal bed and coal mine methane projects in Western
Australia, France and Italy.

Other areas being explored by EPG includes Bleue Lorraine, Gaz de
Gardanne and Gaz de Saint Etinne permits.

The company also covers a sizable part of Sulcis in southern
Sardinia.

The permit area covers 615sqkm and contains over 1,000Mt of
sub-bituminous coal and includes the rights to all hydrocarbons with the
area.

ENDS