hartleys report, page-2

Cool, thanks Ktrianta.

Investment Highlights
• NSE-C1 Success Bodes Well for Reserves (CVN 40%) – Carnarvon
Petroleum Limited (“Carnarvon”, “CVN”, “Company”) has reported a
successful test of its NSE-C1 appraisal well, located at its Na Sanun
East field in onshore Thailand. The well is flowing at 575 barrels of oil
per day with water cut of 7%. The water cut is expected to decrease as
the well cleans up and drilling fluids lost while drilling are recovered.
This well is particularly significant for reserves as it is located in an area
that was defined as possible reserves by the independent auditor,
Gaffney Cline and Associates. We expect that some of the significant
3P reserves will be converted to 2P when the end of year assessment
is done. This also bodes well for the surrounding area, which is
delineated by seismic as being under structural closure but where no
drilling has occurred and no reserves are assigned.
This confirms our understanding of the reservoir and of the substantial
in place resources at Na Sanun East. Our valuation has not changed
as some of these volumes are already factored in; however, the
downside risks have decreased substantially.
• NSE-D3 Tests at 1,130 Barrels of Oil per Day (CVN 40%) – This
result is the ninth success from nine attempts for Carnarvon in its
development program, which started in June this year. The well is still
cleaning up and flow rates may increase during this process.
The nearby NSE-D2 well was drilled close to the interpreted gas/oil
contact and is subsequently being sidetracked deeper into the oil leg.
Results from this well are expected before the end of the year.
• NSE-E1 Exploration Well Drilling Ahead (CVN 40%) – The NSE-E1
well is being drilled to the west of the development wells at Na Sanun
East and has the potential to add to the Company’s reserve position, if
successful. Carnarvon’s historical success from exploration in the area
is 33% and we consider this to be a reasonable expectation for success
in this well.
• 2009 Set to be a Big Year – 2008 has been an extremely successful
year for Carnarvon, with current production levels very close to the
stated target of 6,000 barrels of oil per day net. The Company has
focussed primarily on development in 2008; however, 2009 will see a
shift back to exploration and appraisal from which we expect significant
discoveries to be made. The Company has only scratched the surface
of the potential of its onshore blocks in Thailand and remains a first
mover in exploiting the new play type in fractured volcanics.
Carnarvon’s success is now being recognised by a wider forum and it
would not surprise if significant share price appreciation occurred in the
short term. CVN is well placed to weather fluctuations in the oil price as
its operations are very low cost with drilling costs of US$1.5m per well
and opex of US$5 per barrel. The Company has approximately A$50m
in cash, increasing production and reserves as well as 150cps of
medium risk appraisal upside.